Recommendation for Japan tax accountant or attorney for US-source retirement income

[picklerick]

I'm completely exhausted from my year long search for a Japanese tax accountant or tax attorney who is knowledgable about Japan income tax for US retirement income sources, such as 401k, IRA, social security, and other investments. I've been through big name international firms and small firms with very poor results all around. Big waste of time and money.

If you have direct experience using a Japanese tax accountant or attorney who is very knowledgeable and experienced in this area, I beg you to please PM me with the contact info.

[TokyoBoglehead]

I'm completely exhausted from my year long search for a Japanese tax accountant or tax attorney who is knowledgable about Japan income tax for US retirement income sources, such as 401k, IRA, social security, and other investments. I've been through big name international firms and small firms with very poor results all around. Big waste of time and money.

If you have direct experience using a Japanese tax accountant or attorney who is very knowledgeable and experienced in this area, I beg you to please PM me with the contact info.

Have you tried PWC? If a firm like that cannot help you, you'll probably need to be more specific about why.

[picklerick]

[/quote]
Have you tried PWC? If a firm like that cannot help you, you'll probably need to be more specific about why.
[/quote]

Yes, I have. From the very beginning, they said that they don't get into detailed planning scenarios for individual clients. I used their services anyway to help fill in some general knowledge gaps and get some suggestions.

[Tkydon]

It seems ridiculous to me that PWC cannot 'help' you

I'm completely exhausted from my year long search for a Japanese tax accountant or tax attorney who is knowledgable about Japan income tax for US retirement income sources, such as 401k, IRA, social security, and other investments. I've been through big name international firms and small firms with very poor results all around. Big waste of time and money.

If you have direct experience using a Japanese tax accountant or attorney who is very knowledgeable and experienced in this area, I beg you to please PM me with the contact info.

The Japanese Tax Code is not that complicated.

Assuming you are a Permanent Resident for Tax Purposes (you have been in Japan for more than 5 years in the last 10 years):

Japan has First Call on your Global Income. Taking your list in reverse order...

Other Investments: Liable for Capital Gains Tax:
(Sell Price in Yen - Average Purchase Price in Yen) x Units Sold - Fees
Capital Gains Tax 20.315% (15% National, 0.315% Reconstruction and 5% Residents' Taxes)
Kakutei Shinkoku Form B Page 3

IRA: Liable for Capital Gains Tax:
Not Tax Free in Japan.
(Sell Price in Yen - Average Purchase Price in Yen) x Units Sold - Fees
Capital Gains Tax 20.315% (15% National, 0.315% Reconstruction and 5% Residents' Taxes)
Kakutei Shinkoku Form B Page 3

Social Security: Liable for Pension Income Tax at the Marginal Rates
This Income is entitled to the Public Pension Deduction, and your regular Allowances/Deductions for Yourself, Dependents, Medical Expenses over Y1M, Furusato Nozei, etc..
See Page 12
https://www.tax.metro.tokyo.lg.jp/book/ ... k2022e.pdf
The Net Aggregate Taxable Income is then taxable at your Marginal National Tax Rates and 10% Residents' Taxes.

401k:
There are two ways for you to take benefits of your 401k; Lump Sum or buy an Annuity? (Treated differently)
Annuity:
Treated same as Social Security. Included in your Aggregate Taxable Income. After deducting all Allowances/Deductions, taxable at your Marginal National Tax Rates and 10% Residents' Taxes.

Lump Sum:
There is a really beneficial tax method for the the Lump Sum.
For the total number of years of your 401k, you can take a Special Deduction equal to Y400,000 per year for the first 20 years and Y700,000 per year for years greater that 20...
This is the Only Deduction allowed for the Lump Sum.
You deduct the Special Deduction from the Lump Sum, and if this is positive, divide the remainder by 2. This Net Taxable Amount is then taxed at standard Marginal National Tax Rates and 10% Residents' Taxes.
This is assessed completely independently of any Income in that Tax Year, so does not increase your Marginal Aggregate Tax Rate.

Unfortunately the US currently retains the right to also tax its Citizens, so you will have to file your taxes in the US too.

For Low Tax countries, you would pay local low taxes and then pay the difference to the IRS, but with Japan Taxes being on par with US Taxes, there shouldn't be much if anything left over for Uncle Sam...

[picklerick]

It seems ridiculous to me that PWC cannot 'help' you

I was very frustrated when I wrote that post, and it was poorly worded. I did not mean to imply that PWC was a waste of time. Allow me to restate and elaborate...

