Does Japan care about tax on foreign investments?

[SwedishBoots]

Hi and thanks for having me on the forum!

My situation: I have recently moved from Sweden to Japan (1½ month ago) and are working for a Japanese company now. In Sweden, I have nothing left (no car, no house etc.) except for some bonds investments I've done over the years. Money that I would like to keep in Sweden and kind of forget about to let them work their magic.

In Sweden, I'm planning on moving all my money to a account type called Kapitalförsäkringskonto (KF) (Which I think in English is Endowment insurance account). This is an account where I'm not - legally speaking - the one paying the tax to the Swedish tax authorities. I'm paying a fee to the owner of the account, which in turn is paid as the tax to the Swedish tax authorities. For the Swedish side of things, this is totally normal and I've checked with them that it's fine for me living in Japan while having this account. This is the account is most beneficial for me as a Swede (in most circumstances depending on how the market swings).

But how about Japan? Am I legally required to report about this? Or can I just simply let the money be for themselves, withdraw them in 25 years to my Swedish bank account and only have to worry about the tax on the Swedish side even if I'm living in Japan the whole time? And then maybe use a little bit of the money now and then (slowly) via my Swedish credit card here in Japan?

I'm a bit stressed about the whole thing and any input I can get regarding the situation is wholeheartedly appreciated.

[Tkydon]

This is the Tax Guide for last year. See Pages 5-9

https://www.nta.go.jp/taxes/shiraberu/s ... df/050.pdf

In Japan, regardless of your Immigration Status, you will be classified as follows:

Just arrived to First Year Anniversary (or establishment of permanent address) - Non-Resident for Tax Purposes - Only Income in Japan is Taxable

One Year Anniversary to 5 Year Anniversary - Non-Permanent Resident for Tax Purposes - Income in Japan is Taxable, and Overseas Income is only taxable if you remit the funds to Japan in the same Tax Year.

Transferring money to Japan is not an Income Event in itself, and is not in itself taxable, but if it is related to an Income Event in the same Tax Year, then Tax is due on that Income Event.

From 5 Year Anniversary - Permanent Resident for Tax Purposes - Income in Japan is Taxable, and Overseas Income is all taxable, whether you remit the funds to Japan or not.

Now, for this account, Kapitalförsäkringskonto (KF), you will not be liable for taxes until you take distributions in 25 years.

The taxation on this type of distribution is very advantageous. You will need to check in 25 years to see if the situation has changed

The Japan Sweden Tax Treaty refers.

http://www.mof.go.jp/tax_policy/summary ... edenEN.pdf

See Article 18 Paragraph 2 and Article 21A Paragraph 7

The income will be taxable in Japan, and you should be able to claim a Tax Credit for any Tax levied in Sweden, to avoid double taxation.

[SwedishBoots]

Thank you so much Tkydon for the response! I'm trying to break down your reply as well as other sources slowly, so forgive for not immediately getting back to all your points.

First I'm trying to understand in which box I currently reside (Non-Resident, non-permanent-resident or permanent-resident).

As of my understanding, Even though I have just moved to Japan, I am still a non-permanent resident. This seems to be because I am working for a Japanese company (as of 1st of June this year). Although not as a full time employee but billing my hours (which I'm doing full time... complicated!) The reason this is important is because of this URL: https://shimada-associates.com/en/indi ... uFJojox1fU.

In this link, they're stating this:

If a person comes to Japan to work for Japanese company based on one year or more employment contract, the person becomes “Resident” from the time the person enters into this employment contract.

And since I have lived here less than 5 years within the last 10 years, I'll then be placed in the non-permanent box. According to this:

Any resident of non-Japanese nationality having domicile or residence in Japan for an aggregate period of five years or less within the last ten years.

Is my understanding of this correct?

Then, according to the same URL (case 2, in the far bottom), it seems that any stocks/bonds I buy in Sweden after having entered Japan as a non-permanent will be taxable. I have already purchased some bonds in Sweden after moving here which I guess was a stupid mistake then as it complicates things. And now - As I wrote in the beginning of the thread about the KF account - I probably want to sell everything on one account and move it to the KF (Endowment insurance) account. This would in reality mean to sell everything and re-buy it which will make it so everything is taxable according to the example shown in the URL.

Before I re-evaluate my options here: does my understanding of the Japan side of things seems to be correct? My brain can't move faster than this pace...

[Tkydon]

You are currently in the Non-Permanent Resident for Tax Purposes category until your 5 year anniversary.


The bonds you bought in Sweden only become taxable when you sell them for a profit in Yen terms.

If you sell them for a loss in Yen terms, then there is no tax to pay.

If you sell them before you are a Permanent Resident for Tax Purposes (before you been here for less than 5 years in the last 10 years) for a profit in Yen terms, then the gain is taxable if you remit the money to Japan, and may be taxable, even if you don't.

If you wait until you are a Permanent Resident for Tax Purposes (after you been here for more than 5 years in the last 10 years), and then sell them for a profit in Yen terms, then the gain IS taxable in Japan, whether you remit the money to Japan or not.


If the bonds are paying Interest / coupons, then see Article 11 of the Tax Treaty

Until you have been here for more that 5 years in the last 10 years, the interest is not taxable in Japan, unless you remit the money to Japan, when it becomes taxable.

After you have been here for more that 5 years in the last 10 years, the interest is taxable in Japan, and only in Japan, whether you remit the money to Japan or not.
For this, you probably need to submit a form in Sweden to qualify for Tax Exemption as a Non-Resident, so they do not withhold tax at source. Check with the Swedish Tax Authority how to do this.

https://taxsummaries.pwc.com/sweden/cor ... ding-taxes

I think this is it. Please check...

https://www.skatteverket.se/servicelank ... 51ba9.html