Be wary of your investments -- the TAXMAN is watching

[jrp]

No tax evasion, no penalties.

You're absolutely correct.

'No tax evasion = no penalties' is perfectly true. But at the same time 'an honest mistake = penalties' is also true.

I believe that was the original point of this thread.


This thread is actually one of the more practical on GP regarding tax. Especially if you've been living here in Japan for over five years and have income in another country (whether you're still a resident for tax purposes or a non-resident for tax purposes).

[Guest]

...And starting in 2013, new laws will come into effect so that the tax men will have to present a paper in advance informing you of why you are being audited and what will be covered in it along with the date of the audit.

...every time the tax man asks for permission to do something, ask them why they need to do it

....You have the right to stop the audit process if you feel overwhelmed or if you don't know the proper answers.

...They recommend having someone else in the room with you during the audit

All very nice to know.

Thanks

[chainbolt]

You're absolutely correct.

'No tax evasion = no penalties' is perfectly true. But at the same time 'an honest mistake = penalties' is also true.

The penalties for an honest mistake are more lenient in Japan than in the US and in some European countries. Here you pay currently the BoF discount rate (currently zero) + 4.0% interest + 10% to 20% penalty. If it was really an honest mistake and you can credibly explain it, you probably end up with 4.% interest + 10% penalty. And if you come clean by yourself before they audit you, you pay only 4.0% interest on the evaded tax for 3 years and no penalty at all. I'm not sure you find a developed country with a more lenient system.

I'm only on page 7 of this whopping thread. Lots of useful, but at times conflicting and vague, information presented.

So true, if it is important, you must see a CPA / certified tax consultant for advice. When it comes to legal matters I would be doubtful about anything I hear from friends and the web.

[Shimokitazawa]

I am super busy for the next 24 hours or so but will reply Shimikitazawa, when I can. Briefly, though, I was and still am a NR of Canada but I still did have to pay taxes at that time. I was issued NR-4 slips too.

The figures were in millions of yen.

For me, the point of this thread is to make people aware of what seems to be a calculated plan to assess maximum penalties in a less than above board way.

I see, thanks.

[Brown Cow]

Finally got the time to sit down and read the entire thread. Very interesting and definitely leaves me some things to do. The first is to bite the bullet and declare income from interest abroad. Far better to sort this now than leave it to pile up for 5 years or so.

The news on gifts and inheritance tax is horrible. And it seems very unfair that you can play by the rules in the country that generated the money, reduce your tax bill fair and square, and then still get hammered here just the same. May as well not have bothered.

Anyway, many thanks for the information. Forewarned is a lot better than blissful ignorance.

[chainbolt]

Finally got the time to sit down and read the entire thread. Very interesting and definitely leaves me some things to do. The first is to bite the bullet and declare income from interest abroad. Far better to sort this now than leave it to pile up for 5 years or so.

Now, I think you draw the right conclusion. I was in a similar situation some time ago, and after I cleaned up a few things, I felt so much better.

I agree with chainbolt (that was beautiful, man), but to avoid any further trouble with the beloved Super Grover, whom I never "accused" of anything the NTA didn't say he did, let me simply reiterate both Chainbolt's point, and the point Morton made early in the thread:


SEEK PROFESSIONAL HELP!!!!!!!!!!!!!!!!!!!

A man that is is own CA has Benjamin Franklin's self-counsel to guide him.

I remember a land where ignorance of the law is a legitimate excuse, but it only existed in my favourite book of children's fairy tales.

As I wrote above, many Japanese, often influential ones, consider Us to be economic vultures; it should hardly be surprising that they seek to pursue those who do not follow the rules.




Now, on with the rants, I say!!!!!!!!!!!!!!

[caramellocap]

An idiot wrote what I've quoted

These lamenting comments are not helpful. First of all, the subject of this thread has nothing to do with your residential status, or the rights you have or don't have in Japan as a resident or permanent resident tax payer. In fact, not many countries have such a generous 5-year grace period exempting overseas income from local taxation as Japan. In other countries any resident is taxed from the first day he is a taxpayer on his entire income worldwide.

The point here is to understand tax obligations under Japanese laws and how they are enforced. Discussing actual or alleged "unfairness" of the tax system or the resident system isn't helpful. If you stay here, you have to pay taxes in line with the law of the land. The system isn't unfair, because double taxation does not take place. If income is taxed in your home country, you get a corresponding credit here. Sure, taxes in Japan are high, and in some cases higher than in some other countries. We can complain about this, everybody hates to pay taxes, no matter how much, and everybody is free to look for loopholes and ways to reduce his burden. But it seems what certain posters here have in mind or looking for is advice about tax evasion. They get shocked when they hear that the Japanese taxman is not less diligently going after the tax dodger than in Australia, UK, US or France.

