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Be wary of your investments -- the TAXMAN is watching

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  • Originally posted by O'Hanlon View Post
    Your questions reflect an attitude that would land you in deep trouble. Tax investigators give you the opporotunity to explain cash flow/income. You can adopt a ____y attitude, then you will see how much information they already have. The access to bank accounts in Japan; and the international aggreement with other tax authorities, banks to request your financial status on, the grounds that money transfer could be suspicious. Then, when they have done their homework and received all the answers you refused to answer, they finally select one of 3 categories to "punish" you. 1. Did not understand Japanese tax law. 2 . Did understand tax law and was late paying and 3. Deliberate tax avoidance and lied/refused to disclose assets/income to the investigator. Each has a different punishment scale and type 3 is serious. Tax owed over the years income that was generated, a penalty fine and then duplication of all their findings to city ward office local tax to let them take a second bite. Considering their attention to detail, I would not have liked to see the nasty side, or have them arrive at my home.
    True, but #3 is reserved for major offenders. Also, in #3, there is a difference between refusing and having them do things. For example, in my case when they "requested" that I provide them with 5 yrs of bank statements, I got those. I could have forced them to get a court order in Canada since that is the only way the Cdn. banks will release info to outsiders and that wouldn't have been refusing. The meter was running, however, and I knew I was going to be forced to pay one way or another.

    To repeat to any newbies reading this: Get an accountant!
    Last edited by Super Grover; 2011-05-30, 10:45 AM. Reason: clarity

    Comment


    • Originally posted by minamon View Post
      "Oh I hope everyone can be that lucky and not be found. As for the real hassle part above, yeah, it certainly was! "

      It's a matter of luck (of being audited) if you have left an electronic trail.

      If you haven't left a trail, then it's not luck....
      Exactly. I`ve never been audited in Japan or the US because I`ve never given the tax authorities in either country a reason to question my returns.

      Comment


      • Originally posted by Majestic View Post
        The purchase of a house will be the trigger for the National Tax Agency to send you a form (inquiry) asking you for information on how your purchased the house. The "inquiry" (o-tazune) carries no legal obligation for you to reply.

        However, the sending of the inquiry is already an indication that the tax agency thinks something looks suspicious. So if you compound this by not returning the inquiry, you now look doubly suspicious, and instead of a friendly inquiry, you should now be preparing yourself for a fairly intrusive audit.
        Are you suggesting that every time a house purchase is made in Japan the bank or the real estate agency notifies the NTA? I find that hard to believe.
        Or are you saying that a notification is made because a FOREIGNER purchased a house?
        Now that would be blatantly racist/xenophobe/discriminatory, wouldn't it? Not that it would be far fetched when I come to think of it as we all know foreigners are inherently suspicious (a couple of weeks ago a saw a warning on the news about "furikomi" crime, the perp was a blond haired foreigner).

        As well if "the sending of the inquiry is already an indication that the tax agency thinks something looks suspicious" then as might as well not volunteer them any information, why would you disclose anything that they may or many not be able to discover on their own since the investigation will probably commence anyway?
        Originally posted by O'Hanlon View Post
        Your questions reflect an attitude that would land you in deep trouble. Tax investigators give you the opporotunity to explain cash flow/income. You can adopt a ____y attitude, then you will see how much information they already have. The access to bank accounts in Japan; and the international aggreement with other tax authorities, banks to request your financial status on, the grounds that money transfer could be suspicious. Then, when they have done their homework and received all the answers you refused to answer, they finally select one of 3 categories to "punish" you. 1. Did not understand Japanese tax law. 2 . Did understand tax law and was late paying and 3. Deliberate tax avoidance and lied/refused to disclose assets/income to the investigator. Each has a different punishment scale and type 3 is serious. Tax owed over the years income that was generated, a penalty fine and then duplication of all their findings to city ward office local tax to let them take a second bite. Considering their attention to detail, I would not have liked to see the nasty side, or have them arrive at my home.
        My contention is that when they make that inquiry they are unto you already, they are just collecting as much information as possible and hope that you'll be kind enough to provide something that they wouldn't be able to discover/dig up on their own.
        It is the same when a police man comes to my door and inquires about something he thinks might be suspicious. I am under no obligation to cooperate and would never do so whether I am innocent or guilty.
        There is nothing new about tax departments being able to look into people's bank activities, if that bank is located in their jurisdiction, or looking into past tax filings if the country of origin has a reciprocal agreement with the adopted country.
        I think double taxation is inherently unfair so I don't see anything wrong with trying to protect one's assets from such practice.

