RetireJapan

Hi all, first time poster here. Hope everyone is doing well despite the current circumstances.

I'm new to the Japanese tax system, and so I decided to go to my local tax office to figure out my current tax situation. My Japanese is still really basic and while the staff was really helpful, I didn't get any answers to my questions.

I still try to figure out, if I have to file income taxes in Japan for 2020.

My background:

• I came to Japan in February 2020

• got my Zairyu card in June 2020 (spouse of Japanese National)

• working for a company in Europe remotely

I assumed I had to file taxes next month, but after reading the NTA's tax guide I'm more confused than before.

This guide defines residential status (for tax purposes) as follows:

Residents
Any individual who has a “JUSHO (domicile)” or owns a “KYOSHO (residence)” continuously for one
year or more is classified as a resident.

and

In cases where an individual did not own his or her domicile in this country immediately after entry into
this country, but has owned his or her domicile during the period from the date of entry into this country
to that on which one year has elapsed.
--> The individual mentioned above is deemed “a non-resident” until the date before that on which he or
she owned his or her domicile and “a resident” after the date on which he or she owned his or her
domicile.

Does this mean by the end of 2020 I was still a non-resident for tax purposes? My date of entry was in February and I have a domicile since June.

And if I'm still a non-resident, does this mean I don't have to file any taxes this year at all?

Sorry for all these basic questions. I just don't want to risk any penalties.

I appreciate any advice.

Shirudo--welcome to japan!

I'll make a few comments here, but keep in mind that I'm not a even a beginner tax guru, and that as a long timer my situation is pretty remote from yours. Take anything I write as prefaced with "I think" or "From what I know (or have read").

First, the NTA document is not clear. Many are not, tho some are. One difficulty with NTA stuff is that you might find something that almost applies, and then mentally try to apply it to the situation at hand--so it then doesn't look clear. OTOH, sometimes the NTA docs look very clear--when you've found something that directly applies. So bracket that for the time being.

Generally, I'd say you're working here, so you're liable for tax. Even first year english teachers pay taxes their first year (many start in april of the year concerned). However (and this is a big one), there are two general taxes, national and local. National is what you'd expect, local (more commonly: residence tax) is paid to the city (or locality) where you live. IMO, you will need to file a tax return soon (national), and will then have to pay something (or not) depending on 2020 (whether and how much withholding, maybe any dependents, and so on.

Local/residence tax is different. It is paid in arrears, and you almost never file a return for this--it is based on your previous year's national tax return (so there is a one year delay). Also, for local/residence tax, where you pay and who you owe is generally determined by where you live on january 1st of a given year. >>Since you were not in japan on january 1st, 2020, I don't think you will owe residence tax for that year. (This will save you about 10%.) Residence tax is based on your national return, and after you've done your national tax filing, that info (mid-spring) is relayed to the city office where you live, and they calculate/assess the residence tax. This assessment then gets sent to residents in late june or so, and you then start paying--either via deductions from your ongoing salary (if a regular employee here), or via a set of bills mailed to you (installments), which you'd need to pay at a bank. The thing to remember is that this tax is paid in arrears--when you pay these bills, they're for the previous year's taxes.

Back to national taxes. Again, tho you're working remotely, you've been doing that work while located in japan, so you'll need to file and pay. Filing is generally easy here (certainly much easier than in the US!), and locals can now even do it using a phone. But while the tax office is typically quite helpful here (and they're not out to screw you), language may be a problem--in my experience english speakers are generally unavailable, or hard to get to. The tax office can also be pretty busy during tax filing time (take a number and sit and wait). You might consider using a local tax preparer--or course one who is familiar with situations such as yours. The preparer would do your tax return and submit it for you.

Okay, that's my attempt at this--it's still early and time for some more coffee!

Last, another good source of info on this would be this reddit sub: https://www.reddit.com/r/japanlife/ There are a couple of people there that might offer excellent tax info. But the moderators there can sometimes flag a new user's posts (not enough 'karma', so a post might be deleted as spam). If you have used reddit some, it should be okay, but if you're starting a new account, it might take a post or few, or maybe message the moderators, who will then let your post go thru.

captainspoke - thank you for your reply. This helped a lot.

I initially considered a local tax preparer, but since I only worked part-time and only have my domicile since June, I'm not sure if its worth it this time.  Based on a brief research this will cost me at least 100'000 yen.
But if anyone has any recommendations in the Tokyo area, I'm happy to hear.

I called the city office yesterday, and they offered me a free consultation next week. It's in Japanese, but I hope this will answer some of my questions. Otherwise, I might try reddit.

On another note, does anyone know if I have to attach my (foreign) wage statement when filing taxes? And is it a problem if this is in another language and currency?

Shirudo wrote: ↑Wed Jan 13, 2021 9:29 am ...
On another note, does anyone know if I have to attach my (foreign) wage statement when filing taxes? And is it a problem if this is in another language and currency?

