Long term residents-tax on world wide income

[PecosBob]

There are permanent residents and tax residents. If you have lived in Japan over 5 years you have to declare your world wide income to the J-tax office.
Are any of you being requested to do it?
If you wire money in or out of Japan you are subject to a 15% tax and will alert the tax office.
Have any of you had this happen?
The forms to report your worldwide income are only in Japanese and it seems the only way to get the tax office to notice you is to wire money to or from Japan.
What is happening with all of this?

 

[impish]

If you're not working in Japan and only working outside of Japan (ie telecommuting) then don't wire money, just use the ATM.

 

[MikeH]

If you wire money in or out of Japan you are subject to a 15% tax and will alert the tax office.

The former is not correct, there is no tax to move money around. The latter is true for anything over million yens, and if you are found to avoid taxes then the taxes with penalties are going to be more than 15% for sure.

Since something like 2 years ago the Japanese tax man got way easier access to the information of foreign bank accounts of it's residents. That means you don't actually need to send or receive money over the border anymore to get red flagged, they can now check your foreign assets any day they want.

Everyone who is tax resident in Japan has been requested to declare all income worldwide as that's the law. If they contact you personally and ask about it then you already fucked up. The forms are in Japanese because that's the official language. They do have guide in English how to fill the form though.

And to be clear the residency the immigration uses has pretty much nothing to do with the residency the tax man uses.

 

[Sudsy]

Tax residency has nothing to do with your immigration status - the Japanese documentation in English is not particularly well translated. The term most often used in English speaking countries is being domiciled. Once you have lived in Japan for five years, you are considered to be domiciled here under Japanese tax law.

Once you are domiciled in Japan, you are required to declare overseas income, on which you are liable for (generally) earned income or capital gains taxes. You owe taxes on overseas income regardless if whether it is transferred into Japan or not.

You do not automatically get hit with 15% tax on any transfers in or out of Japan. You have to provide documentation, and if it is income or profit, then you will owe taxes. If it's inheritance or simple liquidation of overseas held assets, then you will often owe nothing. It's also worth noting that overseas losses in many instances can be applied to your income in Japan.

For example, I received an inheritance of roughly 10 million yen a few years ago. I had to supply documentation showing that it was an inheritance, and that the total value of the estate was under the limit for inheritance tax, and was not taxed.
(For reference, the basic exemption is 50 million yen + an additional 10 million yen per heir, so in the case of a parent passing away and leaving assets to a spouse and two children, the total exemption would be 80 million yen.)

If you have significant overseas financial assets, it's generally a good idea to have an accountant experienced in dealing with these matters.

 

[MikeH]

(For reference, the basic exemption is 50 million yen + an additional 10 million yen per heir, so in the case of a parent passing away and leaving assets to a spouse and two children, the total exemption would be 80 million yen.)

That was recently reduced to 30 + 6 millions.

 

[Sudsy]

That was recently reduced to 30 + 6 millions.

You're right, so it has. haven't had any relatives pass since the change, so haven't had a need to look it up. And hopefully won't have a reason to remember it for a long time!

 

[impish]

You also have to remember that there are treaties in place. You have to earn above a certain amount of money. I believe it's about USD$100K (total between all assets) that only one of the 2 countries are able to tax you when it's under that amount. You may have to report it still, but you don't have to pay the taxes on it if the other country.

 

[MikeH]

You may have to report it still, but you don't have to pay the taxes on it if the other country.

I believe you are now stating the situation if you are a US citizen?

As the civilised nations in the world don't tax you if you are living outside their borders and liable for taxes outside too.

 

[impish]

I believe you are now stating the situation if you are a US citizen?

As the civilised nations in the world don't tax you if you are living outside their borders and liable for taxes outside too.

Yes that would be between US and Japan, sorry...

 

[warubuta]

The former is not correct, there is no tax to move money around. The latter is true for anything over million yens, and if you are found to avoid taxes then the taxes with penalties are going to be more than 15% for sure.

Since something like 2 years ago the Japanese tax man got way easier access to the information of foreign bank accounts of it's residents. That means you don't actually need to send or receive money over the border anymore to get red flagged, they can now check your foreign assets any day they want.

Everyone who is tax resident in Japan has been requested to declare all income worldwide as that's the law. If they contact you personally and ask about it then you already fucked up. The forms are in Japanese because that's the official language. They do have guide in English how to fill the form though.

