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Be wary of your investments -- the TAXMAN is watching

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  • Well here's a suggestion for you then - do you have Family Trusts in Canada? I assume Canadian law is derived from English common law and you do.

    Too much typing and explaining to do if there's no purpose (unless someone else wants to know about them I guess), so let me know if you want a rundown on them.

    Comment


    • Originally posted by jrp View Post
      Well here's a suggestion for you then - do you have Family Trusts in Canada? I assume Canadian law is derived from English common law and you do.

      Too much typing and explaining to do if there's no purpose (unless someone else wants to know about them I guess), so let me know if you want a rundown on them.
      I read about them a bit. Seems they provide no tax advantages for my situation. Besides, we only have 2 heirs who will get everything (all the debts!!) 50/50.

      So I had my taxes prepared for me for 2010 -- good thing, too, or I would have missed a big point and likely would have had to pay fines and penalties all over again. The CAD appreciated very substantially over the course of the year and my investments were settled in CAD. I crunched numbers and submitted them so it would reduce the accounting fee, but did not take account of that appreciation. Nevertheless, I am happy to report to interested readers that I found s.o. who seems to be a good (good=able to reduce taxation) accountant in Tokyo (can't be definitive until later, after the tax filing has been accepted).

      Comment


      • Originally posted by Super Grover View Post
        I read about them a bit. Seems they provide no tax advantages for my situation. Besides, we only have 2 heirs who will get everything (all the debts!!) 50/50.
        I typed a long reply but lost the lost when GP automatically logged me out - here is the shorter version. Also my set up is for NZ and laws in other countries may vary. But Trust Law is derived from English Common Law, so it would likely be similar for Canada, or any other Commonwealth country for that matter.

        I don't use my Trust for tax advantages. My tax bill would be 2% lower if I had the assets in my own name - I only have my Trust for asset protection, and I think that this is worth the 2% cost.

        The advantage of Trusts is that they are a seperate tax entity to you personally. This means as long as the Trust doesn't owe you money personally, then no creditor can make a claim on the money/assets in the Trust.

        Also, if you set up a Trust correctly, and you are putting money into it (as oppossed to an asset like a house), and you are not a Trustee of the Trust, then creditors would not know it even exists - nor would foreign tax departments.

        But it would be easier/better to have had this setup before you came to Japan, so it propably doesn't help you too much, (but maybe it could too)

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        • Super Grover, or experts please help me understand the tax issue a little more. I read NTA's 2010 income tax guide to understand what is taxable on your income/investment sources from aboard and this is confusing.

          1. Residents
          Any individual who has a domicile or owns a residence continuously for one year or more is classified as a resident. Residents, except for those classified as gnon-permanent residentsh have an obligation to pay the income tax for whole income prescribed by the Income Tax Law.
          Among residents, any individual of non Japanese nationality having domicile or residence in Japan for an aggregate period of five years or less within the last ten years is classified as a non-permanent resident. Non-permanent residents are obliged to pay income tax with respect to any income which has its sources in Japan, any income which has its sources abroad and is paid in this country and remitted from abroad.

          Does this means if you own a home in Japan for a year or more, you are therefore considered to be liable to pay tax on your overseas income even if you have been in the country for say 20 months?

          I was just wondering if someone moves to Japan, buy a house to retire gets hit with all sorts of penalites because he owns a house for over a year even he doesn't have a job in japan.

          Thanks for helping me understand this...
          Last edited by mecafe1; 2011-05-19, 12:50 PM.

          Comment


          • Originally posted by mecafe1 View Post
            Does this means if you own a home in Japan for a year or more, you are therefore considered to be liable to pay tax on your overseas income even if you have been in the country for say 20 months?
            Only if you're Japanese. The next clause explains the threshhold for non-Japanese.

            Comment


            • Thanks for the quick reply Iago. What's confusing about it is that the first chart on the tax guide said Non-permanent Resident and Permanent Resident have to pay some form of taxes from oversea sources. What's your take on this? Man, i think who ever wrote the tax guide needs to use precise words. I can understand when i read the IRS guide but i can't really understand what the NTA wants.. seems like they want everything.

              Originally posted by iago View Post
              Only if you're Japanese. The next clause explains the threshhold for non-Japanese.

              Comment


              • Originally posted by mecafe1 View Post
                ...Does this means if you own a home in Japan for a year or more, you are therefore considered to be liable to pay tax on your overseas income even if you have been in the country for say 20 months?
                ...
                If you are a resident for less than 5 years - you only are liable for overseas income that is remitted into Japan. Cross that 5 year boundary, and you become taxable on worldwide income, regardless of remittance into Japan.