        Comment


        • Originally posted by Ken44 View Post
          Exactly. I`ve never been audited in Japan or the US because I`ve never given the tax authorities in either country a reason to question my returns.
          Great! Your tips?

          Comment


          • Originally posted by Super Grover View Post
            Great! Your tips?
            Keep wire transfer well under 1,000,000 each month and make sure money orders from Japan are kept under $3000 if sent to the US.

            I use Citibank to transfer money into my US bank account. Not the J-bank where my teaching salaries are deposited.

            Comment


            • Originally posted by SantaKraut View Post
              Are you suggesting that every time a house purchase is made in Japan the bank or the real estate agency notifies the NTA? I find that hard to believe.
              Or are you saying that a notification is made because a FOREIGNER purchased a house?
              When you purchase property in Japan, you must pay a property acquisition tax, and so through this transaction the NTA already knows the details of your purchase. The real estate agent and the bank have nothing to do with the inquiry.

              The inquiry is sent at the discretion of the NTA. They do not single out foreigners. Regarding your strategy of ignoring them; best of luck.

              Maj

              Comment


              • Originally posted by Super Grover View Post

                To repeat to any newbies reading this: Get an accountant!
                Agreed. Tax Audit 101. Quality advice; a rare GP phenomenon.
                Last edited by ozzijp; 2011-05-31, 07:48 PM.

                Comment


                • Great way to invest your money. Welcome to your new online business trading options and penny stocks.

                  Comment


                  • First time reading this thread, sorry if I'm repeating any points as I only read the first and last page.

                    You are required by law to declare worldwide income after you have lived in Japan for 5 years (I think you have to have spent more than half of each year in Japan each year for 5 years consecutively). This includes real-estate, interest, salary/wage, trading profits etc. If you're not sure whether you're liable for this, call the tax office and without giving your name ask how it works.

                    You can use this to declare a loss as well remember, lowering your taxable income and possibly setting you up for a tax refund (ku tax and shotokuzei both). Travel, legal, maintenance, depreciation, salary costs... these all can be claimed here. If you're not sure how to declare, just ask the local tax office folk (take someone who speaks Japanese if you don't), if you're humble and go in with the approach that you want to get this right and would love them to teach you, they'll do 90% of the forms for you.

                    If you're not sure what is declarable, ASK. If you think you've paid too much, ASK. The tax office are public servants, they're not rewarded on how much they collect. If you can show that you paid too much, they'll give it back.

                    Once you year 20mil+ the filing is different, I'm not sure if it's the same kakutei shinkoku you'd have to use to declare other income or losses because I don't earn 20mil+, this is a different question to worldwide income however.

                    Comment


                    • Originally posted by ozzijp View Post
                      Agreed. Tax Audit 101. Quality advice; a rare GP phenomenon.
                      You don't need an accountant if you speak and read Japanese. I just went into the tax office and worked through it. It can be a hassle however, but I wanted to know how it all works.

                      Comment


                      • Originally posted by nkjapan View Post
                        First time reading this thread, sorry if I'm repeating any points as I only read the first and last page.

                        You are required by law to declare worldwide income after you have lived in Japan for 5 years (I think you have to have spent more than half of each year in Japan each year for 5 years consecutively). This includes real-estate, interest, salary/wage, trading profits etc. If you're not sure whether you're liable for this, call the tax office and without giving your name ask how it works.

                        You can use this to declare a loss as well remember, lowering your taxable income and possibly setting you up for a tax refund (ku tax and shotokuzei both). Travel, legal, maintenance, depreciation, salary costs... these all can be claimed here. If you're not sure how to declare, just ask the local tax office folk (take someone who speaks Japanese if you don't), if you're humble and go in with the approach that you want to get this right and would love them to teach you, they'll do 90% of the forms for you.