And to be clear the residency the immigration uses has pretty much nothing to do with the residency the tax man uses.

They absolutely cannot check your foreign assets anytime they want. I would love to see a credible source for this that explains the details including the verbiage in the relevant agreements. I would also like to see one case where a J citizen or permanent resident was procecuted for tex evasion that was uncovered through cooperation between the J tax authority and a foreign bank. The fact is that the J goverment would like you to think they have this power, but in all practicality they do not. In spite of all the scary stuff you read about FACTA, and the various agreements being signed to uncover offshore holdings, it is still extremely difficult for any government to get info on accounts in other countries by simply making a request. No bank will provide information on an account unless they are compelled to do so. So if for example, the Japanese tax authority asked Citibank in Malaysia for Taro Yamada's account balance, Citibank would at first say no. The reason: It is private information and they have a Malaysia-based legal responsibility to protect it. Then the Japanese tax authority would say that they have reason to believe that Taro is breaking Japanese tax laws so they would like their cooperation. Citibank would likely still say no. They are more concerned with remaining in compliance with Malaysia banking laws than helping Japan. Then the J tax authority would need to go the the Malaysia banking authority and make a request based on the disclosure and anti-money laundering agreements between the two countries. At this point, interestingly, the Malaysia banking authority is still likely to push back because, at heart, Malaysia wants to maintain confidentiality. Most importantly, there is no regular exchange of account info of J citizens and permanent residents between the J tax authority and foreign banks. That is a complete myth.

The one thing you need to be very careful about is how you move money out of or into Japan. There is really no way to do this without leaving a trail of evidence which will include swift codes, correspondent banks and possibly even your actual account numbers. Once you have made this mistake they will come after you and threaten you, but even then there is not much they can do to get info on your foreign holdings without your cooperation.

 

[MikeH]

In spite of all the scary stuff you read about FACTA, and the various agreements being signed to uncover offshore holdings, it is still extremely difficult for any government to get info on accounts in other countries by simply making a request.

I don't know about FACTA as it appears to be initiated by the USA but I do know that the tax authorities between several countries in Europe and Japan already exchange account information on request basis. The banks report to the tax authorities in their country and then the tax guys share this information between them.

No need for the Japanese tax man to contact any foreign banks. And next year when Japan joins the OECD initiated Common Reporting Standard (CRS) they don't need to even make requests anymore but the information will be exchanged automatically.

That is exactly why they invented the MyNumber thing also; since last year my banks in Europe have inquired me to update my account information and have asked specifically about the MyNumber information too.

 

[TAG Manager]

That is exactly why they invented the MyNumber thing also; since last year my banks in Europe have inquired me to update my account information and have asked specifically about the MyNumber information too.

It's really going to be interesting to see the fallout when all of these connectivity pieces are in place.
Or, even more interesting when stuff starts getting leaked or even worse, hacked. (hello Equifax as the most recent blunder)

On a personal note, I keep most of my liquid assets in Japan and only send out what I need to maintain other investments or pay bills etc.

To date, I've not run into any issue and I don't report anything special beyond my own personal tax filings for business income from investments outside of what I make in salary. (Yes, I have to give a chunk money away to the U.S. which makes me angry.) I'm almost sure I'm doing something wrong, the amount of tax I pay between income and property taxes is insane.

 

[warubuta]

I believe you are now stating the situation if you are a US citizen?

As the civilised nations in the world don't tax you if you are living outside their borders and liable for taxes outside too.

Actually both the US and Japan do tax their citizens on the difference in rates after a minimum. So if you make 30mil JPY in Singapore you need to pay about 20 in taxes in Japan. You get a break on the first 100k. Of the remaining 200k you would pay the difference in the rates. Since Japane would be around 30% and Singapore is 20%, you would pay 10% on 200k.

I don't know about FACTA as it appears to be initiated by the USA but I do know that the tax authorities between several countries in Europe and Japan already exchange account information on request basis. The banks report to the tax authorities in their country and then the tax guys share this information between them.

No need for the Japanese tax man to contact any foreign banks. And next year when Japan joins the OECD initiated Common Reporting Standard (CRS) they don't need to even make requests anymore but the information will be exchanged automatically.

That is exactly why they invented the MyNumber thing also; since last year my banks in Europe have inquired me to update my account information and have asked specifically about the MyNumber information too.

