Question about inheritance/taxation

[stinkynuts]

My parents are in Japan, and they own a house in Canada.

They would like to give it my other siblings and me. However, under the Japanese tax system, it would be subject to an absurd tax rate of about 50%. This would apply to the recipients, not my parents.

My questions are:

1)How likely is it that the Japanese government would find out about the transaction, if not reported?

2)Since I am a Canadian citizen, who rarely visits Japan, and lives in Canada, would Japan have any means of forcing me to pay the tax?

Under Japanese law, it is not clear whether I still hold Japanese citizenship. Japan does not allow dual citizenship. However, since I was born in Canada, I automatically acquired Canadian citizenship. If I wanted to retain my Japanese citizenship, I would have had to renounce it by the age of 20 or so. I never did, so it is unclear whether I still hold Japanese citizenship. But let's say that I was considered not to be a Japanese citizen, would I still need to pay the tax?

 

[roxyfan]

My parents are in Japan, and they own a house in Canada.

They would like to give it my other siblings and me. However, under the Japanese tax system, it would be subject to an absurd tax rate of about 50%. This would apply to the recipients, not my parents.

My questions are:

1)How likely is it that the Japanese government would find out about the transaction, if not reported?

2)Since I am a Canadian citizen, who rarely visits Japan, and lives in Canada, would Japan have any means of forcing me to pay the tax?

Under Japanese law, it is not clear whether I still hold Japanese citizenship. Japan does not allow dual citizenship. However, since I was born in Canada, I automatically acquired Canadian citizenship. If I wanted to retain my Japanese citizenship, I would have had to renounce it by the age of 20 or so. I never did, so it is unclear whether I still hold Japanese citizenship. But let's say that I was considered not to be a Japanese citizen, would I still need to pay the tax?

I think the real issue is taxation of capital gain on disposition of property in Canada by a non resident. Your parents are the owners of the house here and would be subject to capital gains tax. I would get some professional help. Cadesky and Associates are the leading tax firm in the city and would advise you to consult with them.

 

[GPIDEAL]

A good tax accountant can also assist.

Here are various pages in succession (from following the links therein on the disposition of real property by a non-resident, that is between related parties and for which there may be a treaty between the countries that exempts Part I tax):

http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html#txblgtns

http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/dsp/menu-eng.html

http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/dsp/menu-eng.html#purchasers

I haven't searched or included a link as to whether there is a treaty between Japan and Canada that might exempt the Canadian house from Canadian tax. As for Japanese tax, that's a separate issue but there may be a provision in the Japanese tax code with respect to dispositions to related parties - I don't know.

 

[Zaibetter]

I doubt they would find out, were they paying taxes for the house there?
If The Jap. don't know about the house, just change name you may have to pay taxes here.

 

[bazokajoe]

This is the last place you come to for tax rulings. Find a very good tax attorney/tax firm that has experience dealing with international clients.

 

[peeler_feeler]

This is the last place you come to for tax rulings. Find a very good tax attorney/tax firm that has experience dealing with international clients.

It's a good starting point for advice; there are many professionals (tax or otherwise) that are hobbyists and can point you in the right direction with some basic advice and referrals.

 

[roxyfan]

It's a good starting point for advice; there are many professionals (tax or otherwise) that are hobbyists and can point you in the right direction with some basic advice and referrals.

Don't be a cheap fuck....I'm an accountant so go hire a tax specialist that has experience with international tax....I consult with cadesky tax here on toronto.

 

[HobbyHorse]

Your first step is to find out the basis of taxation in Japan. In Canada, for example, the government's right to exact tax is based not on Canadian citizenship but on residence. If you are a Canadian citizen who is not resident (as determined by CRA guidelines) in Canada, then you will not pay tax on money earned outside of Canada. (that's the whole point of the expat communities in the mid-east). If Japan has a similar tax regime in that respect, then as a recipient of a gift resident in Canada you will pay no tax regardless of your citizenship. There are some separate questions: usually the recipent of a gift pays no tax. But the donor of a gift may in some cases have a taxable deemed dispoition. whether some deemed income might be ascribed to your parents in Japan in the event of disposal by gift is another matter, therefore.

