No.15003 Selecting taxation system for settlement at the time of inheritance
1 Overview of the system
The taxation system for settlement at the time of inheritance is a system for gift tax, which can be selectively applied in principle when parents, grandparents or etc. who are 60 years old or older donate a property to presumptive heirs who are lineal descendants of the donor (e.g., children or grandchildren) with the ages of 18 years or older To select this system, it is necessary to file a report on selection of the taxation system for settlement at the time of inheritance with certain documents attached, by the period from February 1 to March 15 of the year following the year in which the property was received by donation.
Once this system is selected, it will be applied to all properties donated by the donor related to that selection from the year in which the system was selected, and cannot be changed to the calendar year taxation system. (Note)
In addition, when parents, grandparents or etc. who are the donors under this system pass away, the inheritance tax amount will be calculated by adding the value of the donated properties at the time of donation to which this system is applied (for properties to which this system is applied acquired by donation on or after January 1, 2024, the amount remaining after deducting the amount of basic exemption related to taxation system for settlement at the time of inheritance from the total value of the donated properties at the time of donation to which this system is applied for each year in which properties are donated) to the value of inheritance. Please refer to "4 Calculation of tax amount" for the actual calculation method for gift tax and inheritance tax.
As mentioned above, the taxation system for settlement at the time of inheritance is a system of taxation for gift tax and inheritance tax.
(Note) Please refer to "15002 Cases where a gift tax is imposed" for details of the calendar year taxation system.
2 Eligible donors and recipients
The donor should be parents , grandparents or etc. who are 60 years old or older as of January 1 of the year in which he/she donates the property and the recipient should be presumptive heirs who are lineal descendants of the donor (e.g., children or grandchildren) with the ages of 18 years or older as of January 1 of the year in which they received the property.
When a person acquires through donation unlisted shares related to the application of "The special postponement or exemption of payment of gift tax concerning unlisted stock (Act on Special Measures 70-7-5)," or when a person acquires through donation assets for business related to the application of "The special postponement or exemption of payment of gift tax concerning personal assets for business (Act on Special Measures 70-6-8)" by gift, the Act will also apply to those other than presumptive heirs who are linear descendants (e.g., children or grandchildren) (limited to those who are 18 years old or older as of January 1 of the year in which the donation takes place.) in the case that the donor is 60 years old or older as of January 1 of the year in which the donor donates the property.
3 Eligible properties
There are no restrictions on the type and value of donated property, or the frequency of donation.
4 Calculation of tax amount
| (1) | Calculation of gift tax (Note 1) The amount of basic exemption is 1.1 million yen. However, if the recipient is donated by two or more donors related to selection of the taxation system for settlement at the time of inheritance during the same year, the amount of basic exemption of 1.1 million yen related to the taxation system for settlement at the time of inheritance is divided by the value of the property donated by each donor. (Note 2) The special credit can be deducted only if a return form within the due date is submitted. |
| (2) | Calculation of inheritance tax |
5 Procedures for application
The recipients (e.g., children or grandchildren) who intend to select the taxation system for settlement at the time of inheritance shall submit a "Report on the Selection of the Taxation System for Settlement at the Time of Inheritance" to the competent tax office director with jurisdiction over the location of their address, together with certain documents including the family register of the recipient. The report must be submitted between February 1 and March 15 of the year following the year in which the property related to the taxation system was first received by donation.
When submitting the return for gift tax, including when the value of the property acquired through donation from a donor related to selection of the taxation system for settlement at the time of inheritance exceeds 1.1 million yen, etc., this report must be submitted to the competent tax office director with jurisdiction as an attachment to the return for gift tax.
The recipients (e.g., children or grandchildren) may select the taxation system for settlement at the time of inheritance for each donor (e.g., parents or grandparents). However, once they have chosen this system, it will be continuously applied effective for the donation from the year of application until the donor passes away, and cannot be changed to the calendar year taxation system.
- Consultation service for national tax is available at the Phone Consultation Center of the Regional Taxation Bureaus. Please take a look at "IF YOU NEED FURTHER INFORMATION, PLEASE CONTACT" and try the phone consultation service.
