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Be wary of your investments -- the TAXMAN is watching

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  • Be wary of your investments -- the TAXMAN is watching

    This is written to caution some who may not be aware that the folks in the tax agency have become very vigilant in tracking money being sent out of Japan. This is not hearsay. I have actual incidents recounted to me in the past few months. Foreign teachers seem to be being targeted.

    Since I hate being taxed unfairly, I will warn you.

    Somewhat large amounts sent will trigger a report to the agency. Frequent transfers will also trigger a report. If you have been here for a day over 5 years you will be viewed as a resident of Japan for tax purposes. It could be less, too, depending on individual circumstances.

    If you send money back and that money earns ANY form of income (i.e., invested) or if it is a "gift" over the limit here, then you are subject to Japanese taxation. Not only that, if you are paying for your spouse's social obligations here and she happens to be a co-signatory to any of your income-earning accounts or investments, then s/he will deemed to be earning income. Therefore you/she will likely be required to pay up for her owed contributions if the interest exceeds the Japanese maximum salary one can earn here before income tax kicks in.

    If you think you are in the clear because you have paid tax on interest or other derived income in that other country and that country has a tax treaty with Japan, then, like my friend, you would be SO wrong. As a resident of Japan, all worldwide income must be reported. So if you paid, say 20% tax in Canada or Australia on investment income, that would be less than what you would pay here. You would be required to pay the difference (at least) and then a 15% penalty and then a late tax (entaizei) of 4.2-4.7% and then a city tax of 10%. The real problem is with penalties. They are brutal. Of course when the NTA wants to treat everything as salary, that's not very friendly or above board.

    Here is an example.
    You have $100,000 in savings or investments that have averaged 8% over the past 5 years. Thus you have earned around $45,000. You have paid perhaps 20% in tax, so approximately $9,000. You earn a decent salary here. Let's say around 8.3 million just as an example.
    The tax authorities here will consider your "investment income" as salary (regular ncome) and that income happens to push you over the 9 million threshold (to the 33% tax rate). According to them, you ought to have paid roughly $15,000 plus a 15% annual penalty on taxed owed and then a 4.2-4.7% lateness penalty, plus the city tax. You will end up with a bill for at least $6,000 and then you will likely be audited in the following year (at least). The process of them investigating you will involve you revealing your travel habits becuase they will demand to see your passport and, potentially, a line by line evaluation of your banking/investment history.

    Again, this is no b.s. whatsoever, this happened to two people I know within the last 2 months. So, be careful.

    Anyone have any ideas for reducing tax and still investing????

    If you are concerned, please, please consult with an fully qualified accountant.
    Last edited by Super Grover; 2011-09-13, 11:58 AM. Reason: an update to enhance clarity & accuracy

  • #2
    Originally posted by Super Grover View Post
    Anyone have any ideas for reducing tax and still investing????
    Get good at losing money profitably.

    Comment


    • #3
      Isn't the statute of limitations 3 years for individuals?
      Last edited by Morton; 2010-12-12, 04:03 PM.

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      • #4
        Originally posted by Morton View Post
        Isn't the statue of limitations 3 years for individuals?
        statute of limitations on what? the authorities can choose to audit you tomorrow if they wish on your activities for the past 5 years, at least. i know nothing about what limitations there might be regarding "non payment" of tax or how far back they can audit. in the cases above, both were for 5 years.

        Comment


        • #5
          I'm no expert but I think that if you have filed returns they can go back 3 years. If you haven't filed returns they can go back 5. If you have been willfully dishonest they can go back 7.

          If you're a typical salaried employee then you probably wouldn't have filed a return and possibly they will go back 5 years.


          Here's one link. http://books.google.co.jp/books?id=4...ations&f=false
          Last edited by Morton; 2010-12-12, 03:39 PM.

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          • #6
            Originally posted by Morton View Post
            I'm no expert but I think that if you have filed returns they can go back 3 years. If you haven't filed returns they can go back 5. If you have been willfully dishonest they can go back 7.

            If you're a typical salaried employee then you probably wouldn't have filed a return and possibly they will go back 5 years.


            Here's one link. http://books.google.co.jp/books?id=4...ations&f=false
            typical salaried workers do nothing. their company files. i know nothing about how long. more important is what is being done to get tax.

