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Be wary of your investments -- the TAXMAN is watching

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  • Originally posted by nkjapan View Post
    Maybe this calculation helps -

    If you do have untaxed income, what would it cost you to pay all back-taxes on that?
    Don't forget to factor in interest and penalties, though...

    Comment


    • Originally posted by nkjapan View Post
      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...
      Yep, thankx.

      Comment


      • Originally posted by MadMax
        ... Some people are saying that the J Govt will want their cut too on that foreign income after residing here for over 5 years? I find that very hard to believe!
        Yes a refusal to believe what is known to be true - is sometimes called constipation of the brain. It is sometimes brought on by too much radiation, but some people are just born that way. Now if you said that it was hard on your wallet - well, then most would understand.

        Comment


        • Originally posted by MadMax
          Where does it say that I get taxed ...
          http://www.mof.go.jp/english/tax_pol...xes2010e_c.pdf

          Please see II.a (page 32).

          Comment


          • Originally posted by MadMax
            But it doesn't.

            ....
            But it does. Unless of course you are not actually living in Japan. The Japan tax laws clearly state that if you have lived in Japan 5 out of the last 10 years, that you pay taxes on worldwide income. Yes - there are adjustments for taxes paid to foreign governments - such as Australia, but you are taxed in Japan.

            And - no, I am not going to go into double taxation or tax treaties - I am only saying what the Japan tax law says. If you want to quote Australia tax law to a Japan tax authority - please be my guest.

            This is where we started:
            Originally posted by MadMax
            Some people are saying that the J Govt will want their cut too on that foreign income after residing here for over 5 years? I find that very hard to believe!

            Comment


            • TJ, my take on that section is that it's vague enough for there to be any number of loopholes-one of which is that the Japanese would consider any profits made overseas by a non corporate individual to be taxed first by the J gov't. This of course wouldn't sit well with the British tax people, who consider that they get to levy taxes on all property and investments first.

              Madmax, in short, you are going to get hosed.

              Comment


              • Max, TJR posted something which clearly states your tax obligation to the NTA, and TJR was kind enough to point out the exact page where you could find it. You are simply being obtuse and pretending the passage does not apply to you because of your particular interpretation of a wonderfully vague phrase in an Australian tax guide. A tax treaty doesn't automatically absolve you of any taxes due to another country. The tax treaties generally offer you relief from double-taxation through credits or deductions, but there is no guarantee of a one-for-one credit, and the treaty certainly doesn't grant you blanket amnesty from filing taxes in your country of residence.

                However, I have no doubt you will continue to pursue your line of thought in which the ATO has generously granted you abstention from taxes owed to Japan. Best of luck.

                Comment


                • Originally posted by MadMax
                  So the devil is in the detail... Of which you draw a big blank...
                  So be it - but at least I challenged your suggestion that it was BS. It is definately not BS - it is the law.

                  Comment


                  • Originally posted by MadMax
                    But it doesn't.

                    That's why we have tax treaties, so we aren't taxed twice. I don't see any mention of tax treaties in the page you quoted.

                    In any case each country has different laws. i am only referring to Australia and its tax treaty with Japan, for which I have posted in black and white direct from the ATO, and it clearly states that taxes are paid only in Australia on Australian property...

                    Again...

                    "Income, profits or gains from the alienation of real property and from the alienation of shares or other interests in land rich entities, or from the alienation of business assets of permanent establishments or assets otherwise attributable to a permanent establishment may generally be taxed by the country in which the property or permanent establishment is situated."

                    You haven't posted anything that otherwise contradicts this.
                    But it doesn't say "only". It just says it may be taxed by the country in which the asset is established. It may also be taxed by the country in which the owner is resident (e.g. Japan).

                    The reciprocal tax treaty will define how much of the tax paid in one country can be used as a deduction to offset the tax payable in the other country in order to avoid some or all of the double taxation.

                    The Australian tax authority doesn't have jurisdiction over the Japanese tax code. The tax treaty governs the reciprocal agreement between the two authorities.