I think this is misleading in both points. First of all, I do know for sure (form my Japanese tax consultant) that the Australian tax authorities do report income in Australia to the NTA. I don't know the threshold, I don't how frequent, or whether it's done regularly, but it takes place at least occasionally. When I turned in the documents for my 2011 tax declaration, my consultant told me that just one of their Australian clients got audited because, the Australian tax authority had reported income to the NTA, which did not turn up in the Japanese tax declaration. I think your second point is also wrong. If you have paid already taxes in your home country (keep in mind though, in some countries there is no tax at all on non-resident tax payers), you get a corresponding tax credit here in Japan. Normally 100% of the tax you have already paid is recognized here. If interest, dividends, or rental income was already taxed in Australia, you get a 100% tax credit for it here in Japan. There ins't anything "immensely hypercritical" about this. Such wording is obfuscating the issue.

Actually, much of your post here is lamentable. But I am not lamenting its lamentability - I will just educate you as to why you don't know what you are talking about theoretically or practically in a lot of this post you just made. You're an Aussie, yes? I know my country has some stupid people in it so I can safely put you in that category.

No 1, Bucko - You can toss around the word 'Permanent Resident' all you like in the J context but you're dead wrong. Gaijin who are on Specialist in Humanities/ Instructor visas and have to renew their visa once a year/every three years if they were lucky enough to get a 3 year visa after their first renewal do not under any circumstances fit into the legal category of actual Permanent Residents with the rights that legal status entails. Permanent residency with all the rights that suggests in western countries is comparitively easy to obtain as is citizenship in Australia, for example.

In Japan all the roadblocks set up against gaijin's legal status in the full sense and rights such as those given to Permanent Residents in western countries, particularly Australia, mean that they are treating us as having PR simply because of over 5 full years of living in Japan. We do not get a Permanent Residency visa with that - unlike most other countries that classify PR in the ways I've mentioned.

If people with PR in western countries are having to declare income in their home country while enjoying the kinds of real PR rights they get in their western country, then so be it. It makes sense, although you're exaggerating the obligations PR have in those countries to declare bank accounts etc back home because it really is case by case according to the country.

In Japan it's the typical racist slant of no, you don't have legal PR status and no, we're not going to make it a formality for you but hang on, we will treat you as a PR and try to grab as much as we can from income you saved in your home country before you ever set foot in Japan and now has been put in interest bearing accounts or investments. The argument against such cynicism is a no brainer. For most of us here.

I'd say your Japanese tax accountant is exaggerating about the cosy relationship between the NTA and Aussie tax collectors. It would have to be some damned significant money, way above the kinds we're talking here.

It would have to be something shonky, not somebody who is an ordinary salary earner regardless of the job, such as the kinds of tax evasion that really go on. What they are after are people whose company send them to Japan and other Asian countries and do shonky things to avoid paying tax in both Japan and Australia.

These are the high fliers - the ones earning way more than most gaijin in Japan, the ones who play around with the residency laws of both Japan and Australia. The pollies voted some time ago to implement a system to prevent this kind of floating employee who is shifted around so that they and their company don't pay tax.

This change can have the effect of catching the little bloke, technically, but I do know that they are after the companies that do this evasion, not after gaijin Engrish teachers or small business people. It sounds like you were stupid enough to get a Japanese accountant who sings like a canary when he doesn't have to - enjoy coming to the attention of the ATO needlessly.

As for your bland assurances about tax credits - we've just read first-hand from other posters how from the J NTA's perspective a significant proportion of tax credits in our home countries are deemed inapplicable to the Japanese tax system, including deductions.

Given that our home countries have their own tax laws then it's obvious to any normal people that what is sitting in our home countries was subjected already to taxation and if the Japanese want to consider that money and treat it like it's taxable in Japan (as opposed to the money we are earning here in Japan), then they are nothing but rogues who are effectively applying their own laws retrospectively on money they really have no right to in the first place.

You're an idiot and you'll give most of us on here a good laugh when you and your J accountant sing like canaries to the powers that be. Now if you wanna focus on people like the farkwit Tkyo Sam who earns money from youtube but isn't declaring it to the Japanese tax authorities, yes, that is tax evasion.

