Leaving Japan for 2 years

[Liveintokyo]

I have been living in Japan for about 15 years but only started paying in to the Japanese pension system a few years ago - actually back paid a couple of years towards the end of 2019 just before Corona hit. I have set up a pension fund in my home country, but started paying into the pension as it was a nice tax deduction. I was planning to start the ideco/NISA as well but Corona destroyed many of my income streams so I barely had enough scrape by for the last couple of years.

I have accepted a job in Thailand for 2 years and will be gone from August 2022 to July 2024. However upon completion of the contract I will be returning to Japan and plan to retire here so I want to keep my retirement funds intact rather than getting a lump payout. Is that possible? I am planning to come back over the summer breaks and make a bit of money and was hoping this will give me enough income in Japan to keep the retirement fund going rather than having to start again when I get back.

Any advice would be appreciated.

[Tkydon]

Yes, no problem at all.

Do you have Permanent Residence Visa? I presume so...

If not, you will have to work out the length remaining on your Visa and so on...

I strongly suggest you get a Reentry Permit from Immigration. It will be valid for 5 years, or until your Visa or Zairyu Card expires.
If you do not, you will select the Special Reenty Tick Box on the Embarkation Card, but many people got caught out due to Covid and could not get back into the country within the 1 year, and this caused a lot of problems... Get The Reentry Permit!

Your Japan National Pension will remain active. Keep your pension book in a safe place.
If you have paid in more than 5 years, you can only get a refund for a max of 5 years - 60 months anyway...
https://www.nenkin.go.jp/international/ ... iles/A.pdf

Wherever you are in the world, if you have paid in more than 120 months of contributions, you will be entitled to a partial Japanese Pension.
If you continue to pay when you get back, you will be entitled to X Total Months Paid / 480 x Full Japanese Pension. See the Website for details at

https://www.nenkin.go.jp/international/index.html

On the Tax front, even though you are not in Japan, you will still be required to pay at least Residents' Taxes for Tax Year 2021, payable from June 2022 to May 2023.

If you do not have a registered address in Japan on 1 Japan 2023, then you will NOT be liable for Residents' Taxes for 2022, payable from June 2023 to May 2024. Make sure you deregister from your address before you leave. So long as you are coming back, you won't need to do anything else, but you will be required to appoint a Tax Representative to deal with any tax issues while you are out of the country, and for taxes (or refund) for income in the period Jan to Aug 2022, in Mar 2023...

Reregister at your (new) address when you come back.

If you do not have a registered address in Japan on 1 Japan 2024, then you will NOT be liable for Residents' Taxes until Tax Year 2025, payable from June 2026 to May 2027.

[adamu]

I want to keep my retirement funds intact rather than getting a lump payout. Is that possible?

Yes. Just don't request the lump sum payout.

Non-resident foreigners aren't eligible to pay into the pension, but your existing contributions will still count as long as you don't take the lump sum. If you keep a registered address in Japan while you're in Thailand, you could keep the national pension payments going (16,610円 a month), but as Tkydon said then you might also be liable for residence tax. Although whether foreigners going abroad for 1+ year while keeping their status of residence are residents seems to be a grey area - my guess is that the criteria is if you have an active residence record, but I'm not 100% sure.

If you have Japanese nationality, you can pay voluntary pension contributions even without being resident.

[Liveintokyo]

Thanks for the advice guys and I'm very happy to hear that it looks like I can keep the pension payments as is. I will be back in 2 year so if I can continue making payments (or at least leave the account ready to start when I get back) that would be the best.

A little bit more information - my wife is Japanese and I don't have nationality, but do have the permanent visa. It needs to be renewed in April so I will definitely get the 5 year re-entry permit. I've had a couple of friends lose their visa over the years due to not coming back in a year.

Also I am planning on moving my address to my Mother-in-laws house for the duration of my time in Thailand. I'm also planning on coming back for a month over summer and Xmas and working both times to keep an income here. I'm assuming it will be around 1,000,000ish that I can make on my "breaks". I think I can take a break from paying into the national health insurance as I will have private coverage provided by my company in Thailand, but not sure if I will need to keep making contributions if I am earning about 1 mill for my time back?