                    In principle, you can be taxed twice on the same income. The tax treaty exists so that in practice you are not (or at least the burden is reduced -- i.e. if the amount you would be taxed on it in Japan is higher than the amount you would be taxed in Australia, you will likely still have to pay the difference if your are a permanent resident in Japan for tax purposes).

                    Comment


                    • Madmax, you are so wrong in you assumptions - and good luck trying to change either the Aussie or J taxman's interpretation of Tax Laws.

                      What's funny is you probably also don't realise you may also get taxed on your Japanese earnings when you get back to Aussie (minus what you've already paid to the J govt). It's a bit hard to get retrospective non-resident tax status if you still have a rental property that you're paying tax on while you're away.

                      http://www.ato.gov.au/taxprofessiona...tent/64144.htm

                      Introduction

                      Australian residents are taxed on their worldwide income. This page outlines the tax implications in Australia if you are working or thinking about working overseas. You will also need to take into account the tax law of the country you are working in.
                      If you are working overseas, you need to work out whether you are still an Australian resident for tax purposes. If you are unsure, Residency - what you need to know can help you work out your residency status. Non-residents pay tax differently to residents on their Australian sourced income.
                      The following flowchart will help you work out if you need to lodge an Australian income tax return.
                      Last edited by jrp; 2011-08-16, 09:56 PM.

                      Comment


                      • Originally posted by MadMax
                        That link doesn't tell me anything I don't already know. Non residents still pay tax to Australian on their assets at 30% in the case of rental income. It says nothing regarding Japan and the treaty tax treaty with Australia. Still no definitive, or useful links...

                        Anyway... Any real world examples? No evidence up to this point anecdotal or otherwise of Aussies being double taxed in Japan on foreign income...

                        So what Aussies on these forums have had foreign income such as rental income taxed by the J Govt?

                        And if you have... why bother even putting yourself in a position where you are doubletaxed... To live in Japan? Lol?
                        It's pretty simple, just search the ATO and J tax-man sites, or you can even ring the ATO and ask, or there are loads of legal case studies on-line that anyone can access. Why the fcuk should anyone else spend time doing for you what you can do for yourself.

                        What you'll end up finding out is you have to comply with both countries tax laws:
                        1. Australian tax residents are taxed on their worldwide income.
                        2. Japanese tax residents are taxed on their worldwide income.
                        3. Because of the Double Tax Agreement you don't don't end up paying twice - but you have to declare your income to both countries tax agencies. So you are not double-taxed as you put it because of the Double Tax Agreement.
                        4. Both Japan and Aussie are voluntary tax systems. It's up to you whether you comply with the law or not. But if you don't, and you're caught - then the penalties are very steep.
                        5. In your case it probably be worth either countries tax department to go after you as you have a rental property (unless the bank owns too much of it) so they would probably be able to cover the penalties you will owe them.

                        Sounds like you are declaring your income for Aussie earnings in Aussie (your rental property) - but you are meant to declare your worldwide income (your Japanese earnings) - which I don't think you are.

                        I would also assume you pay tax in Japan for what you earn in Japan - but are not declaring your worldwide earnings (your rental income in Aussie). I think you will find you are breaking both countries tax laws.

                        Luckily for you most tax departments do not automatically share information - so it possibly won't become an issue for you. But is sounds like the J tax-man has done a data mine and sent information requests to Canadian and US tax agencies (almost all the 'Western' tax agencies have data sharing agreements). And it looks like it has been successful for them so they will probably do more.

                        If they do a similar check with Aussie, and you haven't declared all your worldwide income correctly, then you might be in for a visit from the tax-man - and you can spout on about what you think all you like - it won't change anything.

                        It's pretty simple really.

                        Comment


                        • Originally posted by MadMax
                          That link doesn't tell me anything I don't already know. Non residents still pay tax to Australian on their assets at 30% in the case of rental income. It says nothing regarding Japan and the treaty tax treaty with Australia. Still no definitive, or useful links...

                          Anyway... Any real world examples? No evidence up to this point anecdotal or otherwise of Aussies being double taxed in Japan on foreign income...

                          So what Aussies on these forums have had foreign income such as rental income taxed by the J Govt?

