Avoid Taxes by Investing from Singapore?

[null]

So, I'm just wondering if this situation is possible. I living in Japan but am a Singaporean citizen.

The capital gains tax in Japan is 20% while there isn't any in Singapore. Could I do the following?
Transfer my yen to Singapore and make investments from there and simply use my Singapore credit card to spend money in Japan if I need. There would be some transfer and credit card fees but it would surely be less than 20%.
That way I would be able to earn from investments tax-free and still be able to use it here?

Is this legal/advisable?

[StockBeard]

I want to emphasize what Oklah! said because it's something I had a hard time understanding back in the days.

TL, DR:
- permanent tax resident is not the same as your "permanent resident" status on your visa. The two are uncorrelated. You are considered a permanent tax resident if you have lived in Japan for 5 years or more in the past 10 years.
- as a permanent tax resident, you have to declare your income worldwide. It does not matter that the investment is in a Singapore brokerage account
- Depending on your situation, declaring your income does not necessarily mean you will have to pay tax on it to Japan, but in my experience that is the most likely outcome. Tax treaties ensure you don't get double taxed, but if you paid 0% in Singapore it just gives you a foreign tax credit of 0 yen in Japan, meaning you'll probably have to pay the full bill to Japan.
- Japan has an exit tax for people who try to game the system (e.g. go live one year abroad, sell all your investments there to realize the capital gain at no tax, then come back to Japan)

Paraphrasing:
If you're considered a permanent resident of Japan from a tax perspective (which is different from the "PR" visa, and depends solely on how long you've been in Japan), you have to declare all your income to JP tax office, independently of where in the world you made that money.

Of course if you already pay taxes on that money in, e.g. Singapore, you might be able to claim tax credit in Japan (depending on treaties between the two countries), but my limited experience with that is that, although you don't get double taxed, you always end up paying the maximum of the two countries. E.g. if Singapore has a 0% tax on some category of income and JP is 20%, JP will say "ok, you get to pay us 20% minus the 0% you already paid, so you just owe us 20%

The situation is possibly different if you have been in Japan less then 5 years so far. So maybe what you suggest is both legal and advisable for your first 5 years of Japan, but of course you should absolutely talk to an accountant to confirm this, otherwise you could be hit with some massive tax penalty in the future.

Also note that to prevent people from gaming the system, Japan also has an "exit tax": if you're a permanent tax resident with significant worldwide assets (approx 1 million USD or more) and leave Japan, you will have to pay a tax on unrealized capital gain from your worldwide investments, as if you had sold those investments: https://www.pwc.com/jp/en/taxnews-inter ... 114-en.pdf

[lifesideways]

[edited to fix typos]

I'm also interested in the 5-year rule and international investments.

If, for example, as a non-permanent resident for tax purposes, someone were to make international investments (stock) by transferring money that was earned while in Japan, but never technically have any international income due to all profits being automatically reinvested, then would this still need to be declared to the National Tax Agency in Japan?

[RetireJapan]

I'm also interested in the 5-year rule and international investments.

If, for example, as a non-permanent resident for tax purposes, someone were to make international investments (stock) by transferring money that was earned while in Japan, but never technically have any international income due to and profits being automatically invested, then would this still need to be declared to the National Tax Agency in Japan?

If you are not permanently resident for tax purposes in Japan, it doesn't matter how much foreign income you have as long as you *don't bring the money to Japan*.

Even if you are permanently resident for tax purposes, if you are not making any money then there is no taxable event to declare. You don't have to do anything until you go over 50 million yen of assets abroad (the existence of which you would then have to declare to the tax agency).

[lifesideways]

Even if you are permanently resident for tax purposes, if you are not making any money then there is no taxable event to declare. You don't have to do anything until you go over 50 million yen of assets abroad (the existence of which you would then have to declare to the tax agency).

Thanks, that's also how I understood what I've read so far. In that case, it seems logical — at least for someone in my situation — to keep assets outside of Japan, so long as dividends are automatically reinvested.

The 50 million yen mark is something I've also thought about (this is quite far off, for now ), but I'm not quite sure what I would do with the assets when approaching that ceiling. Assuming I'd still be in Japan at that point, do you have ideas around strategies to mitigate tax?

[RetireJapan]

Well, just having 50m yen in assets outside Japan is not a taxable event -you have a duty to declare its existence, but again as long as you are not receiving dividends or capital gains there is no tax due.

[lifesideways]

Oh, I didn't realise that. I thought that I would have to pay taxes on anything over 50 million yen. Thinking about it now, that wouldn't have made much sense since, as you say, just having the assets isn't a taxable event.

Thank you for the information!

[StockBeard]

Thinking about it now, that wouldn't have made much sense since, as you say, just having the assets isn't a taxable event.

Some countries have a tax on wealth though
Also Japan probably keeps track of this for the exit tax: just having the assets isn't a taxable event, but having the assets AND leaving Japan is, in some cases (or was that for 100 million and above?).

[RetireJapan]

Thinking about it now, that wouldn't have made much sense since, as you say, just having the assets isn't a taxable event.

Some countries have a tax on wealth though
Also Japan probably keeps track of this for the exit tax: just having the assets isn't a taxable event, but having the assets AND leaving Japan is, in some cases (or was that for 100 million and above?).

Exit tax is a bit tricky. It's over 100m in stocks, etc. (not cash, real estate, etc.). Given that you have to sell your stocks in Japan when you leave, for most people that's going to put them under the exit tax limit...

[mighty58]

I wonder at one point an "exit" is deemed to have happened for this exit tax. I presume that one would have to declare an exit, as otherwise events such as job transfers or even extended vacations could be deemed an exit. So situations will arise where someone leaves Japan, fully intending to return, but then life intervenes and they don't make it back.