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Be wary of your investments -- the TAXMAN is watching

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  • Originally posted by Super Grover View Post
    This is just my personal opinion, but I think to protect and or conserve your wealth, you have to be willing to get on a plane and physically move money around or you have to really investigate many other possibilities.
    Yes indeed it seems that way. I was reading something a short time ago that was pointing out that a proliferation of LLCs may make this type of avenue more and more practical.

    I also think it's something that probably has to be a long term project. Money can be legally moved offshore. If time is on one's side it can be gradually moved away in chunks coinciding with overseas travel. And even wiring money is legal, I presume paying tax as required on any income it may generate offshore is an effective way to keep the tax audits away. Avoiding jurisdictions with information sharing agreements would be another good idea I imagine, although such options may become fewer and fewer in future.

    That new Japanese reporting requirement on offshore wealth in excess of 50 million yen is probably just the beginning though. Wealth taxes may become a feature in future, possibly... If not it might be inflation that does the trick instead. Either way I think I'd really like to be gone if that comes to fruition, if not nicely protected from it all in advance.

    Interesting reading, if you haven't seen it already, is www.sovereignman.com. The chap who runs it is a perpetual traveler, non-resident anywhere. Obviously this is not an option for most people, but lots of ideas in this space come up. (He's selling more information besides what he gives away free, I have no idea how useful it might be though.)

    In actual fact, the taxation on Japanese stocks is not too bad
    I've never traded stocks and probably never will, but the tax regime for forex has become more favourable, with a flat 20% of profits from this year. Taxes on offshore forex remains as it was, with income in excess of 200,000 required to be declared for taxation, and also potentially being taxed according to the graduated tax rates. Although I don't think the authorities would have a great chance of keeping track of where money in such accounts has come from.

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    • Originally posted by Super Grover View Post
      This is just my personal opinion, but I think to protect and or conserve your wealth, you have to be willing to get on a plane and physically move money around or you have to really investigate many other possibilities.
      I thought so, too many years ago. Today I know that you shouldn't do it. You need an easy to understand and cheap asset allocation with stocks, bonds, REIT etc. that invests around the globe. This investments should be held where you are living and you should pay taxes oR. In 99% of the cases the taxes you pay are so small that things like offshore accounts / tricky schemes to avoid taxes etc. are not worth the hassle and come more expensive in the end (even if you don't get caught).

      Let's face itF

      1) Who of you guys has liquid assets of 1‰­‰~ and above ? Almost nobody. How much of you guys get more than 50–œ/month in interests and dividends ?
      If you don't belong to such a group then why the hassle and the risk ? To save money in the amount other people have dinner ?

      2) How many people can beat the market with stock picking / timing? 10 per cent of private investors and 40 per cent of professional investors !?
      It's just arrogant and stupid to believe that one could belong to the 10 per cent.

      3) How high are the chances that one can time his/her real estate investment just so it makes more money then a REIT index funds ? Next to impossible.

      If even the best can't beat the market. If even the best get caught with tax fraud. Why even try it ?

      The solution is so easy, relaxing and in almost all cases a lot better when it comes to ROI.

      Comment


      • Originally posted by fxgai View Post

        That new Japanese reporting requirement on offshore wealth in excess of 50 million yen is probably just the beginning though.
        With the yen, I feel, beginning to start moving down this figure isn't all that high. Own some property and have some savings and you'll likely be over it. I just don't want the NTA to know my business because once they do I feel they'll search for and find, legitimately or otherwise, something to tax. There's very little arguing you can do against them. I've got accounts in all my kids' names and money will kept under this limit.


        With the cross border tax agreements between countries, does anyone know how much information or what kind of information they actually share? When I got audited they knew about my interest but didn't seem to know how many accounts I had or how much was in each account.

        Comment


        • Originally posted by Morton View Post
          With the yen, I feel, beginning to start moving down this figure isn't all that high. Own some property and have some savings and you'll likely be over it. I just don't want the NTA to know my business because once they do I feel they'll search for and find, legitimately or otherwise, something to tax. There's very little arguing you can do against them. I've got accounts in all my kids' names and money will kept under this limit.