Please dob him in. I'd do it if I knew his exact name and exactly where he lives. If anybody knows this arzehole's name and address, let his local tax office know.

That was my fault.

I did urge the tax whiners to keep ranting.




Caranotverymellowcap,


You and the other Fairness Junkies are arguing the Shoulds, and obscuring the Is's.

What does all that rather shrill whining have to do with actual tax liabilities????




Chainbolt is right, and you are being a panty pooping prima donna, which makes for enjoyable reading, but you are obfuscating the issue.

Which is, I believe, actual tax liabilities.

[caramellocap]

Hey Kurogane, I like ya new avatar!

Fine re the Permanent Resident issue - but if you cut that bit out, the rest of what I say is correct.

Chainbolt's not only discussing the skewed Japanese NTA's view of their right to tax restrospectively money that was earned in our home countries no matter how long ago under Japan's laws now, and is not only referring to the tax 'credits' that exist on paper - he's actually justifying such things.

1 of the things I pointed out was that these tax credits exist in name only - according to the J NTA version, what is already paid for in our home countries or is a legal tax deduction actually is not in Japan. That is not really a tax credit - that's the NTA saying it does not recognise what is a tax credit in our own countries in some cases. Chainbolt keeps misrepresenting what's going on.

He's also doing the equivalent of 'OOOH, the Oz Boogie man will help the J Boogie man!' when in fact the issues regarding co operation between the two are about the companies avoiding tax for their employees by manipulating residency requirements and floating around so that tax is evaded in both countries.

Stupid gaijin like Chainbolt can be 'grateful' they 'only' had to do this and that but basically in a country like Japan where the black economy of organised crime is screwing everybody over and the organised crime has strong links to politicians, I'd say most of us here have better priorities than snivelling to the NTA and demanding everybody accept being retrospectively taxed AND taxed twice in some cases. Stupid is as stupid does.

[Guest]

....1 of the things I pointed out was that these tax credits exist in name only - according to the J NTA version, what is already paid for in our home countries or is a legal tax deduction actually is not in Japan. That is not really a tax credit - that's the NTA saying it does not recognise what is a tax credit in our own countries in some cases. Chainbolt keeps misrepresenting what's going on.

O.k. here`s how it works in the US regarding rental income. Say property A is showing a profit and property B a loss. You use the loss in B to offset the profit in A and there is no taxable income.

Anyone know if Japan treats investment properties/rental income in the same straight-forward manner?

If so, can you also use losses from previous years to off-set current rental profit?

[Tatsuo]

In Japan it's the typical racist slant of no, you don't have legal PR status and no, we're not going to make it a formality for you but hang on, we will treat you as a PR and try to grab as much as we can from income you saved in your home country before you ever set foot in Japan and now has been put in interest bearing accounts or investments. The argument against such cynicism is a no brainer. For most of us here.

The argument that Japan were racist because non-PR-holders living in Japan had to pay taxes on interests of savings they had acquired before they came to Japan whereas in other countries this was not the case is ridiculous. First of all why should the visa be connected with the fact if someone has to pay taxes or not ? If a person is living in a society and profiting from a society he or she has to pay taxes. The interest is being paid now and now it is that you are living in this country, so you pay taxes on your income. Not because it was fair but because you can. That's the basic thing.

People always talk about "fairness". Paying taxes is not fair. Why do I pay disproportionately higher taxes than most of you underachievers ? Not because it were fair but because I can. The marginal tax rate system itself is an unfair system. There is no logic and fair reason that the first USD100.000 are being taxed a lot less than than the fifth 100.0000 dollars.
We live in a social society that only works because we don't think in terms like "fair" and "reasonable".

In other words: Just pay it !

[Brown Cow]

In other words: Just pay it !

I agree with the thrust of this and I am putting in place measures to do so. Luckily in my case my five years has only recently happened so it is not going to be a big deal.

I don't agree that all taxation is unfair and do think that going after interest earned in another country, on money earned in another country is pretty unfair. It isn't something many countries do. If the money was earned here in the first place, then I can see some justification. Still it has to be paid and that is certainly that.

I find the taxation of inheritance or gifts in another country even more unjust.

I also think the financial system is becoming dysfunctional. Suppose through diligence and by locking money up in bonds I can earn 3.0% in the UK. Inflation is about 3% so I am just about preserving the value of my hard earned savings. Then along comes the Japanese government and takes 20% of the interest. Result? I am left with a loss in real terms for the year.

