Tax: keeping a low profile?

[william of lemon]

Hope someone can help with this question

I have some savings in GB Pounds sterling in offshore accounts in the Isle of Man and Channel Islands. These accounts pay interest gross of tax, and the interest remains offshore (it is not remiitted to Japan). So far I've been able to escape paying tax on this interest payment either in Japan or the UK. This is my sixth year in Japan and in July I have to renew my visa (currently a three year spouse visa). I've just found out that after five years in Japan I am supposed to delare the interest that I receive from sources abroad (i.e. the interest on my offshore sterling accounts), right? I guess maybe I should have delared this income on my tax return that I sent in recently but I didn't. So far noone's come round asking questions about it, so maybe I'm in the clear. But I plan to remain in Japan for two more years before returning to the UK, and I don't want to fall foul of the tax authorities here on this. So next year maybe I have to declare my overseas interest payments. How much income tax would I pay in Japan on earnings from abroad? It's about 100Man or so of interest.

Also when I renew my visa in July, I'm wondering whether to ask for permanent residency or not. It doesn't really matter to me since I don't plan to live in Japan forever, but would it make any difference to my tax status and/or the level of scrutiny that I am subjected to by the tax authorities in Japan?

Cheers



Post Edited (04-07-04 15:43)

[trip_hop]

Permanent residency is not a visa, it is a status on its own. When you renew your permission to reside in Japan, you can apply for PR at the same time.

With PR status, all income from whatever orgin and source is taxed.

see: http://www2.gol.com/users/jpc/Japan/taxes.htm

Don't know of many (in fact any) PRs who declare their offshore savings. You may need to check if any declarations are made reciprocally to the authorities. You should also get financial advice before returning to the UK permanently to minimise potential exposure to taxes there.

th

[trip_hop]

Increased information sharing and more importantly reciprocal tax and pension agreements between developed countries could lead to exposure of undeclared financial instruments. Just be discrete.

[swordfishtrombone]

isn't the whole idea of 'offshore' investing/saving to avoid taxes? if these places are like the Cayman Islands, bahamas, etc., they are most likely 'tax havens' meaning they have very lax restricitons on reporting and probably don't share info with other governments.

[Blues]

Well it used to be that way but it seems that some things have changed.

[maplewoodtree]

Can you prove if needed to Japan that this money did not come from Japan?
After declaring in Japan will the UK who will have access to the Japan information want to know if it came from the uk at some point in the past?
Information sharing around the world is becoming very sophisticated given global events and the previous benefits of such offshore solutions are quickly being lost.

[william of lemon]

As far as the "EU tax directive" is concerned, the info I could find on the Channel Islands and the Isle of Man offshore accounts says this: From next January, people resident in the EU or Channel Islands (or maybe other places like Switzerland) will be able to opt for either full information exchange with their local tax authority (where they reside), OR to have their income subject to a withholding tax at source in the Channel Islands/Isle of Man. This supposedly will not affect people living outside the EU, provided they give proof of residence outside the EU. But to be honest there seems to be very little info about all this, and none mentioned on any of the sites of banks based in Ilse of Man/Channel Islands. Seems they're not too keen to publicise this forthcoming tax bombshell to potential customers!

[yogibear]

In your particular case, if your annual interest income is around 100man yen, then the tax would amount to 20man yen. As for the status of the information exchange between the channel islands, isle of man and the NTA of Japan, the current negotiation reportedly mirrors the scheme that was established between Netherlands, the US and the above crown colonies. This would presumably mean that 2way Information Exchange will be made possible sometime in the 2008-2009 timeframe, although the directives may not go so far as to grant options of either having the offshore institutions withhold tax - or letting them provide the NTA with your account information explicitly.

[R.Akashi]

With that kind of return Bill, you would be better off putting the money into a portfolio bond and then investing it into the very same bank account...

Then 2 years down the road, when you return to the UK, you can continue to legally keep your offshore account and never pay tax on it, until funds are remitted back into the UK. There will be substantial tax breaks afforded to you, which will more than justify the cost of the wrapper..