          With the cross border tax agreements between countries, does anyone know how much information or what kind of information they actually share? When I got audited they knew about my interest but didn't seem to know how many accounts I had or how much was in each account.
          If I remember right, you're British. I assume you fill in a form every year to get the tax paid back on interest earned in the UK. That's likely to be the only information the UK IR have on you (why should they have gone to the trouble of searching for information on your bank accounts unless you are a suspected tax-dodger?). This is probably the information they give the Japanese NTA when they ask. Do make sure that the UK income you write down on that form matches the amount you put down when you make your income declaration in Japan.

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          • Originally posted by cucashopboy View Post
            If I remember right, you're British. I assume you fill in a form every year to get the tax paid back on interest earned in the UK. That's likely to be the only information the UK IR have on you (why should they have gone to the trouble of searching for information on your bank accounts unless you are a suspected tax-dodger?). This is probably the information they give the Japanese NTA when they ask. Do make sure that the UK income you write down on that form matches the amount you put down when you make your income declaration in Japan.
            Yup, I'm British. I don't fill out a form yearly and my interest is paid gross in the UK. I tell my accountant how much it is and he also insists on detailing the balance for the NTA also.

            When I had my tax problem it caused me/my business to be automatically audited. They found out about my UK interest without me telling them anything about my UK accounts. They put me on the spot by asking how many accounts I had and how much interest I got and what the balance was. They already knew some of this information (the amount of interest for sure) but I'm not sure how much. Luckily at this stage I told the truth.I guess they thought I was potentially tax-dodging (I was asked if my parents were still alive? inheritance maybe?And also about any property I own overseas). Let me add I wasn't tax dodging and my business was given the all clear. In fact the NTA had made an error that my new accountant found and I got money back.

            I kind of agree with Tatsuo above. Just pay it and don't risk the very real stress and hassle. I suspect that a lot of us using the kakutei shinkoku will be audited when it appears we have (semi) retired.

            Comment


            • Originally posted by Morton View Post
              does anyone know how much information or what kind of information they actually share? When I got audited they knew about my interest but didn't seem to know how many accounts I had or how much was in each account.
              From reading around a few websites, I believe the tax information sharing agreements seem NOT to allow "fishing" queries (i.e., Tax Office in Japan cant send a request to Tax Office in UK with a vague request for a list of those paying tax in UK with addresses in Japan, etc.). I also think they wont just pick on Joe Soap and sent a request to Joe's country's tax office without a reason (e.g., a bank transfer into or out of Japan).

              What the Tax Office can do (based on a specific reason i.e. a bank transfer), is to request that a check be made as to how much, if any, a certain person has paid in tax in the UK (or another country with a tax agreement).

              The J Tax Office would know the names of banks to which you have made a transfer (this info is provided by the Japanese sending bank) + the amounts. They would also know the tax you have paid in UK (provided by the UK tax office).

              What I'm not sure about in your case is the fact that your UK bank paid interest gross, meaning you weren't paying UK tax (correct?). I can only assume the UK tax office has a record of non-resident account holders and the amount of interest they earn in the UK.)

              Comment


              • Originally posted by minamon View Post
                From reading around a few websites, I believe the tax information sharing agreements seem NOT to allow "fishing" queries (i.e., Tax Office in Japan cant send a request to Tax Office in UK with a vague request for a list of those paying tax in UK with addresses in Japan, etc.). I also think they wont just pick on Joe Soap and sent a request to Joe's country's tax office without a reason (e.g., a bank transfer into or out of Japan).

                What the Tax Office can do (based on a specific reason i.e. a bank transfer), is to request that a check be made as to how much, if any, a certain person has paid in tax in the UK (or another country with a tax agreement).

                The J Tax Office would know the names of banks to which you have made a transfer (this info is provided by the Japanese sending bank) + the amounts. They would also know the tax you have paid in UK (provided by the UK tax office).

                That`s the same with US citizens, NTA and the Internal Revenue Service (IRS) in the States.

                To run an audit NTA needs a valid reason such as an inquiry about a transfer of funds. And the idea that NTA is looking closer at English teachers is rather ridiculous considering what most of us earn.

                It`s often the sloppy transfer of money (in and out of Japan) which catches their attention.

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                • Originally posted by Ken44 View Post
                  To run an audit NTA needs a valid reason such as an inquiry about a transfer of funds. And the idea that NTA is looking closer at English teachers is rather ridiculous considering what most of us earn.