[Brown Cow]

This may have been posted earlier but anyway here is "2011 Income Tax Guide For Foreigners". Well worth trying to struggle through.

http://www.nta.go.jp/tetsuzuki/shink...011/pdf/43.pdf

Now does anyone know anything about:

Special credit for specified housing improvements
Special credit for anti-earthquake improvement made to an existing house
Special credit for digital certificates etc

and

deductions for premiums paid to qualified individual pension plans


The guide is very vague and refers to other publications in Japanese for details. I'll track them down and get a translation but in the meantime does anyone know the gist of any of these? Even basic stuff like what proportion of the cost of improvements can be claimed.

The other thing that strikes me is that the double taxation issue is handled, as people have said, via a tax credit. First you calculate your tax at 20% of your interest and then you can claim a credit for the 10% you might have paid in the UK. Now it is possible to either pay 10% at source and claim it back at the end of the tax year due to your personal allowance or have it paid gross because there is no way your PA threshold will be exceeded. If you pay it at source and then later claim it back then you could presumable claim a credit in Japan for that 10% because you have paid it. The fact that it is later refunded is a separate issue stemming from allowances under the UK system. Or not? Does that sound like it might fly?

[caramellocap]

The argument that Japan were racist because non-PR-holders living in Japan had to pay taxes on interests of savings they had acquired before they came to Japan whereas in other countries this was not the case is ridiculous. First of all why should the visa be connected with the fact if someone has to pay taxes or not ? If a person is living in a society and profiting from a society he or she has to pay taxes. The interest is being paid now and now it is that you are living in this country, so you pay taxes on your income. Not because it was fair but because you can. That's the basic thing.

People always talk about "fairness". Paying taxes is not fair. Why do I pay disproportionately higher taxes than most of you underachievers ? Not because it were fair but because I can. The marginal tax rate system itself is an unfair system. There is no logic and fair reason that the first USD100.000 are being taxed a lot less than than the fifth 100.0000 dollars.
We live in a social society that only works because we don't think in terms like "fair" and "reasonable".

In other words: Just pay it !

For once I agree with about 90 percent of what you've written. Actually, I made a mistake when I was replying to chainbolt whose so farking keen to feel grateful to the Japanese NTA because they didn't completely clean out his entire savings, assets etc - truly brainwashed.

I forgot that the Aussie tax people not only quite legitimately pursue companies who set it up so their employee is 'floating' between countries in terms of the residency so they try to evade paying tax at all. That's absolutely reasonable.

There's 1 farking unreasonable thing the pollies brought in a few yrs back to make up for the fact they fund a welfare state where you can get knocked up by 5 different men to produce 5 different sprogs and earn more in tax free money than a working family or you can jump on a boat from somewhere with no connection to Oz whatsover any time, any place, and get tax free money for the rest of your life then retire on an Oz pension in Afghanistan, Pakistan, Somalia wherever so your free money from the Australian taxpayer will make you rich in your 3rd world home.

Like other spendthrift govts, the Oz govt needs to recoup that free money they're throwing at those people so they try to screw even more money out of the productive. They claim that it's 'not fair' that Aussie expats get taxed at lower rates in other countries so supposedly they have to 'make up' the difference when they go home.

This is such a cynical assertion I don't know where to begin. For the ordinary taxpayer as opposed to wealthy corporations employees, in many countries you get jackshizz benefits from the country you're an expat in so it's only fair you pay a lower rate of tax. The lower rate in countries like Korea reflects the lower benefits you get from the govt and in the cases of foreign Engrish teachers in bumfark provinces outside of where Seoul is, that means zero services for you.

Where I lived in Korea, there were zero English speakers/interpretors even at govt places where it's crucial you know what's going on - like Immigration, zero English speakers/services at city hall. Zero services acknowledging special needs foreign English teachers have - needs for understanding the system, what to do, where to go for help etc. Compulsory healthcare insurance via govt but so basic that if you had an accident or needed an operation, it's not unusual for foreign English teachers' friends to run public fund raising campaigns for them such were the costs of hospital stays.

Yep - the lower Korean tax reflected the level of service we got from the govt, local, state and national. The cnuts of politicians who made it possible for the Oz tax office to squeeze the low earning expat who gets jackshizz benefits from where they live and pay taxes should make the freeloading cnuts in Oz start doing some real work for their freebies.

But this leads to a discussion about why most taxation is wrong as it's used by politicians to get votes and vote themselves tax free, fat pensions to go with all the tax free/minimal tax benefits they had in parliament/govt.