Basically for every 100K in the bank, you will pay 100K in tax over a 25 year period(@5% growth p.a)
Or you can pay approx 10K in tax over the same period...!!

Your choice sir...!!

Regards

Robert Akashi

[minamon]

As regards the "EU tax directive" I understood that this was a measure to prevent EU citizens (e.g. Germans who place funds in Switzerland; Irish who place funds in Channel Is. or Isle of Man, etc.) from avoiding tax.

It is easy for The EU to pressure Isle of Man, Channel Is., and Switzerland (which are not in EU, but are surrounded by, and dependant on UK or EU, respectively) into disclosing customers with EU addresses.

However, it is not easy for the EU to pressure other offshore locations, such as Caribbean, HongKong, Singapore, to provide such info, and it would be even harder for Japan to do so. THerefore I dont think there will be any disclosure to Japan, from remote (relative to Japan) locations in Europe.

Also if there is disclosure then surely HK and Singapore would do so first, since they are more dependent on Japan -- there are various funds in HK and Sing. with documents in Japanese, for example, and Japanese staff to cater for Japanese customers. The IOM and Ch. Is. dont have enough Jp customers to provide such language backup.

HOWEVER, there is certainly disclosure and checking up on dubious funds in order to prevent money laundering.

[R.Akashi]

except for 1 small flaw...
by all means keep it in those centers and `hope` they never find out...

But what happens should you need to bring the money back into the country, ?

Within the next 10 years, this eutd will probably be global....

regards

Robert Akashi

[minamon]

>>by all means keep it in those centers and `hope` they never find out...

Find out? Those places and others in Europe are perfectly legal. And I've already told the j-tax people about funds overseas. See below...

>>But what happens should you need to bring the money back into the country, ?

I did so already -- I brought back a lump sum to buy an apartment. About a year later I got a letter from tax dept. -- big surprise! I didnt know that banks reported incoming funds (this was about 4 years ago). I explained everything (by phone) to the tax office, ie the funds were originally from my salary, intended for pension etc. but now needed to buy property.
taxman asked if they increased in value?
me: well, yes, a bit -- although they decreased a bit too, so, overall, not much. (I was vague, since I didnt know exactly how much they had increase, what with currency fluctuations, etc.
The nice tax man was happy with that.

>>Within the next 10 years, this eutd will probably be global....

The financial institutions in offshore and other countries use the *no-local-tax* thing to attract more customers -- in fact that is probably the only way they can get business for themselves and stay afloat. Obviously, they prefer not to ____ off existing or new customers, AND they wont want to get involved in extra paperwork, sending details to dozens of countries, so they wont voluntarily start sending out private customer info, unless there is something illegal involved. But there is nothing illegal -- it is just that the customers should declare their annual income to their local tax authorities every year. It is up to us honest tax-paying non-citizens to fess up. (Hey, if we dont pay as much tax as we possibly can, then where will the poor Jp Government find funds to fingerprint us at the airport, or support the amakudari system, or pay themselves double the average for their taishokukin? The poor guys!)

Also, you are only supposed to declare cash gains. Fund values going up (or down) are just theoretical till you actually encash. At that stage you should declare as required. But it is up to you: no overseas bank is going to send info to every country in the world (that requests it) unless they are forced to.

Of course, there is 1 exception: I believe any offshore country would disclose anything to the EvilEmpire, since the Washington regime can zap (physically or economically) anyone who doesnt do what they say. But not other countries.

[R.Akashi]

Actuaslly Minamon, I was replying to your part of an european keeping it in europe...sorry for not making it clear...

The next part was when you want to bring it into japan, unless its a small amount, he`ll want to know where its from.You were very lucky with the jtax man as the uk tax man will want proof...

the 3rd part again was referring to europeans with money in sing/hk etc, the eutd will probably extend their tentacles..

UBS as well as others do state on their sites that at the moment investors funds are exempt but may not be the case in the future,....

William...get yourself a wrapper....and sleep well at night, even once you have returned to the UK...

Regards

Robert Akashi