Help with taxes

[onyourmark2021]

You should get an Accountant to help you with the accounting for your rented property, as it is a little complicated, and the documentation requirements are a little stringent.

If the rental property is in Japan, and you elect to take the Depreciation Expense, then that too can be a little complicated.

Once you have worked that out, you then need to find out if you can qualify to do the Blue Return, maybe not in Year 1, but in subsequent years...

Only qualified accountants, Kaikeishi or Zeirishi, or the people at the Tax Office can help you fill out your returns.

Thanks for the link to the book. Does it, by any chance, help me with the navigation of the online tax website? That is really what I would like to get.

[Tkydon]

You should get an Accountant to help you with the accounting for your rented property, as it is a little complicated, and the documentation requirements are a little stringent.

If the rental property is in Japan, and you elect to take the Depreciation Expense, then that too can be a little complicated.

Once you have worked that out, you then need to find out if you can qualify to do the Blue Return, maybe not in Year 1, but in subsequent years...

Only qualified accountants, Kaikeishi or Zeirishi, or the people at the Tax Office can help you fill out your returns.

Thanks for the link to the book. Does it, by any chance, help me with the navigation of the online tax website? That is really what I would like to get.

The Book does not, but the Annual Doc from the NTA does.

https://www.nta.go.jp/taxes/shiraberu/s ... ku/r04.htm

2022 INCOME TAX AND SPECIAL INCOME TAX FOR RECONSTRUCTION GUIDE（PDF/6,538KB）（和訳版：PDF/8,136KB）

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

But this will not tell you how to do the book-keeping for the rental property.

If you have a Management Company managing the properties for you, then they should be able to provide the documentation for the filing.

However, if you do not have a Management Company managing the properties for you, then you should engage a Tax Accountant to prepare the documents for you as it is probably too difficult for a first-time filer.

You can also file for permission to submit the Blue Return, which allows more expenses, but requires more stringent book-keeping and financial reporting.

[hbd]

[ Ben, this is a bit opportunistic of me, but I'm worried that the post I made in that 18-month old 'Australians' thread earlier today may not be viewed any time soon, but I need 'Help' - or at least feedback - very soon so that I can get the JTO to revise my return before 14/4, the absolute deadline! So if you see fit, please allow this revised version of the post to go here. hbd ]

Seeing this thread is titled 'Help with taxes', I'm hoping someone could 'help' by giving feedback on a vexing and rather urgent situation. As a law-abiding Permanent Res here (and therefore a non-res for tax purposes in Australia) I had this bitter experience when I went to do the Kakuei shinkoku yesterday: Having paid my Oz tax at the 32.5% rate on the income (after deductions) from letting out my flat in northern New South Wales, I was assuming I'd get a tax credit in Japan for just about the whole amount of ca17万円。Imagine my astonishment when they told me that a mere 3万 can be deducted, and I now owe the JTO around 10万 for the 不動産 portion of my tax return！ If that's correct, I might as well keep the flat empty because with the high local property rates, high body corporate/strata fees and high tax, I'm making almost no money for all the trouble of being a landlord from 7,000kms distance. The rationale for my having to pay even more tax to the JTO after already paying the ATO at 32.5% was explained to me as follows: The foreign income (my only form of foreign income, by the way) that I receive from letting out the property represents 7% of my total taxable income, so therefore the total amount of tax that must be paid on that portion of my income must be 7% of my total tax liability. I'm a tenured academic here with a reasonable salary. The JTO is saying that I must pay ca.27万 (a little under 7% of my total tax liability of around 350万）, but have only paid the equivalent of 17万to the ATO, so now owe the JTO a further ca.10万!!

How can that be true after I've already paid such a high rate of tax in Australia? It feels like a classic case of 'double taxation'.

I decided not to pay the tax yet, and would like to go back on Monday to dispute their assessment. Can anyone please shed light on this conundrum?

[Tkydon]

[ Ben, this is a bit opportunistic of me, but I'm worried that the post I made in that 18-month old 'Australians' thread earlier today may not be viewed any time soon, but I need 'Help' - or at least feedback - very soon so that I can get the JTO to revise my return before 14/4, the absolute deadline! So if you see fit, please allow this revised version of the post to go here. hbd ]

Seeing this thread is titled 'Help with taxes', I'm hoping someone could 'help' by giving feedback on a vexing and rather urgent situation. As a law-abiding Permanent Res here (and therefore a non-res for tax purposes in Australia) I had this bitter experience when I went to do the Kakuei shinkoku yesterday: Having paid my Oz tax at the 32.5% rate on the income (after deductions) from letting out my flat in northern New South Wales, I was assuming I'd get a tax credit in Japan for just about the whole amount of ca17万円。Imagine my astonishment when they told me that a mere 3万 can be deducted, and I now owe the JTO around 10万 for the 不動産 portion of my tax return！ If that's correct, I might as well keep the flat empty because with the high local property rates, high body corporate/strata fees and high tax, I'm making almost no money for all the trouble of being a landlord from 7,000kms distance. The rationale for my having to pay even more tax to the JTO after already paying the ATO at 32.5% was explained to me as follows: The foreign income (my only form of foreign income, by the way) that I receive from letting out the property represents 7% of my total taxable income, so therefore the total amount of tax that must be paid on that portion of my income must be 7% of my total tax liability. I'm a tenured academic here with a reasonable salary. The JTO is saying that I must pay ca.27万 (a little under 7% of my total tax liability of around 350万）, but have only paid the equivalent of 17万to the ATO, so now owe the JTO a further ca.10万!!

