Salary & Crypto side hustle Case Study

[AshiyaResident]

Hi,

New here, although I have read some of the advice here. Very cool website.

Objective
Tax avoidance (not tax evasion!)

Case study as follows:

- Long(ish) term resident of Japan, nearing 15th near. Permanent Resident.
- Salary as regular salaryman around 18m JPY, so about to hit 40% tax rate. May change in a few years as I move up, but not relevant now.
- Started trading crypto , mostly as a hobby few years back, wasnt a good time as I incurred losses, but started again late last year, made decent profits (XRP, for those who trade), but I am kind of a day trader in that I "buy the dip", and make 10-20k a day.
- Have a solid strategy, hedging my risks and yet at current rate, I would be on target for 5-7m jpy. If all goes well, this could increase over the years.
- Crypto taxed in a very unfair manner compared to normal stock, i.e. just taxed as extra salary income. At my marginal rates, not great...
- Deductions are limited, phone 100% used for trading with some ancillary, but nothing extensive.

Thinking of the following.
- Set up Goudou Gaisha this year. Make myself, wife and 2 kids "members". Relatively cheap.
- Sell at a low when crypto drops sometime during 2025FY, then immediately buy back in the name of the company, to reduce my personal gains as much as possible and get the investment in the name of the company, whilst price goes back up.
- Keep trading and - assuming I do make 5-7m - pay about 25% (ish) tax combined. Can't remember exact rate.
- Pay out as dividends to my wife and kids. 20% withholding tax, but there is double tax deduction available for dividends.
- As my kids have no other income and my wife's income is very low, I would save a certain amount (not sure how much) on tax overall.
- No gift tax implications I presume as wife would use the funds for her lifestyle and shopping, so wouldnt need to give it back to me. Kids would be a future investment.
- I may lose kids/wife tax dependent exemptions, but think that despite this, I would still be better off.
- If or when my trading improves and I may or may not move over 10m levels, tax savings would increase even further. Losses also to be carried forward.

My question:
- Does anyone with tax knowledge see any issues with the proposed structure?
- Would it be effective, or deemed tax evasion as opposed to tax avoidance by the Tax Office?

I know similar structures are popular overseas, and searched in a lot of places but cant find any concrete examples or use case studies.

Note: I am aware of talks about taxing crypto at 20% and if so, all of the above is no longer relevant - and I certainly hope it will happen, but I cannot wait for this to happen. If it does, I can just wind up my company

Many thanks,
Anthony

[adamu]

Company would have to pay residence tax and corporation tax too I think, have you considered that (I am not an expert)?

[AshiyaResident]

Hi,

Thanks for the reply. Apologies, forgot to provide a bit more detail & background:

Yes - all taxes are considered. It does depend on level of income, but following website provides some insights. As effective tax rate does depend on prefecture too, it does vary a bit , but not all too much

https://www.jetro.go.jp/en/invest/setti ... page3.html

I referenced 4-8m level income at which I would be no more than 25% , all taxes included, corporate, local corporate, inhabitant, enterprise, special enterprise (24.86%, but again, it will vary slightly).

Of course, over 8m, level goes up quite a bit, but still no where near 40% (+10% inhabitant tax), or even as bad as 45% (+ 10% inhabitant tax).

Thanks,
Anthony.