Filing Japanese Income Taxes for 1st time

[Togashi1]

My wife and I moved to Japan in July 2023 and are here as US citizens under 3-year long term resident visas. My wife was born in Japan and is fluent in Japanese. I am a retired federal government employee and both myself and my wife are not working or plan to work in Japan. This will be our first year filing taxes here in Japan. In prior years, I have always done our personal taxes using TurboTax as they were not very complicated, which I will plan to do again to file our US taxes.

However, I wanted to see whether there are other US expats living in Japan who either do their own Japan tax filing with Japan's National Tax Agency, or whether it makes sense to contract with a Japanese Tax Preparer Business to file our Japanese taxes. I understand that there is usually a National Tax Agency office that can assist people through their local city offices, but not sure how easy it is to work with local city officials in their tax office.

Any guidance or advice would be welcome as to whether it makes sense for us to try to file our taxes ourselves, or if it would be advisable to hire a Japanese Tax Preparer to do our taxes. Thanks in advance for any thoughts you wish to share.

[RetireJapan]

Welcome! It will depend on what your financial situation looks like.

Tax office officials are very helpful, but may not have much English proficiency.

I assume you're getting a pension (social security?) and have savings and investments?

[Togashi1]

Thanks for the response. I am receiving a US government pension, a small private pension, Social Security, and a monthly distribution out of my Schwab IRA account. I think we may reach out to the local city tax office officials after gathering the needed documentation, and make a determination whether we should do it ourselves, or see if it makes sense to at least use a Japanese Tax Preparer for the initial filing.

[Tkydon]

Are you in employment?

If so, and you don't have other sources of income or deductions, then your employer will probably withhold taxes - Gensen Choshu - and do the Year End Adjustment - Nenmatsu Chosei - and you would be done.

If not, or you have other sources of income or deductions, then you will have to File a Tax Return - Kkautei Shinkoku. You will use the Statement of Withholding from your Employer(s), Broker(s), etc. - Gensen Choshu Hyo - and enter those numbers and anything else into the Tax Return - Kkautei Shinkoku.

See the New Tax Guide for 2023 Tax here:

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

and the Japanese Translation of the same for your wife here:

https://www.nta.go.jp/taxes/shiraberu/s ... df/060.pdf

See Pages 5 to 11.

See also:

https://assets.kpmg.com/content/dam/kpm ... -Japan.pdf

If you have not yet established a residence, for the first year in Japan you are considered Non-Resident, and only income for work carried out in Japan is taxable in Japan.

After establishing a residence, You become Tax Resident. This is further divided:

If you have been in Japan for less than 5 years in the last 10 years, you are considered Non-Permanent Resident for Tax Purposes, and your Foreign Sourced Income is Tax Free unless you remit funds to Japan.
(Caveat: there have been some changes to the tax code and some income that would seem to be Foreign Sourced Income is classified as Non-Foreign Sourced Income and would be taxable.)

When you have been in Japan for more than 5 years in the last 10 years, you are considered Permanent Resident for Tax Purposes (different than your Immigration Status), and your Global Sourced Income is taxable whether you remit funds to Japan or not.

This is all explained in the documents above; Pages 5-11.


There are several different Tax Offices in your Area:

1. The Local Office of the National Tax Agency - They deal with National Income Tax, Inheritance Tax, Gift Tax, Consumption Tax, etc.. This is the office you need to consult. You can find your local office here:

https://www.nta.go.jp/about/organization/index.htm


2. The Ward or City Hall - They have a Tax Desk acting as a Proxy for the Municipal and Prefectural Tax Offices - They deal with Residents' Taxes as a first point of contact.

3. The Municipal, Ward or City Tax Office - usually located close to the Ward or City Office - They deal with Municipal Residents' Taxes.

4. The Prefectural or Metropolitan Tax Office - usually located close to the Prefectural HQ Office - They deal with Prefectural Residents' Taxes.


The National Tax Agency passes through information regarding your National Tax Return to the Prefectural or Metropolitan Tax Office and Municipal, Ward or City Tax Office, so normally you do not have to deal with them.

This Guide deals with Prefectural or Metropolitan and Municipal, Ward or City Taxes (specifiucally for Tokyo, but pretty much the same nationwide)

English
https://www.tax.metro.tokyo.lg.jp/book/ ... k2023e.pdf

Japanese
https://www.tax.metro.tokyo.lg.jp/book/ ... ok2023.pdf

[captainspoke]

What you need to do is that for every instance of a payment, you need to convert that (dollar) payment into yen on the date that it was paid to you.