When it comes to individual income tax (as opposed to business/corporate income tax), most big firms only do work for corporate clients who need income services for their expat employees. So these firms won't even talk to me. I even got turned down by a big firm that did my tax returns for almost 10 years while I was an expat employee in Japan.

PWC was willing to support me and has been helpful to get high level insights and strategies relevant to my situation. But from the beginning they told me that they don't typically provide optimized detailed plans. It's just not a business service they currently provide to individual clients. I think they may have done if I pushed, but I expect it would have been cost prohibitive to pay for them to develop an evaluation method just for me.

My efforts to find small firms or individual tax accountants/lawyers with specific experience in taxation of US retirement income sources have all been dead ends. And I was looking at firms who tout their knowledge of international income tax considerations. The reality is there just isn't many retirees in Japan with primarily US-based retirement income sources. So finding the experience isn't easy.

The Japanese Tax Code is not that complicated.

Assuming you are a Permanent Resident for Tax Purposes (you have been in Japan for more than 5 years in the last 10 years):

Japan has First Call on your Global Income. Taking your list in reverse order...

I read through your list. I do appreciate it, but you might be surprised to learn the professional advice I received does not agree with what you wrote for some of the income sources.

[Tkydon]

I read through your list. I do appreciate it, but you might be surprised to learn the professional advice I received does not agree with what you wrote for some of the income sources.

Please elaborate. Would love to know where I may be wrong.
Also, you could PM me if you don't wish to share in public.

[Tom.Portland]

Sorry to reply to an old thread, but I would like to know if you found a good accountant. I have had a similar experience to yours. My experience is that the large international firms in Japan only want to deal with corporate clients. Even their Family services are targeted at families that own a large business. I reached out to many Japanese tax lawyers and accountants. Most of these just said, we aren't interested in taking you on as a client. I suspect that the tax law firms are really only interested in large inheritance cases. A couple of accountants quoted a price for tax preparation services, but they did not give me the feeling that they understood the main issue with IRAs, which is the fact that they are not explicitly covered by the US-Japan Tax Treaty. I now have three different answers as to how Japan taxes IRAs, 1. On gains in the account, like an ordinary stock account. 2. As a pension, taxation only on distributions. 3. Taxation on both the earnings in the account *and* on the distribution. The latter is what my local tax office claims. I did get a meeting with a Japanese lawyer, through an introduction. He is not a tax specialist. During the meeting, he said one thing about IRA taxation. After he apparently did more research, he modified his story. I have low confidence that he really has answers. Chat GPT, for what it is worth, said that, because it is not explicitly defined in the treaty, some Japanese tax offices (or individual examiners) declare that gains in the account are taxed, like a regular stock fund. Others say that it is a pension, with only distributions taxed, as in the U.S. I have written about this in another thread, in case you noticed. I am no closer to an answer.

[Tkydon]

but they did not give me the feeling that they understood the main issue with IRAs, which is the fact that they are not explicitly covered by the US-Japan Tax Treaty. I now have three different answers as to how Japan taxes IRAs,

1. On gains in the account, like an ordinary stock account.

Capital Gains on Units Sold and Funds Distributed
Article 21 Refers
Article 1-4(a) Refers

2. As a pension, taxation only on distributions.

No, An IRA is not a Pension.

3. Taxation on both the earnings in the account *and* on the distribution.

No, An IRA is a wrapper, so trading of units within the IRA is not taxable. Capital Gains on Units Sold and Funds Distributed

The latter is what my local tax office claims. I did get a meeting with a Japanese lawyer, through an introduction. He is not a tax specialist. During the meeting, he said one thing about IRA taxation. After he apparently did more research, he modified his story. I have low confidence that he really has answers. Chat GPT, for what it is worth, said that, because it is not explicitly defined in the treaty, some Japanese tax offices (or individual examiners) declare that gains in the account are taxed, like a regular stock fund. Others say that it is a pension, with only distributions taxed, as in the U.S. I have written about this in another thread, in case you noticed. I am no closer to an answer.

Article 21 says only 100% taxable in the country of residence, but Article 1-4(a) says US can tax US Citizens.

Article 23-3(c) says You have to reassign US IRA Distribution Funds as Japanese Sourced Income for the purpose of claiming the Foreign Tax Credit in your US Tax Return for the Capital Gains Taxes paid in Japan.

[jhr1054]

Perhaps try:
中村税務相談事務所
税理士　中村　文彦
Fumihiko Nakamura
Certified Tax Accountant
Nakamura Tax Consultation Office
Tel: 81-3-5366-4749
Fax: 81-3-5366-4702
E-mail: nakamura@japantax.tokyo
Web page: http://japantax.tokyo