I don't mind having to pay tax and will probably continue it going as we have our own company and are on the blue tax form. If I can keep everything going and seamlessly come back and pick up where I left off would be the ideal goal.

[ClearAsMud]

Just as a footnote to the comments above about residents' tax, the payment period is actually from June of one year to May of the next, and individual payment deadlines differ depending on whether the tax is being withheld from your salary (tokubetsu chōshū) or is being paid using the payment slips sent by your local municipality (futsū chōshū), which is the case for self-employed workers.

For tokubetsu chōshū, employees receive notification of tax due from their employer, along with the schedule of monthly payments, by May 31. The schedule of payments starts from June, but since the withholding deadline is technically the 10th of the following month, some taxpayers may not actually have the tax withheld until early July (my payday was the 15th, so my employer always took out the first tax payment on June 15). For futsū chōshū, which is divided into quarterly rather than monthly periods, the first payment deadline is the last day of June, with subsequent deadlines on the last days of August, October, and January (the deadline may slide into the beginning of the following month depending on bank holidays). Self-employed workers, in other words, will normally make their first payment in June and will have paid their residents' tax in full by January of the following year.

[captainspoke]

... I'm also planning on coming back for a month over summer and Xmas and working both times to keep an income here. I'm assuming it will be around 1,000,000ish that I can make on my "breaks". I think I can take a break from paying into the national health insurance as I will have private coverage provided by my company in Thailand, but not sure if I will need to keep making contributions if I am earning about 1 mill for my time back?
...

Initially, this sounded like a here/there thing--you'd be leaving here, and living and working there. (altho on rereading you do mention this in your OP)

But when you add this, I'd wonder if you'd actually be classified as breaking residency. That you "want to keep an income here" might mean that you won't be classed as having left--for pension, residence/income taxes, and also health care.

I no expert on this, no experience, either. But if you come back and work, your employer will probably want to do any necessary tax withholding, and will probably ask for your My Number, and so on. And I suppose you'd need to file a national tax return by March 15th, as would normally be done by someone working/resident here--would you file using a foreign address(?) for work you had done here in japan? Pension and health care may also come knocking.

A million-ish not a whole lot, but it's also not insignificant. I don't see how you could work here now and then, while you were supposedly moved away.

Am I missing something?

[Liveintokyo]

Well my work is a little different to many people so I'll give the details and see if that helps. I'm happy to pay a professional to help sort things out, but not sure where to look for that - any advice on that would be great too.

I've had various jobs in Japan, but since 2013 I have had my own company on the blue tax form. It's a small company but that has allowed us to basically "employ" my wife and give her a salary. Since starting the company I have worked mostly as a musician at hotels/events/gigs here and there, but I have also taught instrumental music and done the odd job here and there consulting/teaching music at different places on short term contracts.

When Covid hit most of my playing work dried up and I focussed on the teaching side of things. I started working part-time at several schools and finally took a full-time job from July last year. I was doing my own pension/insurance etc, but when I joined the company I went on to their system. That is due to expire on July 31st and I start my new contract in Thailand on August 1st. The new school is paying more and is giving me the full expat deal which is why I'm taking it. They pay for flights back for summer and I am intending to play at all of my regular gigs when I am back.

My wife still does our tax as a company and we are looking at how to keep this going while we are away. In the past I have earned income in Australia for rolalties etc and have filed separate tax returns in Japan and Australia. According to the tax office as long as you are paying in the country it is earned you don't need to pay twice.

If I end up having to pay an insurance bill in Japan I understand, but I'm hoping it will be minimal and will be offset by being able to keep paying into the pension system/deductions etc.

[ClearAsMud]

Unfortunately, it's unlikely that many of us here share the experience of being an active company owner working outside of Japan as a full-time employee while periodically returning to the country -- on the employer's dime -- to pick up some side income. Intuition says that defining the extent of the tax obligations of such a "resident" is complicated, to say the least -- issues involving tax residence, double taxation, application of tax treaties, corporate tax regulations, possible differences in treatment between income tax and residence tax, etc., etc. I suspect that you may face a challenge in finding a qualified tax advisor (I have no suggestions to offer), but I would say that one is clearly necessary.

