If one is considering to work in Japan as an expatriate, one should make it short, and stay alive.
The reasons – a 55 percent inheritance tax on the worldwide assets of long-term foreign residents which is imposed by the government. This would mean that the heirs of expats working in Japan could be made to even give up their family homes or businesses even though they might not have ever landed in Japan.
Now, with the aim of making Tokyo a global financial hub, the impact of that rule is being attempted to be eased somewhat by the Tokyo Governor Yuriko Koike. With the aim of providing competition to rival centers such as Hong Kong and Singapore with respect to attracting asset managers to the Japanese capital, the rule has been urged to be looked into by her government in a report that was released last Friday.
But since that law was amended as recently as April of this year, there is no guarantee that any heed would be paid too that urge by Prime Minister Shinzo Abe’s government.
“Japan doesn’t seem to want long-term residents anymore,” said Paul Hunter, secretary general of the Tokyo-based International Bankers Association. This group has been lobbying against the rule and is representative of 50 overseas financial institutions. “Why would you do that at a time when you’re doing Tokyo as an international financial center?”
Back in 2013, when the inheritance tax was first introduced, even short-term foreign residents were potentially brought under the ambit of the law which was primarily formulated to prevent Japanese nationals from giving up their citizenship so that they are able to avoid paying taxes on their overseas assets. However, the rule is now applicable only for those people who have lived in Japan for more than 10 years after the rule was tweaked in April this year. But the April change allowed tax authorities to lay claim to the global assets of even those former residents who die within a period of five years after leaving Japan. This was a clause that was added in the most recent amendment.
In June last year, a panel was formed to advise the Tokyo local government on attracting financial firms to the city and Shigesuke Kashiwagi, Japan head of U.K. investment company Schroders had said at that time that expatriates “can’t die in this country.”
According to Hunter, veterans of the financial industry would be forced to leave the country and talented people would be deterred from coming to japan because of the tax. He said that ten years is “not a long time out of a working career” and the tail provision is “really, really bizarre.”
The potential impact on the short-term foreign residents would be eased to an extent by t he amendments, said Finance Ministry official Keiichiro Inui. “We will monitor the situation with the new framework and consider any revisions if necessary,” said Inui, a deputy director in the tax bureau.
(Adapted from Bloomberg)