Cases when a gift of 1.1 million yen is subject to inheritance tax

It is well known that the gift tax exemption limit is 1.1 million yen per year.

However, that only applies to gift tax, and it is possible that inheritance tax will be levied on the gifted property.

In this article, I will write about the cases in which a gift of 1.1 million yen is subject to inheritance tax.

Gifts made within three years prior to the start of inheritance

Any gift property given within three years of the donor’s death is subject to inheritance tax.

Gifts of 1.1 million yen are no exception.
(1.1 million yen is just the gift tax exemption limit)

However, the tax is only added to gift property given to those who acquired the property through inheritance or bequest.
(For example, gifts to grandchildren who are not heirs are not subject to inheritance tax)

*For inheritances beginning on or after January 1, 2027, gift property given within four to seven years of the donor’s death will also be added(after the 1 million yen deduction) to the taxable value for inheritance tax.

Gifts subject to inheritance tax settlement until December 31, 2023

Gifts of 1.1 million yen to which inheritance tax settlement was applied by December 31, 2023 will be subject to inheritance tax.

However, a basic deduction of 1.1 million yen will be applied to gifts related to inheritance tax settlement from January 1, 2024 onwards.
(The 1.1 million yen deduction for settlement tax applies to both gift tax and inheritance tax)

Therefore, gifts up to 1.1 million yen will not be taxed under either gift tax or inheritance tax.
(Gifts up to 1.1 million yen do not require declaration, but a notification of selection of inheritance tax settlement (and a certified copy of the family register as an attached document) is required to apply this.)

Points to note when applying inheritance tax settlement

If you make a gift of 1.1 million yen, you might think that inheritance tax settlement is more advantageous because it is not subject to gift or inheritance tax.

However, there are some points to note:

• Any gift assets over 1.1 million yen are subject to inheritance tax (even if the gift assets do not exist at the time of inheritance)
• Once selected, it cannot be revoked.

If there are multiple heirs or the future is relatively uncertain, careful consideration is essential, including consideration of the reserved share.

In conclusion

In this article, I have written about cases where a gift of 1.1 million yen is still subject to inheritance tax.

However, the pros and cons vary from case to case, so it is necessary to consider the situation comprehensively.

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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office

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