Use this site to do that (scroll down a bit below the calendars and use the drop downs to select a date), and use the TTM rate--not the buy or sell rate. Also, if it returns a message of 'rate not available' or some such, you need to back up by a day--and then two days, or three, etc--until it gives you a rate. Use that one. (Don't go forward.)

This is not hard, but it does take some 'grunt' work, clicking around to get all the bits. This year (2023) shouldn't be too hard, just note that for many things, regular payments such as SS, interest, maybe dividends, etc., you can keep up with it before tax season even starts. So for example, I have already done all of the regular payments for 2023 up thru early november, and am just waiting for anything that happens in the last ~7 weeks or so. Then I'll add/update that little bit, and be done and ready to go to the tax office.

And I'd suggest that you do this, set up a simple spreadsheet to display it all, before you go to the tax office. This is drudge work, and while the tax office people are certainly very helpful, this is something that you can do in advance (and not waste their time).

If you have any sales/trades, it's more complicated. Generally, you have to also convert the purchase details in the same way--shares of XYZ, purchased on a specific date, which when converted to yen on that date will be your cost basis, which is then balanced against the sale of those shares, on a given date, and at the specific exchange rate for the sale date.

The 'catch' (difficulty) with sales of shares, is that you need to use your average cost basis for all the shares of that stock/fund/ETF that you own. You cannot specify lots, or LIFO, FILO, etc. The number crunching, especially if you have had dividend-reinvesting ticked on over the years, can be a headache. (If someone knows of an accepted way to handle this, please chime in!)

Good luck!

[captainspoke]

(oops)

[Tkydon]

Your Federal Government Pension is not taxable in Japan under the US-Japan Tax Treaty.

https://www.mof.go.jp/tax_policy/summar ... _ST_en.pdf

Article 18 Paragraph 2(a) Refers.

"2. (a) Any pension and other similar remuneration paid by, or out of funds to which contributions are made by, a Contracting State or a political subdivision or local authority thereof to an individual in respect of services rendered to that Contracting State or a political subdivision or local authority thereof, other than payments made by the United States under provisions of the social security or similar legislation, shall be taxable only in that Contracting State."

Therefore, your Federal Government Pension is only taxable in the US.

Your Social Security Pension is taxable in Japan and in the US, but qualifies as a National Pension, and is eligible for the Public Pension Deduction, and you can also claim the Foreign Tax Credit in Japan for the Tax paid in the US.

But for the first 5 years, is only taxable in Japan if you remit funds to Japan.

See Page 8 (Page 12 of the PDF) - Calculating the Public Pension Plan Deduction (Calculation Table) here

https://www.tax.metro.tokyo.lg.jp/book/ ... k2023e.pdf


See also,

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

Page 11.

"2. Persons with only Miscellaneous Income related to Public Pensions etc.
 You are required to file a final return if a balance remains after subtracting all of your income
deductions from your amount of miscellaneous income related to public pensions."

and Page 22 - Computation of miscellaneous income from public pensions, etc.

[Togashi1]

Thanks to all who provided responses, information, and links to my inquiry regarding the filing of Japanese income taxes. Apologies for the delay in responding. I will review in the coming weeks in more detail the responses provided and read the links and information provided which is very helpful. Thanks again and appreciate your responses. Was not sure how to respond to each person, so sending this thank you.

[solo7100]

But for the first 5 years, is only taxable in Japan if you remit funds to Japan.

So, if they keep their pension saved up for 5 years (don't remit it to Japan), then in the 6th year bring it over (as savings...right?...since it was literally sitting in their account), then there would be no tax payable in the 6th year....am I thinking right?

The 6th year transfer would be just them moving their savings over, so no taxable event...?

Thanks,

[Tkydon]

But for the first 5 years, is only taxable in Japan if you remit funds to Japan.

So, if they keep their pension saved up for 5 years (don't remit it to Japan), then in the 6th year bring it over (as savings...right?...since it was literally sitting in their account), then there would be no tax payable in the 6th year....am I thinking right?

The 6th year transfer would be just them moving their savings over, so no taxable event...?

Thanks,

Yes, as the other Global Income will be fully taxable in the same year from Year 6, transferring the savings accumulated over the first 5 years will not be liable for any additional tax over the full tax payable on Year 6 income.

If they tried to bring it earlier they would incur tax.
Say they transfer the first year's accumulated pension savings in Year 2, the rule says the transferred funds are fungible, indistinguishable from the second year's pension income, so the transferred amount would be taxable as second year's pension income, liable to tax to the extent of the full tax payable on Year 2 income, but no more... and so on until year 5.