 

[stinkynuts]

Thanks for the info, guys.

It seems that Japan is one of the few countries that tax you even if you are not a resident of Japan, and are living abroad. What matters is the residency of the donor.

 

[stinkynuts]

From doing some more research, it seems that if my parents were to sell the house, this would automatically trigger a report to Japan, as it is an extremely large value, and my father is not a Canadian citizen or resident.

However, if he were to simply transfer the house in my name, then it seems that there would be no investigation, as there is no financial transaction.

I would then be able to sell the house.

Does this seem logical?

 

[huckfinn]

From doing some more research, it seems that if my parents were to sell the house, this would automatically trigger a report to Japan, as it is an extremely large value, and my father is not a Canadian citizen or resident.

However, if he were to simply transfer the house in my name, then it seems that there would be no investigation, as there is no financial transaction.

I would then be able to sell the house.

Does this seem logical?

It does seem logical, but do they have some sort of capital gain on sales?

I would be surprised if you could take that much money out of the country with no penalty.

One thing you mentioned is siblings. Something to look into, is if the title is transferred to you collectively. Penalties might be less on smaller amounts.

 

[Caspertheghost]

A Canadian property transferred to a Canadian? I call bullshit on ability of Japanese government to seek taxes from recipient. Enforceability would be impossible. On the donors who are Japanese and who own foreign property? In that case I say far more likely....

 

[Aardvark154]

My suggestion is before this is a crisis, find a Tax Lawyer who is familiar with both Canadian and Japanese tax codes.

Before someone says this is like looking for orioles in Toronto in January, a man who was a class ahead of me, practices in exactly this sort of area in Japan, U.S. -- Japanese business law.

 

[stinkynuts]

It does seem logical, but do they have some sort of capital gain on sales?

I would be surprised if you could take that much money out of the country with no penalty.

One thing you mentioned is siblings. Something to look into, is if the title is transferred to you collectively. Penalties might be less on smaller amounts.

Yes, there is a capital gains tax, but it is my parents who would have to pay it. And only if they report it on their tax return. But it would be impossible to collect.

 

[stinkynuts]

A Canadian property transferred to a Canadian? I call bullshit on ability of Japanese government to seek taxes from recipient. Enforceability would be impossible. On the donors who are Japanese and who own foreign property? In that case I say far more likely....

I know, but that is the Japanese law. I cannot imagine that they can take the money. However, the US is VERY aggressive when it comes to seizing property from US citizens living abroad. They have treaties with many countries.

Someone who was born in the US is automatically a US citizen. They then have to pay US taxes even if they lived abroad their whole lives. That's why some renounce their US citizenship.

 

[stinkynuts]

My suggestion is before this is a crisis, find a Tax Lawyer who is familiar with both Canadian and Japanese tax codes.

Before someone says this is like looking for orioles in Toronto in January, a man who was a class ahead of me, practices in exactly this sort of area in Japan, U.S. -- Japanese business law.

Thanks, I just contacted a Japanese accountant who is familiar with this situation. He says that Japan does not have the resources to collect taxes in other countries! YAY!

 

[benhurley]

talk to a tax specialist. I believe that a transfer of property by a non resident would be subject to a 25% non resident tax. The non resident would file a Canadian tax return to recover the excess tax if any. Its a complicated transaction

 

[GPIDEAL]

Yes, there is a capital gains tax, but it is my parents who would have to pay it. And only if they report it on their tax return. But it would be impossible to collect.

Stinkynuts, Canada requires tax filers to report foreign property. Maybe they have similar laws in Japan, so your parents may have already reported their foreign property on a Japanese tax return. If they haven't, then technically it would be tax evasion.