RetireJapan

On Exit Tax - my understanding is that it only engages if you have PR and eligible assets valued over 100 million. My question is on the calculation of the tax. A couple of scenarios where a foreigner leaves:

1) 99 million in global stocks. Foreigner pays nothing in Exit Tax.
2) 101 million in global stocks. Foreigner pays Exit Tax (capital gains tax) for the full 101 million worth of stocks.
3) 101 million in global stocks. Foreigner sells 2 million in stocks to leave 99 million before leaving. Foreigner pays no Exit Tax (but pays cap gains on the 2 million).

Is this correct? If so it is such an absurd tax.

PWC posted something on this:
https://www.pwc.com/jp/en/taxnews-inter ... 114-en.pdf

You don’t have to be a PR and the tax is on your global financial assets of over 100M (foreign + Japanese). Does NISA and iDeco count?

You’ll be taxed as if capital gains were realized so selling may not be so good if you like the long term perspectives of your investments.

It’s annoying.

Ax6isB wrote: ↑Mon Mar 15, 2021 9:14 am PWC posted something on this:
https://www.pwc.com/jp/en/taxnews-inter ... 114-en.pdf

You don’t have to be a PR and the tax is on your global financial assets of over 100M (foreign + Japanese). Does NISA and iDeco count?

You’ll be taxed as if capital gains were realized so selling may not be so good if you like the long term perspectives of your investments.

It’s annoying.

My take is iDeco accounts wouldn't be included (along with other pension funds), however NISA might.

Ax6isB wrote: ↑Mon Mar 15, 2021 9:14 am PWC posted something on this:
https://www.pwc.com/jp/en/taxnews-inter ... 114-en.pdf

You don’t have to be a PR and the tax is on your global financial assets of over 100M (foreign + Japanese). Does NISA and iDeco count?

You’ll be taxed as if capital gains were realized so selling may not be so good if you like the long term perspectives of your investments.

It’s annoying.

Thanks for the link. From my understanding selling to ensure that your taxable assets subject to the exit tax are worth less than 100 million means that you pay nothing in exit tax. But if you are over 100 million then the whole amount is subject to the tax. So the "winning strategy" would be to sell your losers sufficient to go under the 100 million threshold (and pay capital gains from that sale, if any), leave the country and then re-buy them when you are no longer a resident of Japan. This wouldn't work for super wealthy individuals as the pre-exit sale would net them a higher tax rate due to residence taxes and the fact that they would need to sell a significant amount of assets to get under the threshold. But for people that are just above 100 million they should definitely strategically sell to minimize capital gains and ensure they are under that threshold.

If this is correct then it just amplifies my belief that this is the stupidest tax ever. All it serves to do is make moderately wealthy people jump through a few tax hoops to avoid it.

eyeswideshut wrote: ↑Tue Mar 16, 2021 12:07 am If this is correct then it just amplifies my belief that this is the stupidest tax ever. All it serves to do is make moderately wealthy people jump through a few tax hoops to avoid it.

It's not aimed at moderately wealthy people. If I recall correctly, it is the NTA's response to being shown up by some billionaire that moved to Singapore (no capital gains taxes), sold all his shares, then moved back to Japan with the cash.

The NTA took him to court and lost. And then Japan got this slightly ill-conceived new rule.

Maybe this case? Didn't have time to read it properly: https://www.nikkei.com/article/DGXNASDG ... 0C1000000/

RetireJapan wrote: ↑Tue Mar 16, 2021 12:50 am

eyeswideshut wrote: ↑Tue Mar 16, 2021 12:07 am If this is correct then it just amplifies my belief that this is the stupidest tax ever. All it serves to do is make moderately wealthy people jump through a few tax hoops to avoid it.

It's not aimed at moderately wealthy people. If I recall correctly, it is the NTA's response to being shown up by some billionaire that moved to Singapore (no capital gains taxes), sold all his shares, then moved back to Japan with the cash.

The NTA took him to court and lost. And then Japan got this slightly ill-conceived new rule.

Interesting, I wonder if Carlos Gohn paid his exit tax before he fled the country lol.

eyeswideshut wrote: ↑Tue Mar 16, 2021 1:06 am Interesting, I wonder if Carlos Gohn paid his exit tax before he fled the country lol.

"Why is this cello trying to hand in tax paperwork?"

Was he even resident here officially?

RetireJapan wrote: ↑Tue Mar 16, 2021 12:54 am Maybe this case? Didn't have time to read it properly: https://www.nikkei.com/article/DGXNASDG ... 0C1000000/

Yes, my understanding is that it is the Takefuji heir’s case that started the ball rolling for the exit tax.

eyeswideshut wrote: ↑Tue Mar 16, 2021 12:07 am
If this is correct then it just amplifies my belief that this is the stupidest tax ever. All it serves to do is make moderately wealthy people jump through a few tax hoops to avoid it.

I had a friend at PWC and he said the same thing and their company was lobbying hard to stop this to no avail. It dissuades foreign workers from coming amongst other things.