Help! The Japanese Tax Office Wants Dingo's Money!

[dingosatemybaby]

Dingo sold some stock in his US account and transferred the money, about $200 grand, to his account at Shittybank Japan to use for the purchase of his decripit little house in Karuizawa - you know, Japanese banks not giving mortgage loans to FGs and all. This was in 2001. Now, dingo gets notices from the Japanese Tax Office saying that Japan wants to assess taxes on the money. Having paid almost $80,000 in US capital gains taxes already, dingo is, needless to say, a bit disconcerted by the prospect of having to pay still more to Japan.

Generally speaking, does anyone know under what conditions foreign-earned income, for which taxes have been paid to the relevant foreign taxation authority, are subject to Japanese taxes? Has anyone gotten one of these vile little letters of inquiry from the Japanese Tax Office asking about a transfer from a foreign source?

Any help mucho, mucho apreció.

[American Oyaji]

The question is....

Are they taxing the HOUSE?

Or are they trying to tax the money you transferred to your account?


Basically, what I think happened is that a J-official got his ass on his shoulders cuz you got money that dont have and since they watch gaijin accounts more closely...he ratted on you saying that you had income.

In TRUTH, its NOT income. The stock had value before you sold it

Question is, does the Japanese bank know that you sold the stock. If they don't, fuck 'em. Just tell them that the money was savings and was transferred for the purpose to buy a home.

I think some asshole at your bank was dipping in your business. I'd take my business elsewhere were I you because whatever you do with your money, they will be watching it at THAT bank.

[FG Lurker]

I assume the Japanese government wants you to pay income tax on this amount, as from their perspective the money just *boom* arrived as "income". It wasn't income though, but a conversion of assets into cash. I have no idea how capital gains works here though.

With an amount of money such as this at stake I strongly urge you to seek out a good tax accountant and/or tax lawyer and get their advice. You want to take care of this immediately -- once the tax authorities here start to chase, they do *not* give up until you either a) pay up or b) show you don't owe.

Good luck, I hope it goes smoothly.

Ian

[FG Lurker]

The question is....

Are they taxing the HOUSE?

Or are they trying to tax the money you transferred to your account?

Banks have no choice -- they must report large transactions, probably anything over US$10,000. Why? To (try to) stop money laundering. This is also why you have to declare if you are carrying cash/convertible securities/etc over US$10,000 whenever you cross a border -- if you do not declare the money it can be seized.

Casinos etc in the US also have to report any transactions of US$10,000 or more for the same reason.

In TRUTH, its NOT income. The stock had value before you sold it

True. But it is up to dingo to prove this now. Trust me, once the tax authorities send a notice, they won't suddenly give up and go away.

Ian

[Marvin Feltcher]

wants to assess taxes on the money. Having paid almost $80,000 in US capital gains taxes already

If the Capital Gains Taxes were paid regarding that sum and you have documentation to prove that, you won't have to pay tax on it in Japan.
You will have to pay an annual assets tax for owning the house (something along the lines of 100,000 to 150,000 yen).

[dingosatemybaby]

The question is....

Are they taxing the HOUSE?

Or are they trying to tax the money you transferred to your account?


Basically, what I think happened is that a J-official got his ass on his shoulders cuz you got money that dont have and since they watch gaijin accounts more closely...he ratted on you saying that you had income.

In TRUTH, its NOT income. The stock had value before you sold it

Question is, does the Japanese bank know that you sold the stock. If they don't, fuck 'em. Just tell them that the money was savings and was transferred for the purpose to buy a home.

I think some asshole at your bank was dipping in your business. I'd take my business elsewhere were I you because whatever you do with your money, they will be watching it at THAT bank.

Hello AO and everyone. They want to tax the money I transferred to my account, for which I already paid capital gains taxes on the US side. I'm thinking I'm going to avoid at all costs making a transfer from the US to Japan again. My sense is that the Japanese tax authorities are getting hard up for money. If I have to pay capital gains taxes to BOTH the US and Japan on my $200,000, it's going to be more than the $200K itself. <dingo makes a series of little yelping noises>

[kamome]

Actually, gains from the sale of stock are considered income, it's just a form of investment income, not salary income. There are several categories of "income" as they are defined in the Japanese tax laws. I am not sure which basket of income the proceeds from your stock sale falls under. But the tax rate on each particular type of income varies and is also subject to different kinds of standard deductions. So this (the question of what type of income you earned) is something you need to ask your Japanese accountant.

You also need to clarify how long you have been in Japan. Is it more than 5 years? If so, you are considered a "permanent resident" of Japan for tax purposes, thereby making your worldwide income taxable in Japan. That sucks for U.S. citizens, because their worldwide income is also taxable in the U.S. For a permanent resident, the remittance of money into Japan doesn't trigger the tax, it just notifies the tax authorities that you made this income overseas. Since a permanent resident by law is taxable on all of his income wherever earned, the remittance of some income into Japan puts the authorities on notice that you made money they couldn't track beforehand and now they are going to go after it.

For people who have lived in Japan less than five years, the tax on remittances into Japan is a bit too complicated to explain here.

