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Be wary of your investments -- the TAXMAN is watching

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  • Originally posted by Super Grover View Post
    I do not know why either and I said that. I wish you were correct and then I could just know it is a figment of my imagination. I am set to lose, it seems, a whole year of GROSS salary in payments. One of the others is about the same. THEREFORE as a courtesy I brought it up. I think for the NTA it is easy to do.
    I think we're all glad you brought the subject up.

    However, if you don't want to get audited again it might be wise to speak with an accountant who specializes in this area to find out WHY they went after you.

    Comment


    • Originally posted by thewileycoyote View Post
      I have to admit I am surprised so many expats here know so little about this. There are also possible consequences for some of you back home as well, especially for those of you who only stay for a couple of years. Just because you live in another country for a few years doesn't mean you don't have to file tax returns or pay tax in your home country. Did you sever almost all your ties with your home country? Do you own property, who is living in it. Do you keep memberships to clubs, bank accounts, drivers license, health cards etc. Most of your home countries also want you to declare your worldwide income and pay any difference in tax to them if there is one.
      I agree. I've met plenty of Americans living in Japan who don't file US taxes.

      Let me add this... If you owe money to the IRS you may very well find yourself arrested after entering the US. An acquaintance didn't declare some stock transactions or something of that nature and he was arrested while going through immigration last year. They swiped his passport and bingo. He was nabbed.
      Last edited by Ken44; 2010-12-23, 10:36 PM.

      Comment


      • Originally posted by Ken44 View Post
        Exactly. Just don't draw attention to yourself and you should be fine. I don't know why the OP and a few of his buddies suddenly found themselves audited but I don't believe NAT is deliberating hunting for gaijins. The money just isnft there. I know some people might think earning 7-9- million yen is a lot and it is pretty good for a gaijin teacher but in the overall scheme of things itfs hardly the kind of income NAT would scrutinze unless they had a good reason.

        Agreed. Correct me if I'm wrong, but that kind of salary for those in their later years is pretty unremarkable.

        Comment


        • Originally posted by Ken44 View Post
          I think we're all glad you brought the subject up.

          However, if you don't want to get audited again it might be wise to speak with an accountant who specializes in this area to find out WHY they went after you.

          pretty sure it was the amount and frequency of transfers, but they also have a cooperation plan (all of you can read about it) at the NTA website. i sent money. i asked the bank over there if they reported. no. only with a court order. the first few questions showed me they (NTA) were ready to play hardball. next they showed me about "all world income" and the penaltiies. i have to think that they got the info from cdn tax authorities.

          anyway......................gotta make this back. but not right this moment.

          merry christmas!

          Comment


          • Originally posted by Keeptrying View Post
            Agreed. Correct me if I'm wrong, but that kind of salary for those in their later years is pretty unremarkable.
            In Japan, I would say if you are in your "later years," which I might be and you are married and under that salary (7 million), it is not so good, but it depends on where you live. Nevertheless, many are below it (be careful about marrying a J. gal). Foreign profs are being squeezed. Positions such as mine are harder and harder to come by. I read two ads where they want a PhD and will pay 4.8 million with zero possibility of renewal or tenure (OTOH, some of the "scholarship" here is a joke -- much of ESL/EFL). As I have written many times, I am waiting for my better half to retire. Canada is better, but even with its NTA, Japan is better than so many other places.
            Last edited by Super Grover; 2010-12-23, 10:47 PM. Reason: more ranting

            Comment


            • Originally posted by Ken44 View Post
              My situation has to do with rental income. I gross maybe $75,000 a year but after my accountant gets done I'm in the red and net nothing. Write-offs are legit and verifiable. I haven't paid US taxes for years.

              So.... if the NTA were to audit me I don't know where it says I have to bring up the fact I own property. I only report income earned.
              In your situation, your expenses do not erase the fact that you have rental income, they merely mitigate the taxable income to zero. So on your Japanese returns you should be claiming the income and the expenses just like you do in the States. There may be some variation in what you are allowed to claim, but my guess is that the result will be basically the same.

              If you are avoiding putting this income down on your Japanese tax returns because "it nets out to zero anyway, and its a hassle, and I'd rather not tell the NTA more than I have to", then you are kind of unnecessarily setting yourself up for the same nasty experience that Grover is going through.