How can that be true after I've already paid such a high rate of tax in Australia? It feels like a classic case of 'double taxation'.

I decided not to pay the tax yet, and would like to go back on Monday to dispute their assessment. Can anyone please shed light on this conundrum?

I started some other notes, but;

If you do the Kakutei Shinkoku (done) and pay the taxes as levied, you then have upto 3 years to revisit the Kakutei Shinkoku, adjust the figures and claim any refund of over-paid taxes...

Also, Check your Aus return, but I think you should be able to amend your Aus Return with a Foreign Tax Credit for the Taxes paid in Japan; The National tax you quoted above, and the additional Residents' Taxes of 10% of the Taxable Value, and get a refund on the Aus side. Check with your Aus Accountant.

[hbd]

Many thanks to you, Tkydon. It's quite a relief to know I can re-visit the matter and perhaps stand a chance of proving to them that the taxes they're asking for represent over-payment.

I'd be very interested to read those other notes you started, should you be willing to share them one way or another. The validity of the JTO explanation is what I'd really like to test; it has a certain logic to it, but has the effect of making an average-salaried academic pay around 27万 in tax on the income from a very modest investment property for which the Taxable Income in Australia last year came to the equivalent of a mere 53万。A tax rate of about 54%! If I'm missing something fundamental, please point that out.

It's also good to know that the Residents' Taxes of 10% of the Taxable Value (yet to be paid, so adding them will likely push me up to around a 60% tax rate!!!) might be able to be refunded on the Oz side. However, for the last 7 years (since I became an Australian non-res for tax purposes) my Au accountant has been telling me I cannot claim a Foreign Tax Credit for what I'm taxed in Japan. Time to find a new accountant, perhaps?

[TokyoWart]

Having paid my Oz tax at the 32.5% rate on the income (after deductions) from letting out my flat in northern New South Wales, I was assuming I'd get a tax credit in Japan for just about the whole amount of ca17万円。Imagine my astonishment when they told me that a mere 3万 can be deducted, and I now owe the JTO around 10万 for the 不動産 portion of my tax return！ If that's correct, I might as well keep the flat empty because with the high local property rates, high body corporate/strata fees and high tax, I'm making almost no money for all the trouble of being a landlord from 7,000kms distance. The rationale for my having to pay even more tax to the JTO after already paying the ATO at 32.5% was explained to me as follows: The foreign income (my only form of foreign income, by the way) that I receive from letting out the property represents 7% of my total taxable income, so therefore the total amount of tax that must be paid on that portion of my income must be 7% of my total tax liability. I'm a tenured academic here with a reasonable salary. The JTO is saying that I must pay ca.27万 (a little under 7% of my total tax liability of around 350万）, but have only paid the equivalent of 17万to the ATO, so now owe the JTO a further ca.10万!!

Sorry that you are in this situation. This is the unfortunate result of the way section "３ 所得税及び復興特別所得税の控除限度額の計算" of the "外国税額控除に関する明細書" does that calculation. It gets me every year because as a US expat I wind up paying a lot of US taxes but the JTO only considers a fraction of my income to be foreign sourced which makes the denominator unusually low in their tax/income calculation of the effective US tax rate. If I understand the math correctly, the bizarre outcome of this practice is that a very high income taxpayer in Japan will get to claim more of the foreign tax paid because they have a high effective tax rate in Japan and it's that Japanese rate which is limiting the foreign tax deduction.

[hbd]

Thanks very much TokyoWart. Sorry to hear you suffer this sort of thing as a US expat. Shamefully ignorant of tax matters though I am, I think you're correct, because they told me twice that the amount of tax paid to Australia was only a very small percentage of my overall liability, so the 控除限度額 had to be relatively low (their expression - mine would be 'staggeringly low').

However, I have a happier tale to tell today: I went back asking whether I could show evidence of various kinds of 経費 expenses (to which Tkydon had kindly directed my attention) and on that basis ask them to re-calculate the tax. Whether because of it being a time of day when the local office wasn't very busy, or because I happened to be served by someone patient and generous of heart, I can't possibly know, but the answer was YES!! I showed them pdf files on my computer for the RE agent's management fee, the strata (body corporate) fees, the local council quarterly rate payments, and some repairs that I had done. Adding up to around 80万/ca.Au$9000. They requested that I print them all out and bring or post them in with a revised assessment form. Lo and behold I'm now going to pay at least 8万 less, unless someone higher up the food chain raises a red flag about something the coal-face workers didn't notice today. So far, so good.

[RetireJapan]

Lo and behold I'm now going to pay at least 8万 less, unless someone higher up the food chain raises a red flag about something the coal-face workers didn't notice today. So far, so good.

