Tricky (?) tax question

[ADHWGT]

Hey guys,

I work as a freelancer in Japan for a couple of Swedish companies. Although my income is Swedish-source, I only pay taxes in Japan (as this is what the Swedish tax agency instructed me to do).

So far so good, but here comes the confusing part: when I filed my Japanese taxes this year (which was actually the first time I've done this), I was instructed by the staff at the temporary tax office here in Shinjuku to only report income I've actually earned IN Japan. So basically, I excluded all income I'd earned while on business trips or vacation in other countries.

I asked the Swedish tax agency about this point just to be sure, but they insisted that I should pay no Swedish taxes, not even on the income NOT taxed by Japan.

So my questions is this: can it really be the case that whenever I leave Japan for a certain period of time, any income I earn during that period is not taxable at all? Sounds too good to be true, which is why I doubt it actually is...

Any advice would be much appreciated!

[Russell]

Make sure you get these explanations from the respective tax agencies on paper, and store them somewhere. Printouts of emails should be fine.

If they want to fine you in the future for not paying taxes for the part of your income not earned in Japan, you have proof of their advice.

BTW, how long have you been in Japan?

If it is less than 5 years or so, there may be a tax treaty.

I seem to remember that Japanese living in the Netherlands for the first 5 years are in a good situation tax-wise.

[Samurai_Jerk]

Foreign residents of Japan only have to pay taxes on global income if they've resided in Japan for a total of five years during the past ten years regardless of nationality. I'm not sure exactly how that applies to people who live in Japan but freelance abroad but it might have something to do with that. Plus there are different tax bilateral treaties that exempt you from income taxes for the first X number of years residing in Japan as Russell mentioned. Depending on your nationality it might be related to that. Anyway, yes do get it in writing.

[Wibble]

Foreign residents of Japan only have to pay taxes on global income if they've resided in Japan for a total of five years during the past ten years regardless of nationality. I'm not sure exactly how that applies to people who live in Japan but freelance abroad but it might have something to do with that. Plus there are different tax bilateral treaties that exempt you from income taxes for the first X number of years residing in Japan as Russell mentioned. Depending on your nationality it might be related to that. Anyway, yes do get it in writing.

Non-permanent tax residents (foreigners in Japan less than 5 years) also supposed to pay taxes on foreign income that they remit into Japan. However, in practice sums less than 1,000,000 yen transferred at a time are ignored. But if they've told you not to pay and you can get them to put it in writing, then surely you're fine for taxes (until you become a permanent tax resident).

For the bilateral treaty thing, it's not necessarily what nationality you are, but can be based on where you were previously a resident depending on the treaty.

[wagyl]

There is one more possibility: that you are liable to pay tax on income you've earned while on business trips or vacation in other countries, in those other countries.

[Samurai_Jerk]

There is one more possibility: that you are liable to pay tax on income you've earned while on business trips or vacation in other countries, in those other countries.

He already addressed that. Sweden told him that he didn't owe taxes.

[wagyl]

There is one more possibility: that you are liable to pay tax on income you've earned while on business trips or vacation in other countries, in those other countries.

He already addressed that. Sweden told him that he didn't owe taxes.

..to Sweden. I get that. I think we are talking about third countries here. Maybe I was mistaken.

Although I doubt that third party countries want to go to the effort to set up a tax file for a non-resident, and it is very likely in many places that any income earned would fall below a taxable threshhold, I will say that the OP has in his other threads shown a remarkable persistence in engaging with tax authorities and getting everything squared and sorted in advance. Russell's advice above, the first answer, really covers all bases: get it in writing to cover your arse for the future.

[Samurai_Jerk]

I assumed based in Japan, freelancing in Sweden. I guess it's not really clear though.

[wagyl]

I assumed based in Japan, freelancing in Sweden. I guess it's not really clear though.

I will say that my main reason for thinking this was talking about business trips and holidays in third countries was because, as you pointed out, the answer already seems to be provided for Japan and Sweden.

[Russell]

...income I'd earned while on [...] vacation in other countries.

BTW, can I have your job?!?

[wagyl]

I'm kind of surprised that the OP is asking here again, after the wide range of answers he received last time, not one of them matching the eventual response he got from the various tax authorities. But then again, it didn't match what the professional expert told him either.

[Samurai_Jerk]

If he's being paid for work done in a third country, one has to wonder whether or not he's got the proper visa to work in that country.

[Wage Slave]

If he's being paid for work done in a third country, one has to wonder whether or not he's got the proper visa to work in that country.

Work done in one of the 27 other EU countries? Or Norway for Swedish people I think.

[wagyl]

If he's being paid for work done in a third country, one has to wonder whether or not he's got the proper visa to work in that country.

Work done in one of the 27 other EU countries? Or Norway for Swedish people I think.

Indeed, "all these foreign people from the East, flooding over the borders and taking our jobs from our children." although I don't think this is what we are talking about here. It all certainly brings home the benefits of the EU, benefits often forgotten by those not inside the system (and I think forgotten by many within). (And yes, I am aware that that particular Nordic cooperation has nothing to do with the EU)

[IparryU]

Wasn't there another thread with a very similar question? I swear i wrote a lot about something like this before.

[wagyl]

Wasn't there another thread with a very similar question? I swear i wrote a lot about something like this before.

Yep. same OP viewtopic.php?f=17&t=29962

[ADHWGT]

Thanks for all the input!

To clarify: I have journalist visa. The Swedish companies I do freelance work for have no offices in Japan, or any presence whatsoever apart from myself. My salary is paid in Sweden, in Swedish kronor (the local currency), to my Swedish bank account. (Some of you have mentioned my previous thread from earlier this year, when I was super confused about whether to pay Japanese or Swedish tax on my "Swedish" income. Thankfully, the Japanese and Swedish authorities agreed that I only need to pay Japanese tax.)

The "advice" I got from the Japanese tax authorities was actually (unfortunately?) verbally, at the time of my filing, back in March of this year. I went to the temporary filing place believing my Swedish-source income was not taxable in Japan, only to be sternly corrected by the tax agent assigned to me. However, he then asked me to deduct all income earned while I've been in other countries from my total taxable income for the year (2013).

As for the other countries I've visited, it's mostly been Sweden and the US (where I also have a journalist visa). A couple of months last year, about three months this year.

[Guyfawks]

I can see where the grey area of confusion comes in, but this is pretty clear to me - you work in Japan, and where you are paid is of little consequence. That is, you pay tax where you work and earn that income. Yes, it's not the usual set-up, but look at it this way - if you get paid onshore, but have off-shore payments like stock awards etc. that amount gets declared in Japan, where taxes have to be paid. This is 100% clear. So the fact that you have the unusual arrangement to be paid offshore completely does not change the situation - you pay taxes where your work is done, not where you are paid. But, you can read into things the way you want, but if the tax authorities catch up with you, it can get very messy, proof or not of what you have or were told. There is an English Tax line on 03-3821-9070 - I would make double sure with them. Even if there is confusion, as I say, you don't want to pay back taxes and fines in the future. Good Luck