              Comment


              • Originally posted by Majestic View Post
                There may be some variation in what you are allowed to claim, but my guess is that the result will be basically the same...
                This is what I need to know before deciding on declaring such income esp. if I see no reason why I should be audited. Declaring another 7 million or so would put my yearly income through the roof!

                My monthly salaries are deposited into a J-bank and I physically take out the around 500,000 each month and deposit the money into my Citibank account where it is then transferred to my BOA account in the States.

                Now I called Citibank, Japan this week and asked about making an overseas remittance and was told only transfers over 1 million yen are reported to the J-tax authorities. Personally, I've never had any trouble and see no reason why NAT would be interested in me given that I declare all my J-income and pay my taxes on time.
                Last edited by Ken44; 2010-12-24, 12:04 AM.

                Comment


                • Can you claim homeloan interest, maintenance costs and property depreciation against your taxable income here?

                  I have been trying to find information on this but cant seem to see any details on what can be claimed for investment properties. I guess it doesnt really matter yet (less than 5 years in Japan), i just need to make sure i declare that income for now... But interested to know what that will mean in the future.


                  Also, what is the ruling on 'having a domicile'? I was here for 6 months in 2008, stayed in a sharehouse and didnt earn a Japanese salary (earned a salary in Australia while i was here). I remitted about 150,000yen a month to my Japanese bank account for living expenses (yeah i was frugal), but never claimed a tax return here :-o

                  Does that count as 6 months 'having a domicile'? i.e. do i become a 'permanent resident' after another 4 and a half years here?

                  Comment


                  • Originally posted by tokyo_dom View Post
                    Can you claim homeloan interest, maintenance costs and property depreciation against your taxable income here?
                    Good question but my feelings is the J-tax laws regardling inventment property aren't nearly as benificial as those I find in the States.


                    Originally posted by tokyo_dom View Post
                    ...I guess it doesnt really matter yet (less than 5 years in Japan), i just need to make sure i declare that income for now... But interested to know what that will mean in the future.
                    Well, if you start declaring overseas rental income now I think you might catch the attention of the J-tax authorities should you decided to stop after reaching the five-year mark because you don't like your tax bill.
                    Last edited by Ken44; 2010-12-24, 01:59 PM.

                    Comment


                    • Originally posted by ozzijp View Post
                      This just can't be true. I had declared (fully reported) income well in excess of 20 mill. in 2003, 4 and 5. Didn't have to do that at all. Unless this rule was brought in after 2005, I find this a little hard to believe. What's your source?
                      For source - please see the link in post #123 above.

                      This has been the requirement for many years - since the late 80's at least. That you didn't get called out on not providing one of the necessary forms is probably just your luck. In the past when I filed in person - some years the "agent" requested it, and some years they didn't seem to know what it was.

                      Comment


                      • Ken and tokyo_dom, you can deduct any legitimate expense from rental income:

                        fixed asset taxes
                        repairs and maintenance
                        insurance
                        loan interest
                        utilities
                        advertising
                        management fees
                        salaries*
                        depreciation
                        cleaning, tax preparation fees, etc..

                        *Certain rules apply when you claim family members as employees.

                        Regarding the form for reporting assets of taxpayers earning more than 20m yen, there actually is a standard form and you can find a pdf of it here. Since TJRandom was able to report his assets with a different format, my guess is that the NTA isn't a stickler for how you report the assets, as long as you make a complete declaration.

                        @tokyo_dom: If you were here for 6 months and didn't earn a Japanese salary, you don't need to worry about domicile or residence or any of that. See the erstwhile Tax Guide For Foreigners (which was also kindly provided by TJRandom in his post #123 as mentioned above) for complete info.

                        Comment


                        • Thanks Majestic, it looks like they have the same rules as Australia, which means i my rental property becomes more of a benefit than a liability (its negatively geared by the equivelant of about 5man a month at the moment thanks to the Aussie interest rates - not taking into account depreciation!)

                          I looked through that tax guide but wasnt sure of the situation because i was physically situated in a Japanese company during that 6 months, but i guess it would be classed as 'on-the-ground-training' rather than actual work (i had a visitor entry pass)

                          Looking forward to doing this right from the start... Lots of great advice in this thread!

                          Comment


                          • Originally posted by TJrandom View Post
                            For source - please see the link in post #123 above.