Whether or not you are registered/classified as a resident determines your tax liability and various social-insurance obligations. As for your regular income-tax return, residents are expected to enter their officially registered address on the return, which is submitted to the tax office with jurisdiction over that address (this is how it gets routed to the correct municipality). For someone with PR status, retaining residence means retaining your "resident other than non-permanent resident" tax status, which in principle causes your worldwide income, regardless of source, to be treated as taxable (it's not a simple case of "what goes on in Australia stays in Australia"). Tax credits and deductions can be used to avoid double taxation. I frankly have no idea how the NTA would look at a return from a "resident" who appears to be employed full-time by a foreign entity in a foreign country. Would the NTA simply accept your reporting of employment income and tax withholding as if you were working in Japan? How are you going to treat expat benefits (free flights back to Japan)? Do you plan to claim a foreign tax credit in Japan for taxes paid in Thailand? Would you or someone else be around to deal with possible inquiries from the tax office regarding your overseas employment? What are Thailand's tax laws regarding their residents with non-Thai income? These are only some of the questions that need to be addressed.

The basic situation regarding residence tax has been described well in previous posts: you are assessed the tax annually based on the location of your registered address on January 1. If you do not have a registered address on that date -- meaning in practice that before January 1, you have notified your municipal authority of your intent to reside overseas for over a year and have actually left the country -- you are not assessed residence tax for the previous calendar year. Other consequences also ensue from submitting official notification: 1) coverage under the various national social-insurance programs is lost (the National Pension account remains valid, and the period spent overseas is counted toward pension eligibility, but payments may not be made except in the case of Japanese citizens, who, as noted elsewhere, can continue to pay on a voluntary basis; Japanese company employees sent abroad may also be able to continue enrollment in some programs); 2) some banks may ask you to close your account (if you tell them); 3) new credit cards cannot be applied for; 4) new life-insurance and health-insurance policies cannot be taken out; 5) your My Number card will be invalidated (not the number, the card itself).

If you do not submit official notification of your intention to reside overseas for more than a year, 1) you remain liable in principle for income tax and residence tax tax on all your income, Japan-sourced and foreign-sourced, regardless of your physical presence on January 1; 2) you are obligated to continue payments for both the National Pension and National Health Insurance, and also for kaigo hoken if you are over 40 years old; 3) you will in principle be unable to receive official certification of residence overseas (needed for remote pension and inheritance procedures, registering real estate, selling vehicles, and school transfers and entrance-exam applications; it's the equivalent of an overseas jūminhyō and would be used by a Japanese citizen hoping to make voluntary pension payments). Of course, if you have family and/or trusted friends in Japan, or if you can return to the country on short notice, these drawbacks may not present major obstacles or, in the case of pension payments, may not even be viewed as liabilities. And there's nothing to stop you from submitting notification from overseas by mail (short-termers no doubt become long-termers pretty often). Since you are currently a full-time employee in Japan, your employer will likely arrange a change back to the national social-insurance programs. Your remaining residence tax from 2021 (payable from June 2022 to May 2023) can either be taken from your final salary/taishokukin or will be billed to you in Japan (although the tax from your retirement month is likely to be withheld by your employer in either case).

More could be added, but it can be seen that an individual's intentions are involved and that a one-year absence is used as a rule of thumb for whether or not notification should be submitted. It should also be remembered that municipalities themselves may implement different policies regarding notification. Indeed, since notification typically results in a loss of tax revenue, some municipalities apparently even recommend NOT submitting notification, at least for Japanese citizens who may be returning at some time in the not-too-distant future. So despite the nominal legal requirement to submit notification of moving overseas (some online sites refer to a possible fine of 50,000 yen for failing to do so), no adverse consequences are likely to result from continuing to perform the normal duties of a taxpaying resident while overseas for two years, at least with respect to residence tax and social insurance.

I think the paucity of responses to your last post is an indication of the complexity involved and further suggests the need for professional consultation before leaving the country. Information provided on a forum like this -- including the information in this post -- can only be regarded as a rough general guide.

[adamu]

Great writeup as always ClearAsMud.

If you're interested, some of that information might be useful captured as part of https://retirewiki.jp/wiki/Residency_for_tax_purposes too.

[RetireJapan]

the information in this post

I want to give that post some kind of award. The Order of the Random FIRE Otaku First Class, perhaps