            Comment


            • #7
              You have $100,000 in savings or investments that have averaged 8% over the past 5 years. Thus you have earned around $45,000. You have paid perhaps 20% in tax, so approximately $9,000. You earn a decent salary here. Let's say around 8.3 million.
              So considering the state of the world economy if your savings are in the red will they be handing out rebates?

              Comment


              • #8
                Since moving to Japan, I haven't sold any investments that netted me a profit. However, I have sold some loser stocks, so should I be claiming that on my Japanese tax return and if I do will those losses count towards lightening my tax load here?

                Comment


                • #9
                  Originally posted by thefan View Post
                  So considering the state of the world economy if your savings are in the red will they be handing out rebates?
                  They are handing out rebates...if your first name is Goldman, and your last name is Sachs.

                  Comment


                  • #10
                    Originally posted by Teacher101 View Post
                    Since moving to Japan, I haven't sold any investments that netted me a profit. However, I have sold some loser stocks, so should I be claiming that on my Japanese tax return and if I do will those losses count towards lightening my tax load here?
                    It seems like it would be worth looking into. If you are deemed a resident for tax purposes, then you could bring your papers to their office. Nothing to lose!
                    Last edited by Super Grover; 2010-12-13, 10:50 AM.

                    Comment


                    • #11
                      Originally posted by Majestic View Post
                      They are handing out rebates...if your first name is Goldman, and your last name is Sachs.

                      If I change my name, maybe I will get some of their mojo? Why people aren't going nuts over this, I just can't understand.

                      Comment


                      • #12
                        Well, I just got audited and luckily I decided to hire a new and very good accountant and he saved me a fortune.

                        One of the taxmen who came was an international tax specialist and he came loaded with information about me. He knew about my bank accounts and the amount of interest I had been paid in the last 5 years. I have been warned not to lie and luckily I didn't. I think if I had been caught lying they would have been much tougher with me.

                        My tax problem started less than a month ago and at that time I posted asking whether or not the NTA would contact my bank. Well they did and my my bank told them and this all happened in a very short space of time.

                        Make no mistake about it they are coming for us and they can and will easily get information about us. I was more ignorant than deceptive but I will never mess with the NTA again.

                        Comment


                        • #13
                          Can I get this straight?

                          I pay tax on my salary in Japan.

                          I send it to my overseas bank account for when I leave Japan.

                          Then I have to pay tax on it AGAIN here in Japan??

                          What am I missing...???

                          Comment


                          • #14
                            Originally posted by Morton View Post
                            Well, I just got audited and luckily I decided to hire a new and very good accountant and he saved me a fortune.

                            One of the taxmen who came was an international tax specialist and he came loaded with information about me. He knew about my bank accounts and the amount of interest I had been paid in the last 5 years. I have been warned not to lie and luckily I didn't. I think if I had been caught lying they would have been much tougher with me.

                            My tax problem started less than a month ago and at that time I posted asking whether or not the NTA would contact my bank. Well they did and my my bank told them and this all happened in a very short space of time.

                            Make no mistake about it they are coming for us and they can and will easily get information about us. I was more ignorant than deceptive but I will never mess with the NTA again.
                            Without divulging any unnecessary personal details, do you mind telling us what triggered it? For example, were you also in some decidedly high tax bracket as well or were you making sizable deductions on your tax returns?

                            Nervous guys like me want to know ...

                            Comment


                            • #15
                              Originally posted by Keeptrying View Post
                              Can I get this straight?

                              I pay tax on my salary in Japan.

                              I send it to my overseas bank account for when I leave Japan.

                              Then I have to pay tax on it AGAIN here in Japan??

                              What am I missing...???
                              If you earn income on that money then if you have been here long enough you must declare and pay tax on ALL your world income.
                              I was reading earlier this eve. that in this scenario that follows a person would owe Japan from 15? to 50%. 50%!!!! Here we go:
                              You are married to a J. You move to another country (i.e., leave Japan!). Within 5 years you die. Japan is entitled to a claim on your estate.

                              Moral: Leave Japan. Do not die within 5 years. Change nationality!
                              Last edited by Super Grover; 2010-12-14, 12:08 AM.

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