And so it begins
We wrote about the OECD tax information treaty on the blog last year. It is now coming into effect, and governments are starting to take action.
Earlier in the year Nutmeg in the UK asked for my Japanese tax information in order to activate my account.
I got a letter from my bank (HSBC) last week with some information and a request for me to inform them of 1) my country of residence for tax purposes, and 2) my tax information number (My Number for Japan).
Here are the documents I received:
Most interesting bit? The fact that they will report both balances and any credits or interest to the account to the Japanese tax office.
Pretty painless paperwork, but it’s going to make a big difference.
I had assumed the system was going to be fairly sophisticated and match accounts according to names and addresses.
Clearly not.
It’s going to depend on self-reporting, with penalties for not registering with the authorities.
I have read several articles about chasing tax avoiders in the UK, and the consensus seems to be that the authorities are completely overwhelmed and unable to pursue more than a fraction of the cases.
There are currently over 2 million foreign residents of Japan, of which just over 600,000 are permanent residents (there are also 140,000 people on spouse visas). I’m guessing the PRs and the spouses will make up most of the people who both have foreign accounts and have to pay tax on them.
The question then becomes: does Japan have the extra manpower to go through millions of accounts and potentially billions of transactions in order to find out whether people are properly declaring foreign income?
I’m guessing they will sort by the amounts in the accounts and focus most of their attention on the larger accounts. Where the line is drawn will probably come to light based on who gets called into the tax office to explain 😉
So over the next few weeks and months you can expect to get similar paperwork from your banks and financial service providers in other countries. The US government did not sign the treaty (funny how they expect the rest of the world to provide them with information for FATCA but don’t want to reciprocate) nor did Singapore (presumably to protect their banking sector).
It’s a good idea to report everything properly, but I know there are a lot of people who haven’t so far. It’s going to get harder in the future to evade taxes, and if the government manages to automate the data collection in any way using algorithms I presume a lot of people are going to be getting letters from the tax office.
What do you think? Have you received any letters like this? Will you register your My Number with your banks and providers abroad?
I’m US, and had never been asked for my social security number. But when my taishokukin hit the bank, I got a letter asking for that and other personal specifics. I’m sure that deposit will be reported to the US.
[quote]…does Japan have the extra manpower to go through millions of accounts…[/quote]
“Manpower” should read “computer algorithms”, or some such thing. Software will do the looking, and if the proper flag gets triggered, or enough of them, people will then get involved.
You’re right, but can I just imagine the tax office printing out millions of sheets of paper and going through them with a highlighter and red pen 😉
Try paypal
Not sure what you mean here. The post refers to bank and financial accounts in other countries. Paypal isn’t really used for deposits, is it?
Regarding the taxpayer information number (TIN) for CRS in Japan, the Japanese National Tax Agency (along with at least some banks) has made it fairly clear that this does NOT mean your My Number. See the following (Japanese) documents, available on the NTA site at http://www.nta.go.jp/sonota/kokusai/crs/index.htm, for details: http://www.nta.go.jp/sonota/kokusai/crs/pdf/nouzeibangou.pdf
http://www.nta.go.jp/sonota/kokusai/crs/pdf/04.pdf
The first document, a worldwide chart of TINs, notes at the top that although white-triangle countries like Japan DO have taxpayer-number systems, these numbers are NOT “automatically assigned” to residents (i.e., presumably not My Numbers). In the second document, FAQ 44 excludes the My Number from consideration as a TIN under the CRS system, and a note on page 14 specifically states that the Japanese My Number is not among the CRS reportable items. I don’t suppose financial institutions will complain about getting a My Number, and in Japan the system is expanding in scope, but in the scanned form, the technically correct response to the request for a TIN would seem to be “N/A” (or blank) because of Reason C. As for what your Japanese TIN might actually be, the NTA doesn’t get specific.
Caution: I have not read all of the Japanese documents in detail, so can’t discount the possible applicability or non-applicability of the other reasons or the possibility that other countries are applying the rules in different ways, and of course financial institutions may eventually end up asking for a My Number anyway. Also, please don’t take this as the final word; further confirmation is suggested.
Wow, FE, that is incredibly interesting (and valuable).
If true, it begs two questions:
1) if My Number is not a TIN, then what is the point of implementing it?
2) how is Japan going to keep track of people then?
