RetireJapan

I'm coming up on the 5 year mark soon, and I see references to a five year rule (which I can't find on the Japanese tax site) about tax residency.

Can someone ELI5 the difference between permanent and non-permanent tax residency? What does it mean for me in practice - is there anything I should do before I hit the 5 year mark?

You will become liable for tax on worldwide income, not just that earned in Japan or remitted to Japan. In practice, if you have no overseas sourced income, nothing should change. If you do, be that from work done overseas, investments, savings interest,rental income, then you should be declaring that in Japan.

This is my basic understanding, there may be nuances that I am unaware of.

But you have to do that anyway after one year, not five.

The rule is described in the income tax guide of the National Tax Agency, section 1-3. Basically, if you stayed in Japan for less than five years during the past ten years, you do not need to pay taxes on foreign-sourced income, unless you redeem it to Japan. After 5 years, you are taxable on worldwide income. See this thread for more discussion. One exception is that you have to pay capital gains tax on listed overseas stocks bought and sold, even before hitting the 5 year mark. See this post and this document.

That income tax guide is basically unreadable - it looks like they put it through Google Translate or something. I've read legal texts that are easier to understand. Is there a Japanese version?

And my original question stands - is there anything I should (or shouldn't) do with assets and/or foreign sourced income before the 5 year mark is up?

As I am in similar shoes as frodesky, I have tried to follow the links and read other posts here but I still have a couple of questions.
As "boring" index investor without dividends only capital gains are relevant for my considerations, so no need to comment on dividends or remittances into Japan as relevant funds and gains shall remain abroad for the time being.

1. Timing:
a) What is the correct starting point for the residency that counts? If on entered Japan on a tourist visa, e.g. 30 Jul xx but the Residence card were only issued 15 Aug xx?
b) Which would be the last day before the 5y clock kicks in: 29 Jul, 14 Aug or even 15 Aug? (Or would it even be 31 Dec of the past year?) Any official source confirming this stance properly?
c) I read the links and posts regarding interruptions as follows, only times where juusho registration were cancelled, time spent abroad, return and re-registration of juusho would not count; whereas absence for holidays abroad while continuously remaining registered wouldn't move out the 5y mark as per b) above. Please confirm or challenge my understanding; the link to that form allowing for multiple periods to be entered didn't convince me otherwise.

2. Taxable event/gains
a) If one sold all securities abroad prior to the 5y mark as per the above, no taxable event and no CG should be taxable (wrt JP); If foreign securities were sold after the 5y mark but before the end of that first year, such event and such CGs were taxable in Japan as now the global regime of permanent tax residence applies. Is my understanding correct or wrong or do I miss an angle?
b) From y2 onwards (following the 5y mark post, thus maybe rather calendar y6), all gains were taxable in Japan anyway (following such wash sale and repurchase as anticipated under a).

(I am fully aware that visa residency status is separate from tax residency, so no need to further elaborate on that).

Telebroker wrote: ↑Tue Jul 20, 2021 3:50 am As I am in similar shoes as frodesky, I have tried to follow the links and read other posts here but I still have a couple of questions.
As "boring" index investor without dividends only capital gains are relevant for my considerations, so no need to comment on dividends or remittances into Japan as relevant funds and gains shall remain abroad for the time being.

...

1. Timing: a) IIRC I included periods within Japan on a tourist visa for my calculation on a form like this. TBH the local tax office were not so sure about it. As the tax burden difference was negligible for me, and the attached passport scans just showed entry/exit dates and not visa status, including was the hassle-free option.
b) 29 Jul for the way I did it
c) that is my understanding too

2. Taxable event/gains
a) Correct. Only will add that if you remit money to Japan in that same tax year, the capital gains from before the 5y mark will become taxable in Japan.
b) Yes

You're thinking is right. Depending on the foreign capital gains tax liability, selling then re-buying before the 5 year mark and re-buying could minimize future tax liabilities to Japan.

Also note as per the post of mine @rasselbiluga linked to, Japanese tax is liable on any index funds you bought after April 1 2017 while you were resident here (i.e. including things before the 5 year mark). It's only funds you bought prior to arriving or before April 1 2017 which benefit from the 5y grace period.