                  It`s often the sloppy transfer of money (in and out of Japan) which catches their attention.
                  Just a quick question regarding this. I have a US dollar investment fund that I've been paying into monthly (basically I regard it as a pension) that hasn't been doing so well. My mom's financial advisor in the UK has long been critical of the high fund management fees of that particular investment fund. He advised me to withdraw 50,000 dollars of it to transfer into another investment of mine in the UK which has been doing very well. I can't close the dollar investment without being charged but I can take the 50,000 out without incurring penalties.

                  Anyhow, his idea was to get the 50,000 dollars transferred as dollars into my Citibank account here as they accept dollars, and then quickly transfer it out to the UK in pounds. I'm much more hesitant having read the problems faced by the good folks on this thread. Even though the money wouldn't be in my Citibank Japan account for longer than a week I still think it may raise red flags. I've spoken to him (the FA) about this and he's looking into it further but I thought people here might be more knowledgeable. I'm also wary as the dollar is so low at the moment it barely seems worth it. I only pay 500 dollars a month into that particular fund and at the moment that amount is almost not noticeable. Would it be better to just have it transferred directly to the UK and converted into pounds over there? Or is it just not worth it as the dollar is so weak? Should I just leave it there and hope that it gets stronger again over time?

                  I do trust my mom's financial advisor BTW. Under his advice her (and my) investments have been doing well and he's got us out of some previously poorly performing schemes into better ones. I started investing through some companies here that dealt with expats when I was young and still very naive not realizing that basically a lot of it's down to commission rather than the actual quality of the company, and once you're in they're done with you. He transferred a lot of my money into much more profitable investments. My mom's FA is paid direct, and though I'm sure commission may have something to do with it - if we do well he does and he also meets with her regularly to go over everything and she's been satisfied with him for many years.

                  Comment


                  • Originally posted by renkachan71 View Post
                    ...Anyhow, his idea was to get the 50,000 dollars transferred as dollars into my Citibank account here as they accept dollars, and then quickly transfer it out to the UK in pounds. I'm much more hesitant having read the problems faced by the good folks on this thread. Even though the money wouldn't be in my Citibank Japan account for longer than a week I still think it may raise red flags.

                    My feeling is it`s this kind of transaction which causes problems.

                    $50,000 coming into Citibank-Japan might very well be reported to NTA.

                    Comment


                    • Originally posted by Ken44 View Post
                      My feeling is it`s this kind of transaction which causes problems.

                      $50,000 coming into Citibank-Japan might very well be reported to NTA.
                      Yeah, that was my gut feeling too. The Financial Advisor's first instinct was to have dollars put into a dollar account and then convert because he thought it might save time and administration fees but after I told him a little about my worries about tax/investing pitfalls here he's gone back to research some more. To him it sounded so 'unfair' that I could be penalized for trying to save money for my future that he didn't quite believe what I had told him but...

                      Comment


                      • Originally posted by renkachan71 View Post
                        Yeah, that was my gut feeling too. The Financial Advisor's first instinct was to have dollars put into a dollar account and then convert because he thought it might save time and administration fees but after I told him a little about my worries about tax/investing pitfalls here he's gone back to research some more. To him it sounded so 'unfair' that I could be penalized for trying to save money for my future that he didn't quite believe what I had told him but...
                        Is this fund in the USA?

                        Comment


                        • Originally posted by renkachan71 View Post
                          Just a quick question regarding this. I have a US dollar investment fund that I've been paying into monthly (basically I regard it as a pension) that hasn't been doing so well. My mom's financial advisor in the UK has long been critical of the high fund management fees of that particular investment fund. He advised me to withdraw 50,000 dollars of it to transfer into another investment of mine in the UK which has been doing very well. I can't close the dollar investment without being charged but I can take the 50,000 out without incurring penalties.

                          Anyhow, his idea was to get the 50,000 dollars transferred as dollars into my Citibank account here as they accept dollars, and then quickly transfer it out to the UK in pounds. I'm much more hesitant having read the problems faced by the good folks on this thread. Even though the money wouldn't be in my Citibank Japan account for longer than a week I still think it may raise red flags. I've spoken to him (the FA) about this and he's looking into it further but I thought people here might be more knowledgeable. I'm also wary as the dollar is so low at the moment it barely seems worth it. I only pay 500 dollars a month into that particular fund and at the moment that amount is almost not noticeable. Would it be better to just have it transferred directly to the UK and converted into pounds over there? Or is it just not worth it as the dollar is so weak? Should I just leave it there and hope that it gets stronger again over time?

