Avoid Taxes by Investing from Singapore?

[TokyoWart]

My experience is that tax equalization packages for expats have become much more unusual than they were 20 years ago and companies control their risk by having repatriation policies which prevent a supported foreign employee from staying in Japan for 5 years. The people I know who stayed longer than that, even those working in senior positions at investment banks, had to give up their expat employment package and become a local hire.

[wololo]

No, IIUC this is no longer possible after the Japan tax reform in 2017 [1], which expands the coverage of taxable income for non-permanent residents.

You can also read about this on [2]:

In general, many people would think that sale of foreign assets constitutes Foreign Source Income.
However, this is not straightforward under the Income Tax Law since it provides that “Capital gains specified by the Cabinet Order as derived from foreign assets” as a Foreign Source Income (Article 95, Para 1, Item 3).
As a result, those that do not fall under this “specified by the Cabinet Order” cannot be “Foreign Source Income” but constitute “Non-Foreign Source Income”.
An example is capital gain on securities sold outside of Japan.

Before the 2017 amendment, all of the capital gain on securities sold outside of Japan had been treated as Foreign Source Income under the Income Tax Law.
However, after the amendment, only capital gain derived from securities satisfied certain requirement (Specified Securities) can be treated as Foreign Source Income (ITL Article 7 Para 1 Item 2).
Consequently, capital gain other than Foreign Source Income will be immediately taxed even if non of such proceeds is remitted to Japan.
This was an important revision in international taxation in the 2017 tax reform.

What are the Specified Securities?
They are securities either of listed below (Income Tax Income Law Enforcement Ordinance (hereinafter referred to as the “ITL EO”), Article 17, Para 1; Income Tax Basic Circular (hereinafter referred to as the “Circular”) 7-1).
（1）　Those acquired on or before 10 years before the sale of those
（2）　Those acquired during the period of 10 years before date of the sales and while a taxpayer is not the NPR
（3）　Those acquired before March 31, 2017 (excluding those that fall under (1) or (2) above)

So by transferring your money to Singapore, you not only lose the transaction fees, but you also have to report these investment gains (even if they are not remitted into Japan).

[1]: https://www.pwc.com/jp/en/taxnews-inter ... 511-en.pdf
[2]: https://ty-tax-accountant.com/en/archives/6972

[Logan5]

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

Wait. Let me understand this. You’re telling me, that in 30 years when I turn 70, and decide to leave Japan to retire back in the US, and I have over 1 million USD in ETFs and stocks, I have to pay tax on that as if I sold it?

According to the linked PDF, they would tax it at 15%. So you’d have to pay $150,000 just for having that much money. And what happens when I do actually start selling in the US? I get taxed again?

Reading stuff like just makes me think of how much money I’m losing in taxes just because I’m living in Japan.

[Beaglehound]

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

Wait. Let me understand this. You’re telling me, that in 30 years when I turn 70, and decide to leave Japan to retire back in the US, and I have over 1 million USD in ETFs and stocks, I have to pay tax on that as if I sold it?

If it’s taxes as a capitol gain, At Japan’s %20 rate that would be like $200,000! And what happens when I do actually start selling in the US? I get taxed again?

Reading stuff like just makes me think of how much money I’m losing in taxes just because I’m living in Japan.

It’s clearly not great, but bear in mind that one would only be taxed on the notional capital gain in that scenario, i.e. you deduct the purchase price from the notional selling price.

[Logan5]

Well that’s good I guess. I’ll just try not to become a multimillionaire while I’m here in Japan.

[Beaglehound]

Well that’s good I guess. I’ll just try not to become a multimillionaire while I’m here in Japan.

Yes, that would probably be for the best. I don’t find it too hard not to become a multi-millionaire tbh.

[RetireJapan]

I struggle so hard not to become a multi-millionaire

Jokes aside, it is a good idea to be aware of things like the exit tax. In my case, if I were over the limit (remember it doesn't include cash, real estate, or things, just stocks and similar with unrealised capital gains). I would sell enough to put me under the limit.

Remember you will probably have to close your accounts here if you leave Japan, largely avoiding the issue unless you have big investments abroad.