Oct 14 (Nikkei) - Japan plans to sharply cut the inheritance tax bills for highly skilled overseas professionals working in Japan, Nikkei has learned, as part of a broader scheme to nurture the country's status as a global financial center.
The plan is to exempt assets held abroad from the inheritance tax levy for certain qualified people. There are also reforms in the works that will expand the roster of companies that can book executive compensation as business expenses.
Developing Japan into a global financial hub has become a signature issue for Prime Minister Yoshihide Suga, and creating an environment that will attract foreign talent is part of this plan. Not only are financial professionals leaving Hong Kong in response to Beijing's new security legislation, but the U.S. is due to toughen visa requirements for overseas workers..
Japan set its highest inheritance tax rate at 55% in 2015, which tops the 40% rate in the U.S., 30% in Germany and 45% in France.
Meanwhile, Singapore, Malaysia, Australia, Canada or Hong Kong do not collect inheritance taxes on assets held within their territories.
If a foreigner dies in Japan, the inheritance tax is applied only to assets held on Japanese soil if the person lived in the country for a total of 10 years or less over the past 15 years. But If the length of stay exceeds 10 years, then the tax is enforced on assets held overseas as well.
This arrangement, along with the high tax rate, has been said to be a reason why some foreigners are reluctant to work in Japan. Consequently, some inside the ruling Liberal Democratic Party have criticized Japan's high inheritance tax.
The ruling coalition plans to provide inheritance tax relief one foreign assets for overseas finance professionals who met certain qualifications, even if they lived in Japan for more than 10 years over a 15-year period. The Ministry of Finance, the Financial Services Agency and other bodies will hammer out the details.
The government designates a "highly skilled professional" based on factors such as academic background and annual salary. The designation allows qualification for multiple residency statuses, and opens the door wider for permanent residency.
