Avoid Taxes by Investing from Singapore?

[RetireJapan]

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.

I guess if you no longer have a 住所 (in tax terms) in Japan?

[mighty58]

I guess if you no longer have a 住所 (in tax terms) in Japan?

That makes sense from a tax point of view. But then an overseas transfer for work effectively means a huge tax bill, and I wonder if companies would pay for that. While the number of people meeting the asset threshold is a small ratio of the overall population, if you focus on only the subset of "people eligible for expat assignments" (ie. higher-than-average remunerated professionals), I'm guessing it's not an insignificant number of people that will be over that bar. Also, if a loss of tax residency is the trigger, then Japanese citizens should/would also be subject.

[RetireJapan]

I guess if you no longer have a 住所 (in tax terms) in Japan?

That makes sense from a tax point of view. But then an overseas transfer for work effectively means a huge tax bill, and I wonder if companies would pay for that. While the number of people meeting the asset threshold is a small ratio of the overall population, if you focus on only the subset of "people eligible for expat assignments" (ie. higher-than-average remunerated professionals), I'm guessing it's not an insignificant number of people that will be over that bar. Also, if a loss of tax residency is the trigger, then Japanese citizens should/would also be subject.

Most people sent abroad temporarily for work would maintain a 住所 in Japan, wouldn't they? There might even be a special rule (like that one that lets you keep your NISA account if you are posted abroad temporarily).

[eyeswideshut]

I doubt any employer would cover the tax bill but they would likely pay for tax advice to help the employee navigate the exit tax effectively. Tax advice is often a part of expat packages.

[mighty58]

I doubt any employer would cover the tax bill but they would likely pay for tax advice to help the employee navigate the exit tax effectively. Tax advice is often a part of expat packages.

This obviously would differ by company, but I know that mine would offset (i.e. pay) any increase in the tax burden that results from accepting an expat assignment overseas.

[mighty58]

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Most people sent abroad temporarily for work would maintain a 住所 in Japan, wouldn't they?

Maintaining a 住所 (address) and being a 在住者 (resident) for tax purposes are two different things.

[StockBeard]

This obviously would differ by company, but I know that mine would offset (i.e. pay) any increase in the tax burden that results from accepting an expat assignment overseas.

I'd love to entertain this for the sake of discussion:
We're talking of someone who owns more than $1 million dollars in taxable assets. If we imagine their capital gain represents $500'000 (money doubled since they started investing), at Japan's 20% tax rate, we're talking of an extra tax liability of $100'000. What kind of salary would that expat require to get, so that their company thinks an extra $100'000 in the expat package is easily absorbed?

[RetireJapan]

[

Most people sent abroad temporarily for work would maintain a 住所 in Japan, wouldn't they?

Maintaining a 住所 (address) and being a 在住者 (resident) for tax purposes are two different things.

Indeed. But you don't have to be a tax resident to have your home here while temporarily abroad. I'm sorry I don't know the details. Would probably be best to ask at the 役所 if someone was worried about how this would go down

[mighty58]

I'd love to entertain this for the sake of discussion:
We're talking of someone who owns more than $1 million dollars in taxable assets. If we imagine their capital gain represents $500'000 (money doubled since they started investing), at Japan's 20% tax rate, we're talking of an extra tax liability of $100'000. What kind of salary would that expat require to get, so that their company thinks an extra $100'000 in the expat package is easily absorbed?

Indeed, which is why I wondered aloud about whether any company would be willing to pay for that, or whether this is the death knell for expat assignments if you happen to be a dilligent saver/investor.

[eyeswideshut]

I doubt any employer would cover the tax bill but they would likely pay for tax advice to help the employee navigate the exit tax effectively. Tax advice is often a part of expat packages.

This obviously would differ by company, but I know that mine would offset (i.e. pay) any increase in the tax burden that results from accepting an expat assignment overseas.

Interesting. Your company is becoming a rare breed I think - sounds like something only the Carl Gohns of the world would get these days .

Not to quibble but there is a substantial difference between agreeing to absorb increased tax on an employees salary (which is a known amount) and the tax accrued deemed capital gains outside of that person's salary (which is what the exit tax is based on and is difficult to quantify in advance). A very wealthy individual who leaves Japan could theoretically have hundreds of thousands or millions USD in exit taxes owing to Japan by virtue of having a very large personal fortune. This personal fortune has nothing to do with the company so it would be nuts to agree to cover the employees exit tax liability because it has no knowledge or control over how much that amount might be. So for those reasons I highly doubt any company would offer a carte blanche to cover exit tax for an employee; it is too risky.