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Be wary of your investments -- the TAXMAN is watching

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  • In my case information sharing between tax authorities has most definitely taken place. However all they seem to know is the tax I've paid abroad as non-residency tax so now naturally want their share as well. They don't have access to bank transaction details but that's what they are interested in seeing both abroad and in Japan.

    Comment


    • Can someone explain HOW you actually show or present the figures concerning earned interest from overseas banks? Just for amounts in bank savings accounts, nothing more complicated. No stocks, shares etc.,

      For example I have sent yen converted to relevant overseas currency to a bank account, but with almost zero interest rates it's showing a pittance of interest. Something like, for example, $10 (yeah, 10) per 6 months.

      Would I still need to declare THAT? And how? Just convert to yen on the day or whatever then put it on the tax return form? Would any documentation be needed, like a bank statement, or something?

      Comment


      • You would need to declare the income on the Japanese tax forms as "miscellaneous income". You would use the exchange rate of the day the interest was received. I suspect you could also use the average interest rate for the year and the NTA wouldn't be too fussy about it.

        But the good news is that if you make less than 20,000,000/year, and you have less than 200,000 in miscellaneous income, you don't need to report the miscellaneous income. In other words, you are exempt from having to report up to 200,000 in miscellaneous income (including foreign bank account interest).

        In Japanese for those interested:
        http://www.alt-invest.com/qa/tax/1.html

        Comment


        • Originally posted by Majestic View Post
          You would need to declare the income on the Japanese tax forms as "miscellaneous income". You would use the exchange rate of the day the interest was received. I suspect you could also use the average interest rate for the year and the NTA wouldn't be too fussy about it.

          But the good news is that if you make less than 20,000,000/year, and you have less than 200,000 in miscellaneous income, you don't need to report the miscellaneous income. In other words, you are exempt from having to report up to 200,000 in miscellaneous income (including foreign bank account interest).

          In Japanese for those interested:
          http://www.alt-invest.com/qa/tax/1.html

          Thanks!

          That's a relief. I couldn't sleep last night for worrying about some pesky J taxman sniffing around my $10 interest income. I need that the way things are going here...

          Comment


          • Originally posted by minamon View Post
            ...
            From reading these posts, as far as I can see, ALL the information that the J tax office has on a resident is from:
            detailed examination of all their accounts IN JAPAN +
            transfers into and out of Japan +
            whatever information the resident voluntarily gives to the Tax Office.
            I have not heard of any case where the J Tax office has got information from outside of Japan (unless of course there is some suspected criminal activity, money laundering, etc).
            ...
            Right. Unless the J-tax authorities have reason to suspect you're doing something dodgy my feeling is you don't have much to worry about. I don't believe gaijin teachers for example are being randomly audited and those that were questioned likely had transactions which for various reasons were flagged.
            Last edited by Ken44; 2011-09-12, 12:43 PM.

            Comment


            • Originally posted by Majestic View Post
              You would need to declare the income on the Japanese tax forms as "miscellaneous income". You would use the exchange rate of the day the interest was received. I suspect you could also use the average interest rate for the year and the NTA wouldn't be too fussy about it.

              But the good news is that if you make less than 20,000,000/year, and you have less than 200,000 in miscellaneous income, you don't need to report the miscellaneous income. In other words, you are exempt from having to report up to 200,000 in miscellaneous income (including foreign bank account interest).

              In Japanese for those interested:
              http://www.alt-invest.com/qa/tax/1.html
              Would this be the same for self-employed as a salaryman?

              Comment


              • Originally posted by O'Hanlon View Post
                During Obon, I heard of another 9 year plus foreigner in Nagano, who recently got the innocent sounding questionnaire on transfer of funds. A second follow-up letter has asked him to disclose all foreign interest earning accounts. He does not earn over 8 mil. I am convinced they are tracking and trawling the foreign residents...
                More likely it was either the amount or something about the transfer which got him flagged. Not the fact he is a gaijin.