That is what we're here for

[igzem]

Having read the saga about Aus property taxation, I have two properties in Sydney, guess need to start looking for a good accountant to protect against possible double taxation …

[Tkydon]

Having read the saga about Aus property taxation, I have two properties in Sydney, guess need to start looking for a good accountant to protect against possible double taxation …

If you want to do the White Form Tax Return for the Kakutei Shinkoku, you only need receipts.

If you want to apply to do the Blue Form Tax Return for the Kakutei Shinkoku, you need to do, or get a book-keeper to do for you, full Double Entry Book Keeping. You then have to request permission to the Tax Office to be allowed to use the Blue Form Tax Return before a Cut-Off Date (I think it may be too late for this tax year, but you should apply with your Kakutei Shinkoku for permission for next year, or I may be wrong, and it may still be ok...).

There are three basic sections.

1. If you do the White Return as an Individual:
For each property, the Rental Income minus Loan Interest, maintenance expenses, and property taxes (and any other legitimate expenses) is treated as Taxable Income, and you have to produce all receipts. The Taxable Income is taxed at your Marginal Income Tax Rate and Residents' Tax Rate.

If you do the Blue Return as an Individual - Sole Proprietor:
For each property, the Rental Income minus Loan Interest, maintenance expenses, and property taxes (and any other legitimate expenses) is treated as Taxable Income, and you have to produce Double Entry Book-Keeping Records. The definition of 'Other Legitimate Expenses' is wider for the Blue Return, and you may be able to book expenses for dedicated office space in your house, 'business related' travel and other expenses.
The Taxable Income is taxed at your Marginal Income Tax Rate and Residents' Tax Rate.

If you incorporate, the procedure is entire different and you would definitely need an accountant.

2. If the property is located overseas, you can now only take Depreciation as a legitimate expense against income from overseas properties. You can no longer use a loss against Japanese Properties of Rental Income.

https://www2.deloitte.com/jp/en/pages/t ... -no68.html

If the property is located in Japan, you can additionally take Depreciation as a legitimate expense, and this should reduce the Taxable Income above to a Loss, eliminating the tax above... If the value produces a loss, you can then take that loss as a deduction against your other Employment Income, reducing your tax at your Marginal Income Tax Rate and Residents' Tax Rate (no longer available for overseas properties), and if sufficiently large can be carried over to subsequent years (3 years max).

You have to remember that if you take any depreciation, it reduces the Tax Basis by the amount of the depreciation for when you come to sell the property, which may mean that you need to pay (additional) Capital Gains Tax on the sale over the Reduced Tax Basis. You would basically be arbitrating your current Marginal Income Tax Rate and 10% Residents Tax Rate against the future Capital Gains Tax Rate of 20.315% (15% National, 0.315% Reconstruction and 5% Residents' Taxes).

If you have you properties managed by a Management Agent, then they should be able to provide you completed accounts for the property for the year, and you would provide those with the Return.

3. If the properties are located overseas, you will (probably) be liable for Income Tax or Withholding Tax on the Locally Sourced Income in that country (from that country's perspective), according to the Tax Treaty between Japan and that country.
You should ensure that you file a Notice with the Tax Authority in that country that you are no longer ax resident in that country, and claim a reduced rate of Withholding.

From the Japanese perspective, this is Foreign Sourced Income.
If you have been in Japan for less than 5 years in the last 10 years, then this foreign sourced income is only taxable in Japan if you remit ANY money to Japan in that year. Any money you remit will be considered to come first from those Foreign Income Sources, and will be taxable.
If you have been in Japan for more than 5 years in the last 10 years, then this foreign sourced income is taxable in Japan, whether you remit any money to Japan or not.

You can then claim a tax credit (deduction) for the foreign tax paid. Under the Foreign Tax Credit Section of the Kakutei Shinkoku. You have to use a special calculator to calculate how much of a deduction at your marginal tax rate would provide exactly the same reduction in your Final Tax Bill as the amount of tax withheld or paid overseas on the same income. There may be a discrepency between Local Currency and Japanese Yen values due to exchange rate fluctuations from month to month or year to year.
However, you will probably have to file Japanese Taxes first by March 15th.. You should report any Taxable Income or Loss Gross in JPY, before any foreign taxes, and pay any taxes due by April 15th..
You then probably have to file foreign Taxes later, by Mid April, or even later. After you have filed your foreign taxes, you should then revisit your Japanese Filing - Kakutei Shinkoku to add the Foreign Tax Credit and claim the refund for overpaid taxes.

You probably want to get a tax professional, or someone at the Tax Office, to do it all for you for the first year, and then you should be able to copy what was done in subsequent years.

You may have to go back and file previous years, and you can do so for the last 3 years. You can amend any filing within 5 years (since 2022).


There was an e-Tax Guide available last year for 2022, but it has been removed, and will probably be replaced with a new e-Tax Guide for 2023 soon, before tax season starts for 2023.
As soon as I find them on line, I will post the new links for 2023 in the Forum.