                Comment


                • Originally posted by mecafe1 View Post
                  Thanks for the quick reply Iago. What's confusing about it is that the first chart on the tax guide said Non-permanent Resident and Permanent Resident have to pay some form of taxes from oversea sources. What's your take on this? Man, i think who ever wrote the tax guide needs to use precise words. I can understand when i read the IRS guide but i can't really understand what the NTA wants.. seems like they want everything.
                  If you are non-permanent resident (for tax purposes), you still have to pay tax on income that is paid overseas if it is paid in compensation for work done in Japan. This is to stop you working in Japan, getting paid overseas, and paying no tax.

                  The calculations can get quite complex and take into account days spent in Japan and days spent outside of Japan during the tax year, together with amounts you remit into Japan.

                  It's also, unfortuantely, not as simple as only declaring amounts you actually remit into Japan. Also, note, that money spent in Japan on overseas credit cards also counts as remittances...
                  Last edited by iago; 2011-05-19, 01:11 PM.

                  Comment


                  • Thanks TJrandom, you just helped me understood it, the keyword is remitted into Japan. So not buying a house but remitting cash over to Japan will be alright regardless of the amount? The reason i am asking is because my wife is a Japanese and someday we want to move to japan. Appreciate all the help this board is giving me.

                    Originally posted by TJrandom View Post
                    If you are a resident for less than 5 years - you only are liable for overseas income that is remitted into Japan. Cross that 5 year boundary, and you become taxable on worldwide income, regardless of remittance into Japan.

                    Comment


                    • Originally posted by mecafe1 View Post
                      So not buying a house but remitting cash over to Japan will be alright regardless of the amount?
                      What do you mean by "alright"?

                      Comment


                      • What i mean is that i would be considered as a non-resident for tax purpose as long as i don't own a house and can remit the money into japan without having the NTA knocking at my door asking me all sorts of overseas investments. Am i been naive here?

                        Originally posted by iago View Post
                        What do you mean by "alright"?

                        Comment


                        • Originally posted by mecafe1 View Post
                          .... So not buying a house but remitting cash over to Japan will be alright regardless of the amount? The reason i am asking is because my wife is a Japanese and .....
                          Not what I intended....

                          To be taxed in Japan you need to be (1) a resident, and (2) have income paid in Japan/attributable to work done in Japan/remitted into Japan... OR cross that 5 year boundary and thus (1) be a resident, and (2) have income from anywhere in the world.

                          As for the taxible consequences of NOT being a resident while transferring funds (savings) into Japan for investment purposes - I do not believe it is a taxible event. I could be wrong.

                          Your wife should have nothing to do with it. You transfer your funds into your account and purchase a property in your name - but if you enter your wife into this, then you are gifting something to her, and there are taxible limits on this. She can of course transfer her own funds, and you can jointly purchase property using the ratio of cash owned by each as the ratio of ownership.

                          Comment


                          • Originally posted by mecafe1 View Post
                            What i mean is that i would be considered as a non-resident for tax purpose as long as i don't own a house and can remit the money into japan without having the NTA knocking at my door asking me all sorts of overseas investments. Am i been naive here?
                            No, it's a little more complicated than that. An investigation could end up raking through all your sources of income, and you could find out more is taxable that simply your remittances.

                            I don't think the owning of a house bit matters, other than it could class you as a resident even if you weren't physically here.

                            Assuming you're not Japanese?

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                            • I am not Japanese. Thanks for sharing the ideas, it gives me something to think about.

                              Originally posted by iago View Post
                              No, it's a little more complicated than that. An investigation could end up raking through all your sources of income, and you could find out more is taxable that simply your remittances.

                              I don't think the owning of a house bit matters, other than it could class you as a resident even if you weren't physically here.

                              Assuming you're not Japanese?

                              Comment


                              • Keep in mind that if you move here as soon as you cross the 5-year threshold, stuff becomes taxable. AT FIRST, you will not be taxed on it, however, and if you declare nothing, even if they are aware of your failur to declare, they won't do a thing. THEN, some years later when they are able to apply maximum penalties, THEN they will audit you and hit you up for whatever they can. It is a deliberate plan to get as much money as possible. It is insidious. Once you pass 5 years, make sure to declare everything OR structure what you have so that it cannot be found/taken.

                                Gifting -- be real careful about that, too. They tried to get us on that one but their grounds were dodgy and they failed. The point is that they tried and had we not fought, they would have assessed us for more. I know I rant, but they are out to get money however they can.

                                When in doubt, contact and pay for qualified, expert advice.

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