National Health Insurance (Kokumin Kenko Hoken)

[rjcurran]

My retired wife and I are in the process of preparing our move to Japan. In preparation for this I am trying to get my head around the level of taxation and insurance contributions we will need to make.

My question which I hope someone can assist is regarding National Health Insurance (Kokumin Kenko Hoken). We will fund our retirement from the UK in the form of UK private/state pensions, UK dividend payments and capital drawdown from UK investments. I understand the National Health Insurance is calculated from ‘income’, ‘fixed-asset’ and ‘per capita’, but I am unclear what my UK funds will be classified under? I assume my pension funds will be considered ‘income’, but what about my dividend payments and investment drawdowns? Finally, what is ‘fixed-capital’?

Hope someone can clarify?

[ricardo]

Good questions. I’m not in a position to answer, but will watch any informed replies with interest as I will be in a similar position in a few years time. Clearly your pension income is income, but do dividends and other drawdowns etc get into the calculation for heal insurance? I suspect they do, but they also appear in different places on your tax return - which will be the key document that will be used to calculate your payments.

Remember that for your first year your health insurance payments will be really low as they are based on the previous year’s income, which will be zero or very low for you depending on your exact moving date. You need to prepare yourself for the first full year.

[RetireJapan]

Looking online it seems the formulas for calculating are complex enough that the answer seems to be: submit your paperwork to the ward office and they will tell you how much you owe

All income is included, and there is a standard deduction. You'll also have to pay nursing care insurance (介護保険) which I believe is set by the local authority.

As ricardo wrote, the first year you are in Japan it will probably be very low.

Sorry I can't be more help, I haven't looked into this in much detail yet.

Anyone else?

[captainspoke]

It may depend on your visa status--which can affect your tax residence classification.

Generally, people who come to work or study in Japan have a five year grace period--they are not considered to be tax residents of Japan, and as long as overseas income is not repatriated to Japan, it is not taxed. After that, it is then subject to tax.

However, in some cases people are considered to be a tax resident immediately, and one of those cases is a person on a spouse visa. So if you get married and switch to a spouse visa within that five year period, you become a tax resident at that time, and your worldwide income is subject to tax (and will be counted when calculating health premiums, and also 介護保険 if you're old enough).

You don't say, but if your wife is Japanese and you're planning on getting a spouse visa, I think this will affect you.

Passive income abroad (interest and dividends) is treated as income. You'll need a simple excel sheet with payout dates, and the f/x rates for those dates, to convert those amounts to yen.

As for 'capital drawdown', any gains (from shares) you realize will be counted as income and taxed. This has to be calculated in yen terms, so your purchase and sale prices need to be converted to yen based on those transaction dates (use historical TTM f/x rate to do this). Be careful with this, since changing rates can magnify gains/losses. E.g., if you bought XYZ for $100 when the yen was at its strongest (about ¥77 to $1), and then sold XYZ today for that same $100 (about ¥111 to $1), you would have to declare that gain in yen terms. (Purchased for ¥7,700, sold for ¥11,100, = gain of ¥3400--even tho in $ terms it was zero.) Of course this can work the other way, too, if the yen has gotten stronger since your purchase.

Lastly, I'm not sure how a foreign pension would be treated here tax-wise, my guess is that it would be classed as income.

edit: Also, if you happen to have more than ¥50,000,000 in assets abroad, there's some kind of form that you have to fill out to declare/list what you have. (shares, property, etc.)

[ricardo]

I’m looking forward to my UK pension being taxed in Japan rather than in the U.K. as income tax rates here (for my circumstances) are/will (probably be) much lower than in Japan - even if you regard health insurance premiums as a form of income tax, which they are.

The OP will need to get a form from the Japan tax office (see U.K. gov web site) to be sent to his U.K. pension provider so that they can pay it to him free of U.K. tax. Otherwise they’ll deduct UK income tax from it before payment. (Doesn’t apply to the state pension, which is paid gross).

[rjcurran]

Thank you for your reply, you comment about being considered a tax resident from day one is something I did not assume but this is likely as I will be entering Japan on a spouse visa. I will need to adjust my plan to safeguard against this, I doubt I will know how they classify me when I arrive but I may go and see the tax office next time I am in Japan.

[rjcurran]

Thanks for your reply Ricardo. My pension is offshore as I am not a UK resident at present, so I will receive it tax free of UK taxes.