                        If you're not sure what is declarable, ASK. If you think you've paid too much, ASK. The tax office are public servants, they're not rewarded on how much they collect. If you can show that you paid too much, they'll give it back.

                        Once you year 20mil+ the filing is different, I'm not sure if it's the same kakutei shinkoku you'd have to use to declare other income or losses because I don't earn 20mil+, this is a different question to worldwide income however.
                        Well, in this thread there has been lots of discussion and disclosure. It might be an interesting? read. There's no chaotic lunacy (except for my rants) like much of the rest of GP and reading Majestic is worth the price of admission! Without going ballistic, I would suggest that this sentence you wrote is subject to interpretation:

                        The tax office are public servants, they're not rewarded on how much they collect. If you can show that you paid too much, they'll give it back.

                        I believe there is a mandate to aggressively collect tax. New(s) stories tend to support this. If you are audited as I was, there is a paper you must sign acknowledging that your right to revisit the audit expires in 3? 5? days (very short anyway). Once it's over it's over and if you missed something such as declaring family support overseas (only an example), tough noogies.

                        If your taxes are simple, indeed, you can go in there and they will help you. Like tax agencies around the world, however, they will not explain ways to minimize your taxes (firsthand experience). If one's situation is somewhat complex, using a smart, qualified accountant is the only way to go. S/he will save you thousands.
                        Last edited by Super Grover; 2011-07-09, 10:25 AM.

                        Comment


                        • sure. My situation was simple. I'm not american and I own offshore real-estate. Minimizing tax meant filling in the depreciation claim correctly and including backup documentation. I did find the folk at the tax office very pleasant to deal with, but I speak Japanese well enough that it wasn't a struggle.

                          If you have a more complicated situation, particularly if you're from the states and have to pay tax on your worldwide income there also, then I agree a top level tax accountant will make your money back dozens of times over. It took me 3 visits to the local tax office to get everything sorted so it's not for everyone. I didn't do that for the fun of it either, the tax accountant I wanted to work with was unavailable for a month so I just thought what the heck and went in and started asking questions.

                          Going forward I might use a tax accountant anyway (I think I'm doing the depreciation too quickly and could get another 1-2 years of benefit, also I want to add more income streams) but I highly recommend the experience. You make a very good point that they're not there to help you lower tax, that's true, but understanding at a really low detail how the process works meant I felt more in control of what was happening.

                          Comment


                          • Originally posted by nkjapan View Post
                            sure. My situation was simple. I'm not american and I own offshore real-estate. Minimizing tax meant filling in the depreciation claim correctly and including backup documentation. I did find the folk at the tax office very pleasant to deal with, but I speak Japanese well enough that it wasn't a struggle.
                            -----------
                            Just wondering -- did you declare your offshore property in your first year as a Japan resident?
                            If not, did the tax office start quizing you about where you got the money to buy the property, whether you paid all J-taxes on it for all the time you've been in Japan, etc.?

                            Comment


                            • Originally posted by minamon View Post
                              -----------
                              Just wondering -- did you declare your offshore property in your first year as a Japan resident?
                              If not, did the tax office start quizing you about where you got the money to buy the property, whether you paid all J-taxes on it for all the time you've been in Japan, etc.?
                              In my case I purchased the property 5 years after arriving. Even if I had bought it earlier I would not have been liable for any taxes because your worldwide income is not taxable in Japan until you have been resident here five years.

                              No they did not quiz me about where I got the money to buy the property (more than one now). Perhaps this is because the property is a rental for mid-lower income earners and was not expensive... but actually I think this is because I accumulated the deposits during the 5 years where my global assets where not taxable .

                              I hope that answers your question...

                              I've found from talking about the experience of using real-estate to offset tax with others that it's a 4 hour conversation and everyone has different questions and stages of readyness - so I'm putting all my experiences about this into an ebook and I'll post here when it's ready.

                              Comment


                              • Maybe this calculation helps -

                                If you do have untaxed income, what would it cost you to pay all back-taxes on that?
                                Now, if you were to wipe out all shiminzei and shotokuzei for 4-5 years what is that worth to you?

                                Which number is higher?

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