Japan tax on overseas property income

[Cheeseman]

Can any of the posters on here with UK property income give some insight on what can be deducted from the income as expenses or any other general tips?

[SARS]

Mortgage interest, depreciation, management fees, repairs etc.

My Japanese accountant is preparing my (確定申告) accounts now so I should be able to provide a more complete answer soon as I've had to put through a lot more costs than usual this year.

I've always had this ongoing debate with myself whether I should do my own accounts in Japan, like I do in the UK. I can read Japanese, so that's not a problem, just feels like too much effort compared to the annual cost of an accountant.

Does anyone on this board do their own Japanese accounts? Interested to understand how much effort it is.

[eyeswideshut]

I have Canadian property but I think the rules are the same. I deduct:

1) Interest on loan
2) HSA fees
3) Rental Management fees
4) Property Tax
5) Insurance
6) Withholding Tax - this is a weird one to me - my accountant says I should consider it an expense but my view is that I should get a credit for the tax paid otherwise I am being double taxed. But he is the expert so I follow his advice. Anyway, it's not a large amount of money.
7) Repairs and other bills related to the maintenance of the properties
8) Other reasonable fees I personally incurred related to the property (travel, meals, accountant fees)
9) Depreciation - You will no longer be allowed to deduct foreign property depreciation from aggregate income beginning next year. I can understand why they made this change as many people, myself included, were using depreciation to massively lower their tax bill in Japan. Ah well, all good things come to an end.

From next year, my understanding is that items 1-8 can still be deducted against both rental income and other income. From next year item 9 will be limited only to income derived from overseas properties. I am still confirming this as the new rules are very vague to me but that is my current understanding.

Unless you know what you are doing, I suggest using an accountant especially if you are claiming depreciation as the rules are really complicated.

[Wales4rugbyWC23]

I have Canadian property but I think the rules are the same. I deduct:

1) Interest on loan
2) HSA fees
3) Rental Management fees
4) Property Tax
5) Insurance
6) Withholding Tax - this is a weird one to me - my accountant says I should consider it an expense but my view is that I should get a credit for the tax paid otherwise I am being double taxed. But he is the expert so I follow his advice. Anyway, it's not a large amount of money.
7) Repairs and other bills related to the maintenance of the properties
8) Other reasonable fees I personally incurred related to the property (travel, meals, accountant fees)
9) Depreciation - You will no longer be allowed to deduct foreign property depreciation from aggregate income beginning next year. I can understand why they made this change as many people, myself included, were using depreciation to massively lower their tax bill in Japan. Ah well, all good things come to an end.

From next year, my understanding is that items 1-8 can still be deducted against both rental income and other income. From next year item 9 will be limited only to income derived from overseas properties. I am still confirming this as the new rules are very vague to me but that is my current understanding.

Unless you know what you are doing, I suggest using an accountant especially if you are claiming depreciation as the rules are really complicated.

Item 9 Just a quick question does this stop in 2021 or 2022?

[eyeswideshut]

Item 9 Just a quick question does this stop in 2021 or 2022?

2021. i.e.: depreciation from overseas properties can be offset against 2020 income for the purposes of your FY21 tax return.

[SARS]

Does anyone know if you can deduct (re)mortgage professional fees and stamp duty on new purchases?

I've asked my accountant and waiting for a response but interested to hear the collective's view.

[Wales4rugbyWC23]

Does anyone know if you can deduct (re)mortgage professional fees and stamp duty on new purchases?

I've asked my accountant and waiting for a response but interested to hear the collective's view.

My Japanese accountant says yes. Stamp duty is quite a lot for second properties in the UK. However, on your British tax return stamp duty is definitely not tax deductible.

[SARS]

Great, I hope that's correct! I'll see what my accountant says this week.

Yes, second property stamp duty is significant, although this year it was a lot lower given the stamp duty holiday.

[KyushuWoozy]

However, on your British tax return stamp duty is definitely not tax deductible.

You're right, however you should keep a record of this plus conveyancing fees and surveys because when the time comes to sell they help to lower your capital gains tax.

[KyushuWoozy]

Yes, second property stamp duty is significant, although this year it was a lot lower given the stamp duty holiday.

Indeed, and stamp duty holiday has been extended again in the recent budget. Rishi seems to be the chancellor that keeps on giving ...