Inheritance tax when receiving from abroad
27 January, 2021
Inheritance taxes are often controversial. As people are going through a loss, the idea of taxing on inheritance raises a number of questions around fairness behind taking wealth for the state at the end of life.
Today, many developed countries have an inheritance tax, with Japan, South Korea, and France setting theirs at 55%, 50%, and 45% respectively. In the US, the new Biden administration has pledged to restate inheritance tax, with estimates pegging the rate at about 67% as part of a $3 trillion tax plan. This will be the highest inheritance rate in the developed world.
Costs of receiving inheritance from abroad In general, when you are receiving inheritance from abroad, there are several costs involved. These costs depend on the country you live in and where you are receiving the funds.
The most basic cost is the money transfer charges when receiving the funds. This will depend on the method used to transfer the funds. The most common way to transfer money is through a wire transfer, where the sender deposits funds straight to your bank account.
This is common because of the simplicity of digital banking. However, while wire transfer costs are relatively low, the exchange rate is usually relatively high in comparison to other transfer options. In fact, many banks have an exchange rate markup that can lower the funds you receive. If you are receiving a huge sum, even a small markup can add-up.
We recommend that you use the modern technology-based money transfer companies that solve the aforementioned problem. They do so by using the real exchange rate when the transfer is being made and show it to the sender, giving you a realistic view of what you can expect to pay. Also, to compete with the traditional banks, many of them have lower transaction costs - meaning overall you are sending, or receiving, the money you expect. You can check the average cost of transactions using a good money transfer comparison company.
Inheritance taxes differ by country
As mentioned above, countries have different inheritance taxes. They also have laws that govern how the taxes are collected. For example, in France, one will need to pay an inheritance tax if it is proven that the deceased had a main home or if they had a professional activity or had economic interests in the country.
Also, if the deceased spent about 6 months in the county, they are deemed as residents. Therefore, the beneficiary will have to pay the inheritance tax regardless of the country they live in. Also, if the deceased was a non-resident but had property in France, they will be taxed. The UK, similarly, has an inheritance tax of about 40% of assets. To pay this tax from overseas countries, the individual needs to be a UK resident or citizen. Her Majestyâs Revenue and Customs (HRMC) agency looks at different things, such as the duration the person has stayed in the UK and the assets they own. The estate tax in the country starts at GBP 325,000.
In the United States, there is no inheritance tax due to the tax reform passed by Donald Trump. However, the new administration has pledged to introduce that tax. Therefore, you should pay attention because Biden has not talked about how his policy will be structured.
Some countries do not have an estate tax at all. They include Hong Kong, Singapore, Canada, Mexico, New Zealand, and Australia.
Inheritance tax, also known as the death tax, is a controversial topic. There are some who believe that the funds are needed to fund the government while others believe that they are unfair. When receiving these funds from abroad, you should consider all the costs and work to reduce them. Click here to see options if you need to transfer money for inheritance tax.
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