My guess here is that instead of overall wages/income, you'll probably need to have a simple spreadsheet for the year. Assuming you get paid monthly, there would be 12 rows, one for each payday (start with columns for pay date, and amount). Then add two more columns--one for the TTM rate for that date (it will vary thru the year), and the next for your pay equivalent in yen (your monthly salary payment times the TTM rate for that date). That would then be totaled at the bottom. You may need another column for foreign taxes paid, if you're paying any on that income, which can be used as an offset against your taxes here.

That would be very similar to what I do for foreign interest and dividend payments. Use the website below for finding the TTM rates. If a rate is not available for a given day (sunday or holiday), use the next available previous date. (In some cases (golden week) you might have to go back 2-3 days.)

http://www.murc-kawasesouba.jp/fx/past_3month.php

I read the same document you did Shirudo, and was similarly confused. I decided that, as I was planning to stay in Japan long-term, I might as well get started on declaring for tax, a decision somewhat eased by having arrived late in the year and not having earned much.

As regards a tax preparer, your situation is new to you, but not particularly complex. If your Japanese spouse is around I suspect you can handle it between you and save the cash. As the Captain suggested, a spreadsheet of your income and conversion to yen would be good, or even the same written in a notebook. The tax return (kakutei shinkoku) will not, in my experience, require that detail, only the amounts of income and expenses, but it would be necessary if they enquire more fully into your circumstances.

I'm ten years into doing my own tax returns and am still learning more about it every year. Company full time employees don't need to do a tax return but the self-employed do. Your situation sounds complicated so this info is if you do need to do a tax return. And the usual caveats - as far as I understand it!

Once you get going on doing your tax returns in Japan, it's definitely worth doing the magical "blue form". I didn't start doing this until I was about 7 years into my stay in Japan and I regret not doing it from the start.

There are basically three ways to do your tax return - the white form, the blue form with single-entry bookkeeping and the blue form with double entry bookkeeping.

The white form is the most basic and is the default. You just list your income, a total of (income - expenses), your social insurance deductions (Japan pension, health insurance, etc) and that's pretty much it.

On the blue form, you give more details, specifically a breakdown of income by month and a breakdown of your expenses. If you do it single-entry style, you will get an extra 100,000 yen deduction. If you do double-entry, you will get an extra 650,000 yen deduction.

If your situation is relatively simple, i.e. just income and some basic expenses, it isn't much work at all to get the extra 650,000 yen deduction and it definitely makes a difference. Double entry bookkeeping sounds scary but if your situation is simple, it's well easy!

Note, you can't do the blue form straight off the bat. You need to apply to do it. If you apply now, you can do the blue from from next year. The application form is on this page:
https://www.nta.go.jp/english/taxes/ind ... /12010.htm

So basically, your taxable income will be (total income - expenses - 650,000 - social insurance contributions - a few other deductibles you can claim - 480,000 (which is a deduction for everyone)).

Note though that the (total income - expenses) amount before any of the deductions can be an important number. If this number is below about 4 million, it may be more difficult to get a mortgage. If this number is below 3 million, it may be more difficult to get Permanent Residency. So be careful how you do your tax efficiency.

Also, if you do end up doing your own tax return, get a website log-in and password from the tax office. Once you have that, you can do your taxes online without having to go to the office to do it. Some people may tell you that you need a card reader to do your taxes online - ignore them! Just a log-in and password is all you need.

Sorry to spew a lot of info at you. Hope there's something in there that's useful.

Hi,

I'm just preparing my fourth tax return and will be piggybacking off the info that more experienced posters have posted. Thanks, Gareth, for the summary of options of forms (white/blue), the deduction implications, and the physical methods of filing.

I suspect the NTA info about 1+ yr of jyusho might be clumsily worded/translated. I think it refers to having a residency status of 1+yr, and then you're taxed on work conducted in Japan (including remote work that is paid by foreign companies) from day one of your residency here. Certainly, that's how I was advised. I gained residency in Japan in 2017 and worked remotely (freelance) for UK companies, and filed my 2017 taxes in Feb 2018.

There might be double tax implications; your tax residency and obligations for your previous country of residence might not have ended with your international move, and your payer(s) abroad may withhold foreign income tax. Double tax treaties exist to eliminate/minimise the effects of double taxation.

I've always rocked up in person to the tax office prior to now as I currently live 250m from it. I've always found the staff very helpful. If you prepare all your evidence and summaries but aren't sure where to input things on the forms, they're great at steering you in the right direction, and filing it on the spot. As others say, don't expect English speakers. But I muddled through. White form so far; aspire to graduate to blue next year if I need to file.

On another note, does anyone know if I have to attach my (foreign) wage statement when filing taxes? And is it a problem if this is in another language and currency?

I always tabulated my data bilingually (didn't take too long) and had my English-language evidence to hand (invoices, statements). This has never been an issue. Copies of the invoices and statements were not collected as part of my filing.

I second captainspoke who said use TTM data from the following source, as this is what I was advised by the tax office:
http://www.murc-kawasesouba.jp/fx/past_3month.php

Sorry for being late here. I just wanted to thank you all again for all the useful help and resources!

I created a simple spreadsheet as suggested by captainspoke and was able to get some help at a place in Shibuya. I'm glad to be done with it for now. But after all, it was still a pretty nerve-wracking situation, and I might consider a tax accountant for the future