Bring monney from abroad to finance real estate

[japanlife]

Hey everyone,

First post here for me.
After 6 years in Japan I finally decided to make a serious move and now started to visit possible home to buy (for living).

My question is related to cash brought from abroad to finance part of the investment.

I know that after 6 years in Japan I have to declare my world revenue and pay taxes on capital gain.

To make it simple:

My tax accountant tells me that possibly after the purchase I will receive a letter from tax authorities to confirm the provenance of the cash. To which I can simply state that it is from my foreign bank savings account (not capital gain), and that's it.

Prestia tells me that I can simply send the cash to my account in Japan and no further request will be done.

Possibly part of what I will bring may come from real estate sale abroad for which I should be accountable here.

I'm not asking if I should cheat and simply not declare this gain but I would rather would like to know if following the sale, has any of you received this request from authorities to state provenance of the cash? How do Japan tax authorities check this in detail?

Note: I'm planning to bring >10MJPY.

Thank you in advance for your comments or experience on this topc.

[TBS]

Possibly part of what I will bring may come from real estate sale abroad for which I should be accountable here.

So has the property sale already occurred or has the sale yet to happen? If you sell/sold while a permanent tax resident, the remittance issue makes no difference - you will be liable for Japanese capital gains tax on the full amount.

Remittances would only factor in if you sold while a non-permanent and remitted money to Japan in the same tax year. In which case the liability would be fractional up to the amount remitted.

Calculating Japanese property capital gains taxes is a little complicated. Various deductions or foreign tax credits may apply. Search past posts on here or r/japanfinance, & seek tax office or professional advice if necessary.

[japanlife]

Hello,

Thanks a lot for your reply.
It definitely requires support from a professional and I will consult my tax accountant again.

I am just trying to hear from other people's experience.

Sale of real estate I own abroad would take place this year.
It would help me finance a real estate buying in Japan this year too.

I understand I should report this sale as capital gain in my next tax filling in Japan.
My understanding of basic calculation is: Buying price - selling price - other deduction = capital gain. As I own it for more than 5 years, tax is 15% of this amount.

Point is at first I didnt plan to stay in Japan that long and (stupidly) didnt report this real estate in my Japanese tax.

I am somehow ready to make things right now and declare capital gain and pay the tax but since I didnt declare prior earnings on this, I m afraid tax ahtorities come back to me asking for explanations and possibly I get a fine or worst...

I am also trying to evaluarte how much I am at risk here.

[Beaglehound]

So if you haven’t been sending cash to Japan until now, the first 5 years here you are classed as a non permanent resident for tax purposes, so any income you have made from the overseas property (I assume from rental) during these five years would not be liable for taxation here. You say you have been here for six years, so it is true that you should be reporting any income after your five year anniversary, which I assume was last year sometime. If you decide to come clean on that, go to the tax office and ask to make a retrospective declaration, I think they would be extremely unlikely to punish you in any way. You would be ‘doing the right thing’ voluntarily.

If you don’t do this and simply report the capital gain I am not sure if they would ask questions about what the property was used for and any gains from ongoing ownership. Unlikely perhaps but it is a risk. And a worry.

In your shoes, I would go to the tax office, explain that you have ‘discovered’ you should have been declaring the overseas income, put it right, and sleep easy.

[TBS]

As Beaglehound says, the main thing is not to worry. Mistakes and oversights is something that happens regularly with tax returns so the NTA are used to situations like this. You can file amended returns for up to 5 previous tax years to correct any mistakes. Your tax accountant should be able to help with this.

Depending on the sums and delinquency periods involved, there will like be some late payment fees and interest due. Nothing too excessive and it sounds like you'll easily be able to pay. Again, your accountant should be able to guide you on sums.

A similar topic was covered here & here recently.


Aside observation: are you planning on getting a housing loan to finance your new property in Japan? If you are in a position to get a loan, financially you are likely to be much better off over the long term buying this way and investing your existing assets, rather than paying in cash.

[japanlife]

Dear all,

Thank you very much for all your comments.
I also checked links shared to other thread here and on reddit.
Very helpful for me as now I am considering to correct past filing to ensure I m clean.


Any further comments please do not hesitate.

Best,

Vincent

[japanlife]

And to get back to your point regarding loan/cash, thanks to my salary in Japan I could afford a nice house without much downpayment but now I will have this cash available from abroad and with JPY at such low level, I see it as an opportunity to leverage my available cash and buy what we spotted as our dream house...

[Tkydon]

Aside observation: are you planning on getting a housing loan to finance your new property in Japan? If you are in a position to get a loan, financially you are likely to be much better off over the long term buying this way and investing your existing assets, rather than paying in cash.

I agree. You have to consider how much monthly payment you can actually afford, and don't expect much in the way of pay raises in Japan due to low inflation, but If you can cover the property purchase with a loan that you can afford, it would be better for you to invest the money at a higher return.
If you put it into the property your effective return on that money is the interest rate you will save by not borrowing the money, as opposed to the yield you could make in something like the eMAXIS Slim All Country Mutual Fund, especially in an iDECO and or NISA...

https://www.youtube.com/watch?v=w3z0vVEVT_s&t=335s