Could I afford to NOT retire in Japan?

[Deep Blue]

I have not found good ways to reduce my tax bills. I was considering the wooden building overseas route (some of my friends did this, and there looked to be a lot of ahem - flexibility - in dividing the purchase price into land and - ahem - “wooden” structures. But I didn’t want to push the envelope and as you say, the loophole is now closed.

One thing we did was - when living outside of Japan - transferring a significant chunk of our assets into my wife’s name. If you are outside Japan for long enough this avoids the need for gift tax. Now the IHT bill will be reduced, and the income generated (mostly rental income on overseas houses) is in her name and attracts a much lower tax bill.

It’s led to the odd situation of me owning all our Japan domiciled assets (our Tokyo house and cash) and her owning all the non-Japanese assets as we could only transfer non Japan-situs assets and successfully avoid gift tax. Not really ideal (especially as she has no tax free allowance in the UK but it’s better for her to pay 10% UK income tax then me 55%+ Japanese tax)

I’m considering setting up some basic investment products for my children but am tempted to see what options are available in the UK (they and I are British citizens). It might not be possible, but the whole iDeco/NISA/child’s NISA system looks really really subpar to me.

Maxing out Furusato Nozei doesn’t save tax but it is nice to eat lots of free fruit, rice, seafood, meat and all our alcohol needs. I’ve also bought a bunch of really nice solid wooden furniture, and most of the children’s birthday presents come from this route (I’m a terrible human being…)

I’ve been working under the strictures of a Big Four accountancy firm my employer retains to prepare my taxes in various countries but this will end this year as I move onto a local employment contract. As such I’ll be free to employ my own accountant and I’ve been given a couple of names that may be a bit more creative or adventurous in minimizing tax liabilities here. If I do get any good tips I’ll pass them on.

[eyeswideshut]

I’ve been working under the strictures of a Big Four accountancy firm my employer retains to prepare my taxes in various countries but this will end this year as I move onto a local employment contract. As such I’ll be free to employ my own accountant and I’ve been given a couple of names that may be a bit more creative or adventurous in minimizing tax liabilities here. If I do get any good tips I’ll pass them on.

Sounds like we are on the same page and would be curious to hear if your local accountant comes up with any interesting tax saving ideas. Mine is pretty useless in that regard with his only suggestion being money transfers to relatives up to 360,000 Yen. The depreciation of rental properties still works in Japan under the old rules and many well to do people own a multitude of 1DK mansions as investment properties for this reason but TBH it seems more trouble than it is worth. I have also heard of circles where wealthy people agree to buy and sell wood frame properties with inflated building values from each other and use the artificially high contracted building price as a depreciation asset. Seems a bit too close to tax fraud for me and relies on a lot of counterparty risk as it requires someone to agree to overpay for your property when you sell after 5 years. So yeah, I just suck it up and pay the tax but it hurts.

[beanhead]

Other countries offer much better options for tax shielding investments. I confess to knowing next to nothing about the US systems but don't you guys have 401k plans? Here we have miserly NISAs which have low investment limits (1m JPY) and only offer tax-protection for a limited time.

In the UK you can contribute 20k GBP (3.3m JPY) to an ISA every year and have both capital gains and dividends protected from tax for your entire lifetime, not five or ten years.

Just reading this old thread.
Changes to NISA seem to be everything you were hoping for?

[Deep Blue]

So under this new scheme I can stick in 2.4 million yen a year of post-tax income into mutual funds and then it will grow, tax free until I decide to take it all out? If this is how it works than it seems like a decent plan, much improved.

What's the difference between a Tsumitate NISA (1.2 million limit) and a Growth Investment Scheme NISA (2.4 million)? The Tsumitate one is a monthly installment plan, and the other one is lump sum? If so, why have different limits? Also there seems to be a total investment limit of 12 or 18 million? Is that committed funds or total pot?

[sutebayashi]

why have different limits? Also there seems to be a total investment limit of 12 or 18 million? Is that committed funds or total pot?

My guess is some were worried about 400 really rich people “paying their fair share”, so came up with a complicated, costly and confusing system to implement and understand, rather than just reducing the capital gains tax rate for everyone.

The 18 million is book value, and reusable from the next year, if you sell what you bought. So it’s not much good for short term speculators, but say you were young and loaded up 18 million, turned it into 25 million and then sold it all and bought a house. Then you could start again with a zero basis from the next year.

[Deep Blue]

Thank you!

So basically you can pay in the maximum amount per year for 7-10 years until you hit the limit. Then you can take it all out without capital gains tax, and start again building up a new pot for 7-10 years. Seems a bit of an odd design.

[RetireJapan]

Thank you!

So basically you can pay in the maximum amount per year for 7-10 years until you hit the limit. Then you can take it all out without capital gains tax, and start again building up a new pot for 7-10 years. Seems a bit of an odd design.

If you pay in the maximum (3.6m a year) you will max out the 18m lifetime limit in five years (four years and a couple of days if you really make an effort)

[Deep Blue]

Oh, you can have both types? I am going from this table here which to be honest isn't entirely clear.

https://investmentjapan.jp/japans-basic/3672/

[RetireJapan]

Oh, you can have both types? I am going from this table here which to be honest isn't entirely clear.

https://investmentjapan.jp/japans-basic/3672/

https://www.retirejapan.com/blog/the-new-eternal-nisa/

[Deep Blue]

Thanks - maybe worth making that a sticky post in this forum so it is easy to find. The new system does look a lot better than the old system. Hopefully the lifetime limits will be removed in time.

Are dividends tax-free in this new NISA structure?