                I got nailed 15 years ago by the US tax office (IRS) because of $200 I made one summer vacation in the States which my dumb-___ accountant forget to file.

                I was living in Japan and earning around 3.5 million yen teaching. However, I am still required to file US taxes while overseas.

                Comment


                • Originally posted by Morton View Post
                  Would this be the same for self-employed as a salaryman?
                  No, this is a special exemption for people who have a single source of wage income.

                  Comment


                  • I think one important question hasn't been asked yet.
                    Do people nailed by the NTA have (substantial)assets in Japan that can be seized upon non-compliance?
                    Real estate (house(s), land, rental property), business, stocks, bonds, cash in bank account, etc.
                    If so they(NTA) have leverage if not I imagine they are lot less motivated to hassle people.

                    Comment


                    • Originally posted by SantaKraut View Post
                      I think one important question hasn't been asked yet.
                      Do people nailed by the NTA have (substantial)assets in Japan that can be seized upon non-compliance?
                      Real estate (house(s), land, rental property), business, stocks, bonds, cash in bank account, etc.
                      If so they(NTA) have leverage if not I imagine they are lot less motivated to hassle people.
                      Good question. I cannot answer for the NTA, but they seem to work much like other countries tax agencies work. So it probably goes something along these lines:
                      1. establish if a debt to the tax agency exists (this could be all from penalties).
                      2. try and get the taxpayer to voluntarily pay the outstanding tax. If they can, then case closed.
                      3. If the tax payer cannot/doesn't pay, then determine what other means can be used where the costs do not outweigh the benefits.

                      The ways they examine are: forgiving the debt (only if there is no money to get), get the tax payer to enter an arrangement to pay installments over time, get tax payers to 'voluntarily' sell there assets like land etc, seize bank account/cash assets, bankrupt or liquidate the individual or business to have asset sale proceeds cover the debt.

                      At the same time that they look at what debt they can recover, they also look if it is worthwhile prosecuting the tax payer for evasion (bankruptcy is a recovery mechanism rather than a punitive measure) - they usually only do this as a punishment if they think there is an ongoing risk of non-payment, or to set an example to scare other people into compiling. The legal costs of this is quite prohibitive, so some tax departments go this path less than others.

                      So to answer your question - yes they will usually hassle you less if you have no means of paying - but they still have to do an audit and investigation to see what your worth is, and if you deliberately tried to evade the taxes, then they may decide to use you as an example. It's a case by case basis decision.

                      Comment


                      • Originally posted by SantaKraut View Post
                        I think one important question hasn't been asked yet.
                        Do people nailed by the NTA have (substantial)assets in Japan that can be seized upon non-compliance?
                        Real estate (house(s), land, rental property), business, stocks, bonds, cash in bank account, etc.
                        If so they(NTA) have leverage if not I imagine they are lot less motivated to hassle people.

                        I only know from one case, so this can't be extrapolated.
                        An Aussie owed and still owes a lot. He had and still does send almost all of his money back there and was in the position of not having enough to pay. As he is still here, he was hassled enormously to bring money from there there to pay his "debts," which is to say all of the outrageous penalties. Now his salary has been garnisheed and the interest meter is running. The NTA does have one more card up their sleeve (rarely played except in cases of huge fraud or evasion with criminal intent), and that is prison.

                        Comment


                        • I highly doubt that these gshake downsh are done at random.
                          The Japanese are consummate planners, they leave nothing to chance and no bureaucrat is allowed / able to improvise or make decisions on hunches.
                          Therefore I believe they have an action plan with which they can reach an annual financial target, as in money collected from gaijins whoes been here long enough and might have acquired assets.

                          This flowchart might be one approach:
                          Click image for larger version

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                          I choose 6 years as the residency threshold because we file taxes for the previous year, so filing taxes after being here for 5 years would mean the income for year 4.
                          The age limit of 30 is arbitrary however if a foreignerfs been living in Japan for 5 years and he/she is under 30 that means he/she came over fresh out of university which would mean he/she had earned very little money and probably doesn't have a high paying job in Japan either.