I also do not know if you are entitled to some sort of tax credit in Japan for having paid U.S. capital gains taxes on your stock sale proceeds. That's another question you should bring up to your accountant.

[AssKissinger]

That sucks for U.S. citizens, because their worldwide income is also taxable in the U.S. For a permanent resident

That's only if it exceeds $70,000 a year, right? Paying taxes in two countries is so fucked. At least, there's something good about being poor. If Japan came after money I made in the states (or vice versa) that would piss me off..I don't even want to say how badly.

[Marvin Feltcher]

I also do not know if you are entitled to some sort of tax credit in Japan for having paid U.S. capital gains taxes on your stock sale proceeds. That's another question you should bring up to your accountant.

I'm almost certain that Japanese tax authorities will not tax you on amounts for which you have already been taxed, provided there is a reciprocal agreement with the country in which the tax was levied. (If dingo is an Aussie, he should be fine). He will, however, have to be able to prove when and where that tax was paid.

[omae mona]

I also do not know if you are entitled to some sort of tax credit in Japan for having paid U.S. capital gains taxes on your stock sale proceeds. That's another question you should bring up to your accountant.

I'm almost certain that Japanese tax authorities will not tax you on amounts for which you have already been taxed, provided there is a reciprocal agreement with the country in which the tax was levied. (If dingo is an Aussie, he should be fine). He will, however, have to be able to prove when and where that tax was paid.

I'm with Kamome. In my experience, for a U.S. citizen, Japan doesn't care whether it's been taxed or not, so long as it meets the requirements for taxable Japan income. But usually there are big tax credits given on one side or the other (I think usually the U.S.), so the taxes don't completely pile up on top of each other.

I've avoided having my U.S. investment income counted as Japan income. I haven't hit the 5-year mark yet, and on accountants advice I have been careful about keeping investment proceeds segregated in my U.S. accounts. This way when I remit cash to Japan, if questioned it would be easy to claim the cash wasn't from my investments - just from my employment income, which is taxed in U.S. and Japan anyway.

I should add that my investment income hasn't exceeded about 27 dollars any time in recent memory...

[American Oyaji]

In the future, instead of transfering money to your account, just transfer the money directly to whoever is the final destination for the money.

[FG Lurker]

Everyone has an opinion, including myself above.

The fact is though, you need to talk to a tax accountant, and the sooner the better. Depending on your visa status and your future desires with regards to life in Japan, this could be a big problem if you don't take care of it immediately.

I hope everything works out without you having to fork over more cash.

Ian

[Mulboyne]

The fact is though, you need to talk to a tax accountant, and the sooner the better.

That's the best advice.
MoF does have a tax website which gives pointers
http://www.mof.go.jp/english/tax/taxes2004e.htm

[kamome]

I should add that my investment income hasn't exceeded about 27 dollars any time in recent memory...

That makes two of us.

[kamome]

That sucks for U.S. citizens, because their worldwide income is also taxable in the U.S. For a permanent resident

That's only if it exceeds $70,000 a year, right? Paying taxes in two countries is so fucked. At least, there's something good about being poor. If Japan came after money I made in the states (or vice versa) that would piss me off..I don't even want to say how badly.

Yeah, the $70,000 threshold is an exception to the worldwide income rule provided under the Internal Revenue Code. If you are only making a salary in Japan and your total income from that salary is under the threshold (I don't know if it's still $70k, though--could be higher), then you most likely won't have to pay taxes in the U.S. But you are still required to file a tax return in the U.S. every year and report every item of income you have made.

By the way, if I recall correctly, that $70k threshold applies to income earned outside the U.S. If you have other kinds of U.S. passive or investment income (rents, interest on bank accounts in the U.S, gains from the sale of stock in the U.S., etc.) you still have to report that income and pay tax on it in the U.S.--provided that such income exceeds the various deductions available to you from year to year.

[dingosatemybaby]

Good news!

Our accountant tells me the Japanese Tax Office has said they'll drop their inquiry into my remittance from the US, but warned that future remittances may be subject to Japanese taxes, regardless of whether US taxes were already paid. Well, no problem there, because dingo sure as shit isn't going to be making any future remittances into Japan; on the contrary - with the yen going up and a planned future consumption tax rate of 10% and ultimately 25%, all of dingo's future remittances are going to be resolutely OUTBOUND.

Anyway, I think the accountant schmoozed with the tax boys and let them know his feral canine client was going to challenge them, whereupon the tax boys decided to abandon their little fishing expedition after concluding they weren't going to get a cut of dingo's previously-taxed assets without some serious bite marks and perhaps a case of rabies.

Thanks to all for their helpful suggestions during dingo's dark days of tax purgatory.

[FG Lurker]

Congratulations Dingo!! Glad it worked out well.

I'd heard the consumption tax would climb to 10% over time perhaps to 15, but 25?? Haven't heard that before... Are you sure?

Ian

[American Oyaji]

Congrats dingo!!

I'm happy for you. But make sure and keep your teeth sharp cuz you know Japanese can easily change their collective minds.