Er, busted?
A reader mentioned this news story in the comments last week. Over two years old, but very interesting, and likely to affect some of our readers.
Basically 51 countries and counting agreed to automatically share information about bank accounts and financial assets owned by each others’ citizens.
The USA does not seem to be on the list, and neither is Singapore, but most other countries of interest seem to be on there.
I’m not sure exactly what this means (what kind of information will be shared, how they will link people and accounts) but it is interesting, particularly following the Japan exit tax post last week.
Any thoughts on this?
All permanent residents (as defined by the tax office, not your visa) and J-nationals with overseas assets over 50 million JPY have the legal obligation to report those assets. See here: https://www.gtjapan.jp/oa/en/
Failure to report is a criminal offense.
I have no idea but I imagine a lot of expats (and Japanese nationals) here are unaware of the requirements to report their overseas assets. I am no expert but assets seems to be defined quite broadly and I think it includes real estate. 50 million Yen is not a very high threshold at all. Now that the Japanese Tax Authority will have access to the databases of the signatory nations will they begin actively investigating and prosecuting people for failure to report? If so then a lot of people could be in for a nasty surprise.
Absolutely. Very few people seem to be aware of this (relatively new?) requirement.
The other wild card is the exchange rate. With the yen at 101 to the USD, I am nowhere near 50m in overseas assets.
If the yen goes over 200 to the USD, it starts getting a bit closer 🙂
The other factor is who are they targeting here? Is it everyone? Or those with assets way over 50m?
Depends on the focus and manpower available I guess.
Yes – the exchange rate makes a huge difference so how to they evaluate? You may be over 50 million yen this year and well under next year! Likewise with real estate. How do they value the property? The price you paid for it or what they think it might be worth now? Seems that would be quite hard. Or does it only matter when you are disposing of assets for CGT purposes?
You have to declare it yourself, so I guess you could value it yourself. It should be current value, which I guess you can estimate?
I think this is the right move, and only fair. Frankly I’m tired of some of my colleagues who do blatant tax evasion by putting all their JP assets in their wife’s account, and all their US assets in their name, basically ensuring they don’t declare their stock options to any of the two countries.
These guys are literally avoiding to pay dozens of thousands of dollars in tax to Japan every year, while still always complaining about how the government is screwing them over.
I have a problem with people who don’t follow the rules. Don’t like the tax rules in the country? Move someplace else.
That being said, the rule of the 50 M JPY was news to me when I moved to the US, and I learned about it only because a tax company was assigned to me to help
I’m with you on this in principle. We all have the obligation to pay our fair share of taxes. That said, it irks me that (a) I am not enfranchised here so I get no say in how the money is spent and (b) I am less likely to enjoy any ROI for my taxes if I do leave at some point. My main issue is the exit tax. I think this is complete BS to ‘deem’ capital gains owed when you leave Japan. Capital gains should only be taxable when you actually sell the assets. I feel it is just a big middle finger to expats here and could give rise to double taxation as other jurisdictions may not recognize the ‘exit tax’ as having settled the tax obligation on actual sale.
If your colleagues are getting stock options or stock as a part of their compensation then they should be aware that their company has a legal requirement to report that compensation to the JTA. So if they think they will get away with not declaring that as income they are idiots who are in for a nasty (and well deserved) shock.
If you are going to have to pay capital gains anyway, why not just sell the assets before you leave Japan and pay the tax normally? You could keep 49 million yen’s worth and avoid the rest of the exit tax.
What am I missing?
Sorry, that should be 99 million to put you under the exit tax limit.
Replying to the main chain cause I can’t seem to reply to RetireJapan’s comment.
I am not an expert and really have only just started thinking about this but I agree with you. One would be best to liquidate eligible assets and pay the actual tax to the Japanese government. The ‘deemed liquidation’ mechanism may not be recognized by your new country of residence as having settled any capital gains due on sale. I imagine it depends on the existence and content of a tax treaty between the two nations.
In any case, actually selling will be the safest course of action. However, this means you may lose the ability to be taxed at a lower marginal rate after you retire so you will be paying full rate on any capital gains. For us ‘buy and hold’ types I think this will be a real headache. The silver lining is that I am nowhere near 100 million Yen in eligible assets and I will do what I can to make sure that remains the case.
Yes, I’m also in the lucky (unlucky) position of not having anywhere near 100 million yen in worldwide assets. Add my wife to the equation and we’re even further away.
In the extremely unlikely (and happy) event that we somehow end up with more than 200 million yen, I think we’d sell enough to get under 100 million each and avoid the tax altogether.
Not currently planning to leave Japan but you never know what the future will bring…
Would like to weigh in on this issue. This is where the basic tenets of long term investing comes in – minimizing costs and taxes.
Ethics aside, with the exit tax being slapped on individuals who intend to leave Japan, moving assets to these jurisdictions effectively allows us to sidestep the money grabbing tax man.
It would be horrible to see one’s own effort of building up a comfortable nest egg for retirement, only to see it taxed by what is essentially a bankrupt administration.
Hi Desmond
Do you mean that once you leave Japan for good it would be difficult for the Japanese tax office to make you pay the tax?
As far as I am aware of, the exit tax is paid once and only once upon leaving Japan for good. Pretty certain that paperwork needs to be filed with the municipal office before leaving.
If one chooses to be utterly unscrupulous, he can opt to transfer all assets to an overseas location, preferably a non-cooperative tax haven, then leave permanently.
This way the authorities will be unable to freeze any assets except real estate.
Thankfully for most people they either won’t be over 100m or can just sell some of their assets to get under 100m before leaving.
I’m sure the super-rich will come up with some funky strategies to get around this 🙂
I kept my HSBC account in the UK when I moved here. Some time ago I figured, perhaps incorrectly, that it would be more convenient for me to have that account updated with my address here. A couple of months ago i got a request from them in line with automatic information exchange, asking for my MyNumber. I think though that it will be quite some time before the whole thing gets going properly: a bunch of countries (including Japan) aren’t down to start sharing until next year.