2024 JP Tax forecast negotiable?

[PaulP]

I am a JP tax resident and sold a big chunk of long-held US stocks in 2023 and paid a capital gains on them to Japan on my 2023 return. I am concerned that my tax 2024 forecast for Japan will be quite inflated this year. I am not expecting to have any big gains like that this year. Is it worth making a case to have my taxes set on my projected 2024 earnings rather than on 2023 earnings? I know I can pay the taxes and then get money back next year. But of course I prefer to keep my money in the market and only pay what I owe.

Anybody have any experience with a similar situation? None of my trusted advisers are optimistic you can get these amounts adjusted but they also haven't ever been in this situation.

thanks!!

-p

[TokyoWart]

What do you mean by your 2024 tax "forecast"? We pay the local tax (住民税) in arrears so while you make those payments starting around June of 2024 it is not a forecast of your 2024 income but you catching up with your local tax liability. The national income tax (所得税) will be based on your income as you earn it and since you paid the capital gains on that already it should not affect your tax rate for income tax during 2024.

[PaulP]

Thank you for responding.

Well it's very possible I don't yet understand the process as I have only been a tax resident for one tax season, 2022 and just submitted my 2023 taxes last month. It is the national tax I am concerned about. Last year I had capital gains as well and I got a letter with 4 payment vouchers to be paid over the course of the tax year. The amount of those payments I assumed was based on my income from 2022, that's the "forecast" I mentioned, perhaps estimate would have been the better word to use. Anyway I am assuming I will receive a similar national tax letter and am worried they are using my 2023 capital gains to make that estimate. But you are suggesting capital gains is not included in those estimates?

-p

[Tkydon]

Yes, If you receive Yotei Nouzei 予定納税 demand, you can appeal the decision at your local National Tax Office where you filed the Kakutei Shinkoku after you receive the first Yotei Nouzei 予定納税 demand.

https://www.nta.go.jp/taxes/tetsuzuki/s ... nai/02.htm

[captainspoke]

... I got a letter with 4 payment vouchers to be paid over the course of the tax year. The amount of those payments I assumed was based on my income from 2022, that's the "forecast" I mentioned, perhaps estimate would have been the better word to use. Anyway I am assuming I will receive a similar national tax letter and am worried they are using my 2023 capital gains to make that estimate. But you are suggesting capital gains is not included in those estimates? ...

The "four payments" sounds like residence taxes. Yes, that is based on your national tax return, but if it is that, then this is not a forecast at all. It is the second component of the taxes you owe, and it's just coming a little later.

After you file your national return (and presumably pay any taxes due in one whack) that same information filters down to the folks who then calculate your residence taxes--city or prefecture. This happens in June, and IIRC, the first of the four payments is due on/about June 30th. This is not a forecast, nor an early collection of taxes presumed to be due the following year. It is a further tax (local level) one your previous year's income. While some are puzzled by this system, it also means you don't have to file a local tax return, or do anything at all after you have filed your national return. It's all automatic, as it were.

One thing that affects all this is whether you chose 'separate' or 'combined' taxation when you filed your national return. If I've got this right, for dividends there is no choice, and these must be combined. But for capital gains, there is a choice, and the best way to go depends on your income level. By choosing one or the other, you may pay more at the national level, but then at the level of residence taxes, the percentage can be either 5% or 10%. To offer a quote from another source:

"It depends if your national income tax rate is lower than the 15% rate for separate taxation. You can try them both and see which one works out better before submitting the final return. Bear in mind you have to use the same method for residence tax too, so if you choose aggregate for national tax, residence tax will be charged at 10% instead of the 5% for separate taxation."

[adamu]

If I've got this right, for dividends there is no choice, and these must be combined.

This is probably TMI for the OP but they are "separately taxed at source", however you can put them on your tax return which, which allows you to choose the method of taxation and maybe claim some deductions. Details on the wiki.

https://retirewiki.jp/wiki/Income_Tax

Anyway, I suspect that although Tkydon answered the literal question, TokyoWart and captainspoke may be right and the OP is thinking of residence tax, which also has a wiki page (partly edited by Tkydon).

https://retirewiki.jp/wiki/Residence_Tax

[captainspoke]

Oops.

I blended my personal situation into that reply--talking about foreign dividends and gains and forgetting that I should not generalize.

[PaulP]

I am definitely in learning mode and didn't realize that the residence taxes were retroactive based on the previous year. Those retirewiki pages were very helpful.

I guess I need to wait and see what my Yotei Nouzei 予定納税 is and then decide if I want to follow-up with the appeal process you posted.

thanks for the help.

-p