Paying tax in Japan on a UK rental property?

[KevinC]

Hello All,

New member looking for some help.

I was wondering if I could get some advice / help regarding taxes on a UK rental property. (sorry, I'm new to this)

I just started to rent my house back in the UK this month and am not sure where I stand with taxes here in Japan. I understand that I will have to file taxes in the UK, although my earnings from the property will be under tax limit so no taxes need to be paid there. However, how does it work when it comes to Japan (where I live)? Do I need to pay taxes here on this? If so, do I do it through a tax return at the end of the year? (I don't usually submit taxes in Japan myself as my company takes it from my salary).

Does anyone else have rental properties in England? If so what do you do?

Thank you in advance for any advice.

[ricardo]

It depends how long you have lived in Japan.

[KevinC]

I've been living in Japan for over 5 years. This is the first time I have received income from the property, so now that I am I assume I have to pay taxes but not sure how to go about it.

[RetireJapan]

I've been living in Japan for over 5 years. This is the first time I have received income from the property, so now that I am I assume I have to pay taxes but not sure how to go about it.

If you go to the tax office after the coronavirus thing dies down they will be happy to help you (and they tend to be very helpful in my experience). Unfortunately depreciation on properties abroad has just been disallowed by the government, although you might be able to get it for this year's tax return.

A quick Google search (in Japanese) pulls up lots of guides. It's fairly simple and there don't seem to be any special tricks or cunning strategies

[KevinC]

That's great, thank you for the advice. I'll head there once everything calms down.

I'll share an update after I've been, incase anyone else has similar issues in the future.

Thanks again for your help with this.

[AustinJapan]

Hi Kevin,
Yes I’ve found people are very open about this in general and conclude there are no special tricks at all. (Do you have a brother?) i would be very interested to know what you dig up, especially in the four scenarios. Btw , not from UK, so I don’t know about limit.

Assume in Japan over five years and want to stay.
Also assume no appreciation/depreciation, and costs are fixed, rates..etc...or repairs that maintain the value and are not ‘investments’ made in the name of anything but fulfilling obligations to tenants, bylaws etc..assume you bought the house with a UK bank on a UK mortgage, your Dad the paid stamp duty or whatever the UK equivalent as a present for passing the Japanese JLPT level 3 lol. Also assume that the UK gov waivers tax obligations if rent is less than 11,000 ponunds

A) Mortgage zero, Gross rent stream 9,000 pounds, total Costs 3,000, Net total stream 6,000
B) Mortgage 5000 pounds, Gross rent stream 9,000 pounds, total Costs 3,000, Net rent stream 6,000, less Mortgage (5000), net total stream 1000.
C) Mortgage 6,000 pounds, Gross rent stream 9000, total costs 3000, net rent stream 6,000, less mortgage (6000) , net total zero.
D) mortgage 9000 pounds, Gross rent stream 9000, total costs 3000, net rent stream 6000, less mortgage (9000) , net total is a loss for you of -3000 pounds.


That knowledge should be the bare minimum any owners would want to know.

In scenario D, can the loss of 3,000 pounds, be written off against your Japanese income?

Then you can start thinking of future strategies. I.e., if you realized it ain’t so nice,

that your gains are eaten away,
or buy to let is a bust,
that the 11,000 pound exemption (or whatever it is in the UK that shelters you from paying tax) is actually meaningless if you are an expat over here,
if you sell it you will fall into the least favorable tax obligation for either country for each parameter they take into consideration (or if one country waivers such an obligation, the other more than makes up for it) ,

Kevin, I wouldn’t be the least bit surprised if you don’t report back, and wouldn’t blame you. Selfishly, of course I want to know.

So I hope you do. Good luck.

[KevinC]

No joy so far.

I called at the tax office a few days ago but couldn't get a yes or no. They did seem very busy, so my plan is to head back once the whole Corona thing is over.

[StockBeard]

couldn't get a yes or no.

To which question? Looking back at your questions in the original post, here's how it goes:

Do I need to pay taxes here on this?
--> Basically yes: If you've lived in Japan more than 5 years out of the past 10 years, you are considered a resident permanent for tax purposes, and that means you owe taxes in JP on your income worldwide.

If so, do I do it through a tax return at the end of the year?
--> Yes. More specifically, the tax return is filed in March, for the year before. You'll basically have to fill it with the tax data from your regular job (your salary, how much you paid for social security and how much you already paid in taxes, any deductions you can get - this information is sent on a slip at the end of the year by your company), add the money you made from the rental property at a specific line in the tax return, subtract the expenses related to that income on another line or sheet, then follow the calculation to compute your final tax. The total you owe, minus what your company already paid, is what you will have to send the JP tax office by April. BTW If that difference is huge (i.e. if you owe a lot of additional tax - I'm not sure what the threshold is), there's a possibility the tax office will ask you to pay estimated taxes in advance for the year after that, so plan a bit ahead.

[KevinC]

StockBeard,

Thank you very much for helping and sharing this information. It has cleared up the questions I had.

I'll file the taxes this coming March in that case.

Thanks again

[Beaglehound]

There will be currency conversion from sterling to yen as well, so worth checking with the tax office if they will require you to use the exchange rate for the income/expenses on the day they are received/paid out, or if they will let you do it on an annual basis, e.g. using the rate on December 31st of the tax year in question. TBH I have had mixed messages from the tax office on this in the past (I earn a small amount of overseas income) but I calculate using the mid-rate on the day the cash is received.