At the level you are speaking, it makes sense. But at the next level of detail it all falls apart. So what 'account information' do you think is being 'shared'? And how is it being shared? Do you think that, for example, the German tax authority gives a daily or monthly report to the Japan tax authority on all accounts held by Japanese citizens? Hard to imagine how many laws that would be breaking. And in the case of a German who happens to also be a permanent resident of Japan, how is the German tax authority even going to know he might have a tax bill in japan? Is the Japanese tax authority going to send list of all of their permanent residents to every country in the world? And what information do the banks 'report' to tax authorities? In all countries, the tax authoriies need to have a court order to get any meaningful information from a bank. The OECD 'standards' are just standardized electronic forms for making requests. I have actually seen them. So they have a format for sharing info, but they cannot actually share anything without a good reason and a court order. Most importantly, it was never the intent to have some kind of database or regular exchange of info on accounts, nationalities, and balances. So if you have an account offshore, as long as you dont transact directly with it from Japan, there is no way it can be discovered.

 

[TAG Manager]

(hello Equifax as the most recent blunder)

Oh and by the way, I just want to point out this person, Susan Mauldin, whom was in charge of security (CSO) at Equifax whom didn't have, IMHO, a proper field of study to hold the job that she did. (http://www.marketwatch.com/story/eq...he-companys-chief-security-officer-2017-09-15) --- I'm not a CSO, but I've been heavily rooted in the security field for some ~20 years. I'm appalled that she could be approved to hold such a title with the associated responsibility.

...back to your regularly scheduled program.

 

[warubuta]

It's really going to be interesting to see the fallout when all of these connectivity pieces are in place.
Or, even more interesting when stuff starts getting leaked or even worse, hacked. (hello Equifax as the most recent blunder)

On a personal note, I keep most of my liquid assets in Japan and only send out what I need to maintain other investments or pay bills etc.

To date, I've not run into any issue and I don't report anything special beyond my own personal tax filings for business income from investments outside of what I make in salary. (Yes, I have to give a chunk money away to the U.S. which makes me angry.) I'm almost sure I'm doing something wrong, the amount of tax I pay between income and property taxes is insane.

Great point. If you rememember, the Panama Papers scandal only happened because of a deliberate leak. And even then, the vast majority of the accounts were fully protected by shell company and trust shrouding out of the BVI. All of the 'connectivity pieces in place' really are not going to change anything. The governments can set up all the agreements and data exchange platforms they want, but full global banking transparancy will never happen because the rich guys make the rules.

If you are a US citizen and a J permanent resident and you are paying taxes on ww income in Japan then it seems likely to me that your US property taxes are what is driving your overall rate beyond what it would be if you were a J citizen and did not have any US obligation. If it is only income and capital gains, usually the J rate will be slightly higher than the US rate.

 

[Sudsy]

I've been heavily rooted in the security field

Perhaps not the best choice of words.

 

[namae]

So if you have an account offshore, as long as you dont transact directly with it from Japan, there is no way it can be discovered.

That is wrong basically.

You have an obligation to report your foreign bank holdings to the JPN government. That was introduced about 3 years ago ( I think). Foreign banks will ask you for evidence that you have filed notifications with the JPN government ...coupled with a vague threat to discontinue the banking relationship if you don't show them a copy of the filing. That is my personal experience with two foreign banks.

No one is probably interested in the $862 you may have with Citibank in New York. ...but once the numbers get interesting....banks get interested in reporting.

 

[TAG Manager]

Perhaps not the best choice of words.

Involved then? Speaking off the hip here. Trying to pay attention to the dude on the phone talking to me :O

 

[Frenchy]

Actually both the US and Japan do tax their citizens on the difference in rates after a minimum. So if you make 30mil JPY in Singapore you need to pay about 20 in taxes in Japan. You get a break on the first 100k. Of the remaining 200k you would pay the difference in the rates. Since Japane would be around 30% and Singapore is 20%, you would pay 10% on 200k.