                          The income limit of 5 mil is again arbitrary, however given the high cost of living in Japan and young peoplefs chronic inability to save anything substantial while living on their own would suggest that earnings under that amount would not allow a person to save significant amounts. Your mileage, of course, may vary.
                          The "trigger event" of course means a large cash remittance in / out of Japan, large cash deposit, etc.
                          Amend as you wish.
                          Last edited by SantaKraut; 2011-10-03, 12:03 PM.

                          Comment


                          • Of course

                            ABSOLUTELY they have targets set! This is a given. And not at random, either. This much I wrote much earlier on in the thread. I would certainly think that there are trigger events such as large and/or frequent remittances, but they may also investigate people within a category/sector first and look for such events later. That's what I would do if I were them.

                            I did remit, yet the first question they asked of me (I have written this much earlier on) was about an investment they only could have found about by directly asking Canadian tax authorities (I had paid Cdn. tax). That is to say they did not start by asking about remittances. After that I got the clear sentence about how failing to disclose income on any income-earning assets is a crime (got that one shown to me in English, too). Well, I will never forget, but I have moved on. The question I have posed on occasion is how to make money safely going forward.
                            Last edited by Super Grover; 2011-10-03, 02:26 PM.

                            Comment


                            • Makes me wonder when I will get audited. I currently send money to an offshore fund through a visa card every month, but that fund matures next year. From the sounds of it, if I send the money to my bank account in Canada, I should pay a non-withholding tax on the profit to the Canadian tax authorities, and then report the income from profit to the Japanese authorities, as it should be over 200,000 yen ?

                              However, this will be the first time I have reported any income outside of Japan to the GTA, so I will now be on file with my Canadian bank account on file as well. Meaning I will be in the same boat as Super Grover , re; how do I deal with future income outside of Japan? Report everything from now on?

                              What about the profits I made from Japanese income overseas BEFORE I was PR, and sent them to the same account in Canada. This would be from 5-6 years ago and was not on PR but had been in Japan for 10 years at that point.

                              This sounds like I should keep hiding the Canadian account unless I get audited and then be prepared to pay the penalty. There is currently not enough interest being made on the Canadian account to worry me, but dropping a large amount of cash from an offshore investment might be the trigger for the audit as it will show previous large cash deposits from offshore funds.

                              Comment


                              • Originally posted by SantaKraut View Post
                                I highly doubt that these gshake downsh are done at random.
                                The Japanese are consummate planners, they leave nothing to chance and no bureaucrat is allowed / able to improvise or make decisions on hunches.
                                Therefore I believe they have an action plan with which they can reach an annual financial target, as in money collected from gaijins whoes been here long enough and might have acquired assets.

                                This flowchart might be one approach:
                                [ATTACH]15371[/ATTACH]
                                I choose 6 years as the residency threshold because we file taxes for the previous year, so filing taxes after being here for 5 years would mean the income for year 4.
                                The age limit of 30 is arbitrary however if a foreignerfs been living in Japan for 5 years and he/she is under 30 that means he/she came over fresh out of university which would mean he/she had earned very little money and probably doesn't have a high paying job in Japan either.

                                The income limit of 5 mil is again arbitrary, however given the high cost of living in Japan and young peoplefs chronic inability to save anything substantial while living on their own would suggest that earnings under that amount would not allow a person to save significant amounts. Your mileage, of course, may vary.
                                The "trigger event" of course means a large cash remittance in / out of Japan, large cash deposit, etc.
                                Amend as you wish.
                                Great chart but I think that "Assets Abroad and/or Regular Remittances Abroad" rather than "Assets in Japan" is more appropriate. They may tell you there is a 1 million yen threshold on transfers but....

                                Comment

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