Investor receives inheritance in Bitcoin and discovers 110% tax

A recent post from a cryptocurrency investor revealed an intriguing tax situation regarding the legacy of digital currencies in the Japan. According to him, Bitcoin heirs could face a heavy tax burden, which could reach a combined tax rate of 1.25 euros 110%. The phenomenon occurs because of the sum of the inheritance tax is about capital gains.

In his outburst text, entitled “I have no choice but to give up my inheritance”the investor says he called the tax authorities to find out how much tax he would have to pay and was told the rate would be 110%.

He explains the matter and says that a deceased person bought Bitcoin for 1 million yen and the value at the time of death was 1 billion yen. In this situation, heirs would initially be taxed at approximately 55% of the inherited value.

Furthermore, if they sold Bitcoin, they would have to pay income tax on the profits realized, which would be calculated based on the decedent’s original purchase price. The heirs would therefore be subject to inheritance tax of 55% and income tax of 55%, for a total of 110% tax.

In other words, if the heir decides to sell the inherited bitcoin, he would have to give the full value to the government and still owe it.

110 bitcoin tax
110 bitcoin tax. Image: Tweet

“I have no choice but to give up my inheritance.”

According to the Japanese, renouncing an inheritance emerged as a tragic but financially viable solution to avoid a budget deficit. This option, while painful, prevents the heir family from going into debt to pay taxes. transferring the bitcoins to the national treasury.

“If the inheritance is relinquished, the deceased’s bitcoins go to the national treasury, but the family is not taxed. So it is a very sad story, but the best solution is to give up the inheritance and give up the bitcoins.”

Consultations with the Japanese tax authorities confirm the 110% rate, in addition to addressing the issue of tax on donations, which follows a similar logic to that of inheritance, resulting in a heavy tax burden for beneficiaries of donations in cryptocurrencies.

As a countermeasure, investors want to pressure the government to implement reforms in the tax system, given the irrationality of the 110% rate.

“Unfortunately, the inheritance tax rate under current tax law is 110%, but this is unreasonable and subject to review. To achieve this we must put pressure on politicians.”

Additionally, some cited the option of moving to countries with more favorable tax regimes, such as Singapore or Dubai, as a strategy to minimize exposure to exorbitant taxes.

Japan and cryptocurrencies

Japan has taken a fairly progressive approach to cryptocurrencies and since 2017 established itself as one of the first countries to legally recognize Bitcoin and other cryptocurrencies as legal tender.

Regulation in Japan is notable for its balance between promoting innovation and consumer protection. Japanese authorities have introduced strict rules for exchanges, requiring them to register and meet strict security and compliance standards.

This happened partly in response to high-profile incidents such as the 2014 hack of Mount Gox, which was based in Tokyo and was one of the world’s first and largest Bitcoin exchanges.

Despite progressive regulations, Japan faces tax challenges, as evidenced by high inheritance taxes. This shows that while the country is leading the way in cryptocurrency adoption, it is still adapting its tax system to deal with such assets.

Cryptocurrency Heritage in Brazil

In Brazil, taxation is a complex issue and although the Federal Tax Authorities require the declaration of cryptocurrencies for income tax purposes, the lack of mandatory communication with the tax authorities makes the collection of the Causa Mortis and Donation Transmission Tax (ITCMD) a challenge.

This tax is levied on the market value of the inherited or donated property, with rates that may increase 8%.

In the State of São Paulo, Bill No. 834/2019 explicitly seeks to include the incidence of ITCMD on cryptoactive substances. However, there are still no clear provisions on identifying ownership or determining the basis for calculating taxation.

Source: Live Coins