igzem wrote: ↑Mon Oct 16, 2023 7:03 am
Having read the saga about Aus property taxation, I have two properties in Sydney, guess need to start looking for a good accountant to protect against possible double taxation …
If you want to do the White Form Tax Return for the Kakutei Shinkoku, you only need receipts.
If you want to apply to do the Blue Form Tax Return for the Kakutei Shinkoku, you need to do, or get a book-keeper to do for you, full Double Entry Book Keeping. You then have to request permission to the Tax Office to be allowed to use the Blue Form Tax Return before a Cut-Off Date (I think it may be too late for this tax year, but you should apply with your Kakutei Shinkoku for permission for next year, or I may be wrong, and it may still be ok...).
There are three basic sections.
1. If you do the White Return as an Individual:
For each property, the Rental Income minus Loan Interest, maintenance expenses, and property taxes (and any other legitimate expenses) is treated as Taxable Income, and you have to produce all receipts. The Taxable Income is taxed at your Marginal Income Tax Rate and Residents' Tax Rate.
If you do the Blue Return as an Individual - Sole Proprietor:
For each property, the Rental Income minus Loan Interest, maintenance expenses, and property taxes (and any other legitimate expenses) is treated as Taxable Income, and you have to produce Double Entry Book-Keeping Records. The definition of 'Other Legitimate Expenses' is wider for the Blue Return, and you may be able to book expenses for dedicated office space in your house, 'business related' travel and other expenses.
The Taxable Income is taxed at your Marginal Income Tax Rate and Residents' Tax Rate.
If you incorporate, the procedure is entire different and you would definitely need an accountant.
2. If the property is located overseas, you can now only take Depreciation as a legitimate expense against income from overseas properties. You can no longer use a loss against Japanese Properties of Rental Income.
https://www2.deloitte.com/jp/en/pages/t ... -no68.html
If the property is located in Japan, you can additionally take Depreciation as a legitimate expense, and this should reduce the Taxable Income above to a Loss, eliminating the tax above... If the value produces a loss, you can then take that loss as a deduction against your other Employment Income, reducing your tax at your Marginal Income Tax Rate and Residents' Tax Rate (no longer available for overseas properties), and if sufficiently large can be carried over to subsequent years (3 years max).
You have to remember that if you take any depreciation, it reduces the Tax Basis by the amount of the depreciation for when you come to sell the property, which may mean that you need to pay (additional) Capital Gains Tax on the sale over the Reduced Tax Basis. You would basically be arbitrating your current Marginal Income Tax Rate and 10% Residents Tax Rate against the future Capital Gains Tax Rate of 20.315% (15% National, 0.315% Reconstruction and 5% Residents' Taxes).
If you have you properties managed by a Management Agent, then they should be able to provide you completed accounts for the property for the year, and you would provide those with the Return.
3. If the properties are located overseas, you will (probably) be liable for Income Tax or Withholding Tax on the Locally Sourced Income in that country (from that country's perspective), according to the Tax Treaty between Japan and that country.
You should ensure that you file a Notice with the Tax Authority in that country that you are no longer ax resident in that country, and claim a reduced rate of Withholding.
From the Japanese perspective, this is Foreign Sourced Income.
If you have been in Japan for less than 5 years in the last 10 years, then this foreign sourced income is only taxable in Japan if you remit ANY money to Japan in that year. Any money you remit will be considered to come first from those Foreign Income Sources, and will be taxable.
If you have been in Japan for more than 5 years in the last 10 years, then this foreign sourced income is taxable in Japan, whether you remit any money to Japan or not.
You can then claim a tax credit (deduction) for the foreign tax paid. Under the Foreign Tax Credit Section of the Kakutei Shinkoku. You have to use a special calculator to calculate how much of a deduction at your marginal tax rate would provide exactly the same reduction in your Final Tax Bill as the amount of tax withheld or paid overseas on the same income. There may be a discrepency between Local Currency and Japanese Yen values due to exchange rate fluctuations from month to month or year to year.
However, you will probably have to file Japanese Taxes first by March 15th.. You should report any Taxable Income or Loss Gross in JPY, before any foreign taxes, and pay any taxes due by April 15th..
You then probably have to file foreign Taxes later, by Mid April, or even later. After you have filed your foreign taxes, you should then revisit your Japanese Filing - Kakutei Shinkoku to add the Foreign Tax Credit and claim the refund for overpaid taxes.
You probably want to get a tax professional, or someone at the Tax Office, to do it all for you for the first year, and then you should be able to copy what was done in subsequent years.
You may have to go back and file previous years, and you can do so for the last 3 years. You can amend any filing within 5 years (since 2022).
There was an e-Tax Guide available last year for 2022, but it has been removed, and will probably be replaced with a new e-Tax Guide for 2023 soon, before tax season starts for 2023.
As soon as I find them on line, I will post the new links for 2023 in the Forum.