                            This has been the requirement for many years - since the late 80's at least. That you didn't get called out on not providing one of the necessary forms is probably just your luck. In the past when I filed in person - some years the "agent" requested it, and some years they didn't seem to know what it was.
                            Thanks. Maybe I was just lucky. Maybe, they took pity on me when they saw the losses I took in 06, 07, 08 and 09.....

                            Comment


                            • Originally posted by Majestic View Post
                              Ken and tokyo_dom, you can deduct any legitimate expense from rental income:

                              fixed asset taxes
                              repairs and maintenance
                              insurance
                              loan interest
                              utilities
                              advertising
                              management fees
                              salaries*
                              depreciation
                              cleaning, tax preparation fees, etc..

                              *Certain rules apply when you claim family members as employees...
                              Thanks for the information and while the J-write-offs appear the same as in the US my situation is more involved.

                              Property A is paid off and brings in maybe $25,000 in profit. However, I am able to use the write-offs from Property B to off-set the profits from Property A. Not sure how the J-tax laws view this.

                              If all goes well by the end of 2012 Property B will be paid off but I still have losses from previous years which I can now roll over to off-set profits from both A and B properties. Not sure how the J-tax laws cover this either.

                              I don`t believe the Op and his friends were audited simply because they were gaijins. There was something about their tax returns and/or bank transfers which caught the attention of the J-authorities. Morton`s situation was pretty straightforward: He was transferring money vie a J-bank to an account in the UK which likely caused a red flag.

                              Again thanks for the tax information but I`m going to try and keep under the J-tax radar until it`s time for me to leave. When I file my J-taxes I actually go to the local tax office for help and when my return is done it`s stamped I`m given a copy and sent on my way. My feeling is if my return is accepted then there`s no reason to look any further unless something pops up like the year I didn`t submit all my year-end tax statements and I got a call from the ward office.
                              Last edited by Ken44; 2010-12-25, 07:49 PM.

                              Comment


                              • NTA taxes

                                Hi,

                                I have read this thread with interest and I have a couple things to throw in:

                                1) On being audited. As I understand it, transferring over a million yen in or out of Japan causes a red flag to go up and could lead to further checking. Another thing that might, according to a Japanese site, is buying land/house, since there is usually a big payment - money transfer, and they might be suspicious as to where it came from. These things start them looking.

                                2) Foreign income. As mentioned, if you have been here five years, Japan has first right to tax all your income, and as I understand it, you can't get credit for any income tax you paid the other country. If like me, you thought that because of the tax treaty, with the US in my case, that by paying US income tax on income from US property and stock investments you wouldn't have to pay it in Japan, then you are wrong. I am being asked to pay it all here with no deduction of the taxes I paid the US, and no chance to refile in the US (for 2005-7 at least) and deduct what I'll have to pay Japan. It's vicious. Double taxed.

                                3) Income from stocks. Worse. Contrary to what one person on this thread wrote, you cannot carry over a loss from one year to the next, unless you are using a specially licensed Japanese company to buy your stocks. As far as I can tell, those big on-line companies like Ameritrade, Scottrade etc don't have the license. This obscure fact is killing me. I am being audited for the last five years, in which I lost 2 million overall. I haven't been cashing out, but like most people, selling and buying back the same (or different) stocks quite often to try to prevent losses when the market dips. As a result, my yearly statements reflect fairly closely gain or loss my total value, even though all that money is still invested. Now here is the pinch. Over those five years, I showed three years of 3 million yen gain each, and two years of 5.5 m yen loss each.

                                Ie, I lost about 2 million, but the NTA JUST COUNTS THE UP YEARS, AND CONSIDERS THE DOWN YEARS AS 0 INCOME. No carryover. They want about 4 million on money I did not make! (and had paid US taxes on as well) My total investment in the stock market is just 10 million, but every time it swings up, I get hit big, and after a fall and swing back up again, hit big again. Now the market is always swinging up and down, and they tax every upswing. It is close to being double-triple-quadruple taxed on the same money.

                                4) things to do:
                                - If you are sending back money to Mom (or not?), write her off as a dependent.
                                - Ask if you can claim the trip fare back home as costs for some of your foreign income, such as royalties
                                - Get a tax consultant.

                                5) Questions
                                - Does anyone know the exchange rates the NTA uses for 2005-2009, or how they calculate it?
                                - Does anyone know how to report stock income? For example, can you line up buys and sells of one stock across years (long term) so that you can decrease the profits and losses over a five year period?

                                -Does anyone else have and ideas like these?

                                Comment

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