                          I do trust my mom's financial advisor BTW. Under his advice her (and my) investments have been doing well and he's got us out of some previously poorly performing schemes into better ones. I started investing through some companies here that dealt with expats when I was young and still very naive not realizing that basically a lot of it's down to commission rather than the actual quality of the company, and once you're in they're done with you. He transferred a lot of my money into much more profitable investments. My mom's FA is paid direct, and though I'm sure commission may have something to do with it - if we do well he does and he also meets with her regularly to go over everything and she's been satisfied with him for many years.

                          Can you please tell us the name of the funds you are investing at the moment monthly and the name of the funds in the UK ?

                          Comment


                          • Originally posted by Plats View Post
                            Is this fund in the USA?
                            No, actually it's in Europe. I just chose dollars for that one because I wasn't sure at the time where I would end up and wanted something I could 'carry around'. At the time I started it the dollar was strong and seemed like a 'universal currency'. I have that one in US dollars, plus investments in pounds (my main now - and I'm from the UK), Euros (quite small and new) and Australian dollars (small and long term - maybe 2 million yen but I can't touch it for 10 years). I have no investments in yen except my regular bank accounts.

                            Comment


                            • Originally posted by renkachan71 View Post
                              No, actually it's in Europe. I just chose dollars for that one because I wasn't sure at the time where I would end up and wanted something I could 'carry around'. At the time I started it the dollar was strong and seemed like a 'universal currency'. I have that one in US dollars, plus investments in pounds (my main now - and I'm from the UK), Euros (quite small and new) and Australian dollars (small and long term - maybe 2 million yen but I can't touch it for 10 years). I have no investments in yen except my regular bank accounts.
                              So what does this USD-denominated fund invest in?

                              Comment


                              • Originally posted by fxgai View Post
                                Taxes on offshore forex remains as it was, with income in excess of 200,000 required to be declared for taxation, and also potentially being taxed according to the graduated tax rates. Although I don't think the authorities would have a great chance of keeping track of where money in such accounts has come from.
                                Any offshore income (capital gains, interest, dividend, rental income, etc) has to be declared, if you are permanent resident (staying longer than 5 years). Only a person with a total annual income of less than 200,000 JPY does not need to declare. You can check this at page 9 of the "2011 tax guide lines for foreigners". And the NTA could know by 3 ways about your off shore income / investments (also long and broad discussed here): (1) Transfer from and to Japan get reported to the MOF. (2) NTA audits you and find a trail of invested money (in and out) from your Japanese or foreign bank or security account (see the example in this thread how this work) (3) The off shore tax authorities report your off shore income to the NTA because they know you are residing in Japan. The Australian tax authority, for example is doing this pro-actively. It seems (3) is still a rare case, but it seems increasingly to happen. From 2104 onward you even have to declare all assets worldwide in your tax declaration, if they exceeding 50 MJPY regardless they generate income or not.

                                Originally posted by Ken44 View Post
                                To run an audit NTA needs a valid reason such as an inquiry about a transfer of funds. And the idea that NTA is looking closer at English teachers is rather ridiculous considering what most of us earn.
                                I don't think they need any reason. I think the NTA can audit anybody at their discretion any time. Individuals above a certain income threshold get anyway regularly audited. Other by random, but there is no specific reason necessary.

                                Originally posted by Hijinx View Post
                                Yes, technically, but the point I'm trying to get at is: how would Treasury know? I certainly doubt the NTA is in the habit of sharing it's citizens' bank info with foreign countries if they don't owe taxes in a particular foreign country.
                                They can do exactly this based on mutual double taxation treaties, linked and discussed earlier in this thread. NTA and IRS for example seem to exchange such information on a regular basis.

                                Originally posted by renkachan71 View Post
                                Anyhow, his idea was to get the 50,000 dollars transferred as dollars into my Citibank account here as they accept dollars, and then quickly transfer it out to the UK in pounds. I'm much more hesitant having read the problems faced by the good folks on this thread. Even though the money wouldn't be in my Citibank Japan account for longer than a week I still think it may raise red flags.
                                50,000 USD (or the equivalent in another currency) in and out your Japanese citibank account abroad will be reported by the bank to the MOF and will be informed to your local tax office. If you have never declared income abroad and if you are a permanent resident (staying long than 5 years here) it might raise red flags
                                Last edited by chainbolt; 2012-09-14, 09:34 PM.

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