At the level you are speaking, it makes sense. But at the next level of detail it all falls apart. So what 'account information' do you think is being 'shared'? And how is it being shared? Do you think that, for example, the German tax authority gives a daily or monthly report to the Japan tax authority on all accounts held by Japanese citizens? Hard to imagine how many laws that would be breaking. And in the case of a German who happens to also be a permanent resident of Japan, how is the German tax authority even going to know he might have a tax bill in japan? Is the Japanese tax authority going to send list of all of their permanent residents to every country in the world? And what information do the banks 'report' to tax authorities? In all countries, the tax authoriies need to have a court order to get any meaningful information from a bank. The OECD 'standards' are just standardized electronic forms for making requests. I have actually seen them. So they have a format for sharing info, but they cannot actually share anything without a good reason and a court order. Most importantly, it was never the intent to have some kind of database or regular exchange of info on accounts, nationalities, and balances. So if you have an account offshore, as long as you dont transact directly with it from Japan, there is no way it can be discovered.

Not so sure of the last point . I got a letter from a financial institution in France at which I have an account , asking me to confirm my address and that going forward as part of the CRS agreements they will communicate some information (starting with the existence of the account and its balance , I guess) with Japanese tax authorities .
If you have something to hide , you probably need to have an account in a country not part of the CRS scheme ... which interestingly includes the USA , kings of "we bother you with our FATCA shit but don't hope for reciprocity ".

 

[TAG Manager]

Ah yeah, they want the big fish. They aren't interested in accounts that aren't worth the time to chase down and investigate. They want big results for big accounts where there's a real case of deception going on whether intentional or playing dumb.

I'm not terribly worried -- but the invasion of any privacy or bypassing of privacy laws DOES concern me.

 

[Frenchy]

That is wrong basically.

You have an obligation to report your foreign bank holdings to the JPN government. That was introduced about 3 years ago ( I think). Foreign banks will ask you for evidence that you have filed notifications with the JPN government ...coupled with a vague threat to discontinue the banking relationship if you don't show them a copy of the filing. That is my personal experience with two foreign banks.

No one is probably interested in the $862 you may have with Citibank in New York. ...but once the numbers get interesting....banks get interested in reporting.

Yes, there are some minimum thresholds obviously

 

[TAG Manager]

If you have something to hide , you probably need to have an account in a country not part of the CRS scheme ... which interestingly includes the USA , kings of "we bother you with our FATCA shit but don't hope for reciprocity ".

Funny enough, many international banks won't deal with me because I hold a U.S. passport. I got shutdown repeatedly while trying organize some other bank accounts about a year ago. Japanese banks were resistant, but they came through. So, I'm stuck with only U.S. and JP accounts.

Edit: If I had given them some bigger numbers, they may have pushed it through. But at the time, it may have been small potatoes in their eyes in the grand scheme of things. I know people toss around hundreds of millions of yen on a daily basis, which makes my 'tens' amount to chicken scratch.

 

[Frenchy]

Funny enough, many international banks won't deal with me because I hold a U.S. passport. I got shutdown repeatedly while trying organize some other bank accounts about a year ago. Japanese banks were resistant, but they came through. So, I'm stuck with only U.S. and JP accounts.

FATCA is a monster of regulation to tackle with , basically the IRS saying to the whole global financial system "do OUR job, or else". It's pure blackmail .

 

[TAG Manager]

FATCA is a monster of regulation to tackle with , basically the IRS saying to the whole global financial system "do OUR job, or else". It's pure blackmail .

Yeah, I know... it's seriously fucked up. AND the limit is so low! 10,000 USD or more, has to be reported.

 

[MikeH]

So what 'account information' do you think is being 'shared'?

Again I don't know how this works in USA but in Europe it is now same all over the place. The bank is required to be able to identify you in person, and update your information regularly. One of the items they need to know is all the countries you are taxable. They are then required to offer this information to the tax authorities in the bank's own country.

The tax man then shares the information with all the countries the bank reported. They will give out your name, tax ID, bank name and account number as well as the balance in that account. This will be done automatically with the CRS end of every year.

In all countries, the tax authoriies need to have a court order to get any meaningful information from a bank.

This is certainly not true in Europe. On the contrary if the bank doesn't keep it's customer information up to date and offer that information to the tax authorities they face penalties and in worst case revoking their banking license.

Most importantly, it was never the intent to have some kind of database or regular exchange of info on accounts, nationalities, and balances.

I am pretty sure that's what they want us to believe.

So if you have an account offshore, as long as you dont transact directly with it from Japan, there is no way it can be discovered.

If by offshore you mean in a country that will not provide the information to other countries then you are absolutely correct. However those countries are now few and even they are being pressured to join the agreements. And as soon as you move your money away from them to any other country they will require you to report what is that money and where did it appear.