                          And if you have... why bother even putting yourself in a position where you are doubletaxed... To live in Japan? Lol?
                          Hello. I started this thread to warn and help others, not wanting them to find themselves in a situation similar to mine (hopefully over and done with forever!). As far as I know there has been an absence of BS in this thread.
                          Tax departments in quite a number of countries do indeed have cooperation agreements where they share information. Australia and Japan cooperate. If you were to have quite a bit of time and were to read through the many postings, you'd find that I mentioned I knew several people who were also audited. One of those is (and their audit is ongoing some six+ months later) an Australian, though I did not state that. He is being totally roasted for failing to be cooperative. I thought my situation was a nightmare, but compared to his I got off easy (I did NOT get off easy, however!). There is no magic silver bullet for Aussies, sorry.
                          Majestic was kind enough to point out that taxation does not line up/cancel each other out from country to country. As a result, people like me ended up across from these ____roaches as they tried every trick in the book. I think you need to develop a more in depth understanding of the ways taxes are applied. They suck!
                          As for the rest, people are often unaware of the tax laws, and, personally, I believe that the tax authorities here wait until they can collect maximum penalties. Why remain/be in Japan, etc.? Well that is just childishness, isn't it? Some of us are experts in our fields. Some are married with kids mid-way through school. Some are hooked on Japanese food, anime, yukata and riding the Keio Line trains!

                          Comment


                          • My Aussie friend was just stubborn. He is paying the price for that. But in fairness to his situation, it seems like the NTA here is looking to create a revenue stream from him. Most people do not seems to realise that these agents have targets to meet. The louder you complain, the more vicious they will become because they sense there must be something more to find.

                            I am sure that for many it is not so easy to up and leave, though when it was happening, I was considering that. Then we wondered, "Would they simply come after the other if one of us left?" We actually do not know the fine points of that scenario. When the crash happens (I think it has only just begun), stock prices will be incredibly undervalued, so we will want to take advantage of them one last time. Yet if we can, and make some real money, the tax bill would be punishing. At that time, I will have to know whether to leave or not.

                            Comment


                            • I asked an accountant here in the States about the US tax treaty between Japan and was told I have nothing to worry about even though I am a long-term resident of Japan who owns investment rental properties in the United States:

                              2010 return
                              Property #1 shows $40,000 profit, property#2 $10,000 loss. Roll over losses from previous years and my net gain is $0.

                              Now.... if I understand correctly the Japanese are required to abide by what the IRS determines and Schedule E line 26 on my 2010 tax return has $0 total rental income (after write-offs) so I paid no US taxes.

                              Thus I have no overseas income to declare


                              But I've had tax accountants screw up before and tried looking up:
                              http://www.treasury.gov/resource-cen...8-c24f360101f2

                              in order to verify what I was told but I can't really understand the legal jargon.
                              Last edited by Ken44; 2011-08-18, 05:12 PM.

                              Comment


                              • Update:

                                First off while it is true Japanese tax officials can obtain a complete rundown on all of my US assets they are required to have just cause.


                                However, to be on the safe side...

                                American lives in Japan six years and buys rental property in US.

                                O.k. what to do...?

                                1. File US taxes first.

                                2. Bring tax return to J-tax accountant and file J-taxes. J-accountant must work off US tax return and accept write-offs allowed in US. If U.S. IRS says you earned $0 net income J-tax office must abide. The key is to make sure you file correctly in the US and everything is in order.


                                But .. what can I do given I have never reported my U.S. rental income and suddenly get audited by J-tax authorities?

                                1. Bring copies of US tax returns proving income was never hidden in the US.

                                2. Explain since I had no net income in the US that I didn't think I was required to report anything in Japan.

                                3. I will be hit with a penalty but there will be much less trouble if (a) I wasn't seen as deliberately trying to scam the J-tax authorities and (b) that I wouldn't have owed money had I filed correctly from the beginning.


                                So what will I do now....?

                                Nothing.

                                I've never given the J-tax authorities reason to audit me and don't plan on starting anytime soon.

                                However, if I ever do get called in I now have a plan of action.
                                Last edited by Ken44; 2011-08-20, 03:11 AM.

                                Comment

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