Save Taxes! What can be done to reduce inheritance tax? Experts come up with three tricks

Business Times Lin Yujun 2022.08.31

Save Taxes! What can be done to reduce inheritance tax? Experts come up with three tricks

To reduce the inheritance tax, the Ministry of Finance and the accountant have put forward three measures, including the annual gift of the deceased, the conversion of the type of property to real estate or insurance policy, etc., and the spouse of the deceased after the death of the relative, making good use of the right to claim and deduct the difference in the remaining property, etc., to effectively reduce the inheritance tax.

The Tax Administration of the Ministry of Finance pointed out that the current annual gift tax exemption per person in China is 2.44 million yuan, that is, the total amount of property given by the donor (the person who gave away the property) to others every year is exempt from tax within 2.44 million yuan, but it must be noted that the property donated within the first two years of the deceased will be regarded as inheritance tax, and it is recommended that the elderly should plan the transfer of property as soon as possible.

If the tax exemption limit for gifts is exceeded, China will levy tax on the donor, and the gift tax rate will be 10% for the net gift amount of 25 million yuan, 15% for 25 million yuan ~ 50 million yuan, and 20% for more than 50 million yuan.

For example, if an elderly person wants to transfer cash to a child, he can give $2.44 million per year, and in terms of annual gifts over the next 10 years, the elderly person can transfer a total of $24.4 million to the child in 10 years and is completely tax-free.

Zhang Zhiyang, an accountant of the tax department of KPMG Anhou Jianye Certified Public Accountants, said that individuals can also start by changing the calculation method of the taxable value of the property under their name, such as the most commonly used life insurance annuity policy for Chinese people (the insured and the insured are themselves, and the beneficiary is the legal heir, and does not involve single payment, serious illness, advanced age, loan and other insurance forms), if it is a death benefit, the beneficiary can apply the personal minimum tax system to enjoy a tax exemption of 33.3 million yuan when obtaining the insurance money, and the tax rate of 20% will be applied only if the amount exceeds the amount.

Ernst & Young (EY) Certified Public Accountant (Practising) for Family Business Succession Planning and Tax Advisory Services Lin Zhixiang also pointed out that gifts between spouses are exempt from gift tax.

In addition, the spouse can make good use of the inheritance tax deduction and the right to claim the difference between the remaining property, such as the elderly person’s marital property increases by 600 million yuan and the spouse does not increase the property, if the elder person passes away, the spouse can use the right of claim to include 300 million yuan in the scope of estate tax exemption.

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