For now I will happily answer ‘Japan’ and N/A on further paperwork. Thanks for the heads-up 🙂
Good info. I’m slightly confused though–based on the information provided, though, wouldn’t the reason for entering N/A be “A” rather than “C”–As, according to the chart, Japan does have a taxpayer-number system, but numbers are not “automatically assigned” to residents?
The weird thing is that My Number is assigned to residents automatically…
I just gave my My Number and have since had a confirmation letter from my UK bank that all was okay. Maybe I didn’t need to but I’m pretty sure that’s what most folk will end up giving!
Although enforcement will not be as easy as with a My Number, since your name, address, and other details will still be reported, it probably wouldn’t be too difficult for the good people at the NTA to use their highlighters and algorithms to connect your overseas account with your domestic tax records — gives them a little extra something to do. I imagine the situation right now is that no legal basis exists for allowing the use of My Numbers outside the country. A little privacy and identity-theft protection, then, but no protection against tax audits unless you claim not to be tax-resident in Japan. That makes CRS different from the obviously unenforceable new estate-tax laws, where no domestic records will exist of beneficiaries who may never even have set foot in Japan.
Again, surely no overseas institution will complain if you provide your My Number, it’s just that technically speaking, it doesn’t seem to be required by Japanese law. Given the vagueness surrounding the use of My Numbers, most people will indeed probably just go ahead and report it without incident. But on the form, reason A does not seem right to me as a reason for not providing the My Number, because the paradoxical fact is that the chart previously mentioned clearly shows that Japan does not assign TINs to taxpayers “automatically,” but it DOES assign them. I have no idea what “automatically” means in this case and don’t know what the NTA actually uses as a TIN, but if you get a kakutei shinkoku form sent to you every year, you will see various numbers printed in the margins and a whole bunch of numbers and letters printed under your name and address on the second page, so there might be some connection there (and if you don’t do a kakutei shinkoku, before the current use of My Numbers, the tax office had to have had some coded method for dealing with the information provided directly by employers). All in all, pretty hard to get a firm grip on, and it makes me glad that CRS does not yet impact me directly.
One more piece of information that may be of interest. (I hadn’t been following this issue, so it was all news to me.) I received similar forms from another UK financial institution last week. The cover letter was poorly written, or at least I was a bit confused by what it was trying to say, so I rang the dedicated help line number in the UK to try to resolve the issue. During the course of my conversation I learned that the bank only cares about the period since 1 January 2016.
Ah, OK, I found the section on the OECD website that explains TINs for the various countries. According to the English document on that site (linked to below), the My Number IS the TIN when personal information is being disclosed to a NON-Japanese bank etc. and the account holder claims tax residency in Japan. If an account holder is tax-resident in Japan and opening an account in Japan, THEN providing the My Number is not required — see http://www.nta.go.jp/sonota/kokusai/crs/pdf/kouzakaisetsu.pdf for the situation when opening accounts in Japan.
It looks like I was originally trying to apply the domestic rules to international situations (and My Numbers will eventually get tied to bank accounts in Japan, too, just not right yet). Sorry for getting the two confused.
The OECD document:
http://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-identification-numbers/Japan-TIN.pdf
Okay, so that reverts to what I originally thought.
You wouldn’t need to provide this for overseas tax residency for a Japanese bank, although they will ask for your My Number as part of opening the account (in a different step).
Hmmm.
Japanese banks may ask for (require?) your My Number now when opening accounts, but connecting My Numbers to regular bank accounts officially begins from 2018, and then only on a (technically) voluntary basis. MUFG’s current FAQ (although it dates from March 2016) says that My Numbers are not required for opening, closing, or making deposits and withdrawals from standard accounts there. The Japanese AllAbout site has a pretty good single-page summary (https://allabout.co.jp/gm/gc/465816/). Mandatory reporting isn’t supposed to start until around 2021. In theory (in theory, mind you), someone with only a regular a bank account can refuse to reveal their My Number to the bank without penalty until about 2021 (international money transfers, new securities accounts, and a couple of specific transactions are different, and maybe a My Number would also be necessary for regular accounts that allow such transactions, although Shinsei didn’t require one when I opened an account there as Japan-only tax resident).
Yes, you’re right! I have been mainly dealing with securities accounts recently, and they just started requiring My Number -haven’t heard of a bank asking for it for current account yet 🙂