RetireJapan

Question:

A friend told me it is possible to purchase a car here in Japan at a dealership via wiring money from their American bank account directly to the car dealership. In fact, the car they were driving was bought that way...the bank from their company wired money from the states directly to the car dealer here and BAM....brand new Honda.

Is this a thing? Anyone ever do this? We are going to buy a car soon and having headaches about how to wire 5millon+ yen over here without getting all sorts of flags pop up.

So if the above scenario is possible, that would make things much easier and quicker.

Thoughts? Thanks!

Yes, of course it’s possible. I’ve bought cars in Japan using an international wire as well as paid a contractor for a major home renovations in amounts well of 5 million yen. As long as the recipients account can accept international wires, it is a simple as sending any other international wire.

I think you will definitely be asked about the source of such a large international transfer, and it will probably be reported to the NTA. Whether that bothers you or not depends on whether you've been paying the proper taxes on that money here in Japan

It is from a savings account that has been purposed for large purchases. As in, our personal savings account that has grown.

I was told that if we live in Japan for less than 5 years and remit our own savings to Japan there is no taxable event. I assume the same would hold true with this car transaction purchase.

solo7100 wrote: ↑Mon Feb 05, 2024 6:22 am It is from a savings account that has been purposed for large purchases. As in, our personal savings account that has grown.

I was told that if we live in Japan for less than 5 years and remit our own savings to Japan there is no taxable event. I assume the same would hold true with this car transaction purchase.

As always, the devil is in the detail.

If you have been in Japan for less than 5 years in the last 10 years, if you have any overseas income in the tax year, then the National Tax Agency assumes that the money remitted to Japan firstly comes from that income and is taxable in Japan to the extent of the amount remitted or the amount of the income, whichever is smaller. Money is fungible, so you can't tell savings from any other source of funds.

If the savings have grown, and you sell something and remit the funds, then you will be liable for Capital Gains Tax at 20% on the gain on the sale. If you have been receiving Interest, then remitting the funds will expose the Interest to Interest Tax.

If you have no overseas income at all, then you can transfer savings free of tax.

As soon as you have been in Japan for more than 5 years in the last 10 years, your global income becomes taxable, whether you remit funds to Japan or not.

If you have any income paid overseas, but for work performed in Japan, then it is Overseas Paid Japan Sourced Income, and taxable in Jpan whether you remit the funds or not, regardless of how long you have been in Japan.

Understood, it makes sense as I have also heard and went to our local tax accountant/office about these matters. The tax on overseas income within 5 years that is remitted to Japan makes total sense. What doesn't is that the NTA assumes. I think that's where I'm getting hung up and hence the question here. Thank you all for your responses so far.

Just to understand/clarify, the monies we would bring over for this purchase have come from various sources over the years - monthly savings, part of sale of a house (last year), family members giving Christmas gifts or birthday monies. Basically, savings that you'd stick under your bed with some money from here, there, etc. Then, "hey...I want to use that savings to buy a car."

So it's a chunk of money that is NOT from an employment income as the person is retired (i.e. they get pension which is already taxed by the time it gets to them) and the part of the money that has been topped up from the sale of the house came in last year in October. Other parts of the money, as I said, are accumulated gifts and presents.

By all accounts that I see...if we bring this money over to purchase a car I cannot fathom why the NTA would lop off 20% of money...that is ours, that has already gone through the American tax system, that is portioned from various sources of money over the years, etc. Not invested, no capital gains that I know of (at least negligible considering the savings account interest rate which I don't know).

I get the feeling that we would have to somehow convince the NTA that, "Yes, this is our money. No, it is not from a job, yes, it has been taxed, no it did not come this year, etc." since they would assume a lot of things.

Some things I've read here and reddit and other places make it seem so simple ("Yeap, I just transferred my money over and told them it was my savings.") while other times I hear a conglomeration of different experiences and tax issues and hearing others that had to go down to the tax office for questioning, calls from banks.

We just do not want to get into a sticky situation, do the right thing, and make sure all governments and people are happy! It's just a head scratcher when simply trying to bring our own money to Japan to buy a car. Like, literally how hard can that be? I have asked about bringing money over in this forum a number of times and am totally grateful for the guidance. It's just sometimes I get confused by the various responses and experiences.

Thank you!

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am Understood, it makes sense as I have also heard and went to our local tax accountant/office about these matters. The tax on overseas income within 5 years that is remitted to Japan makes total sense. What doesn't is that the NTA assumes.

It's quite simple. If you have no overseas income and bring savings over there is no tax to pay.

If you have overseas income and you have already paid taxes on it in Japan there is no tax to pay.

If you have overseas income that has not been taxed by Japan (because you haven't been here for five years yet) and bring savings over, the money you bring over is assumed to be the income, and is taxed.

You can't be taxed more than the amount you would have owed on the overseas income, so if you have $100 in income abroad and bring over $50,000 you would only be taxed on the first $100.

At least that is my understanding of how it works. Anyone else?

RetireJapan wrote: ↑Tue Feb 06, 2024 3:02 am

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am Understood, it makes sense as I have also heard and went to our local tax accountant/office about these matters. The tax on overseas income within 5 years that is remitted to Japan makes total sense. What doesn't is that the NTA assumes.

It's quite simple. If you have no overseas income and bring savings over there is no tax to pay.

If you have overseas income and you have already paid taxes on it in Japan there is no tax to pay.

If you have overseas income that has not been taxed by Japan (because you haven't been here for five years yet) and bring savings over, the money you bring over is assumed to be the income, and is taxed.

You can't be taxed more than the amount you would have owed on the overseas income, so if you have $100 in income abroad and bring over $50,000 you would only be taxed on the first $100.

At least that is my understanding of how it works. Anyone else?

That matches my understanding. In the OP's case it would appear that they have overseas pension income and (perhaps) income from interest on a savings account. And that they have been here under 5 years. So if, for example, they send the equivalent of 5m yen to Japan and there is 1million yen of income in the same calendar year in which the money is sent, that 1 million becomes taxable here.
As I see it, the NTA makes only one assumption in the OP's position: that any money sent to Japan includes any overseas income in that year. You can't, for example, argue that the particular money you sent is from under the mattress and not from pension or savings income.

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am Understood, it makes sense as I have also heard and went to our local tax accountant/office about these matters. The tax on overseas income within 5 years that is remitted to Japan makes total sense. What doesn't is that the NTA assumes. I think that's where I'm getting hung up and hence the question here. Thank you all for your responses so far.

The remitted funds are assumed to come first from any forms of income in te tax year;
There are many forms of income. See Pages 5-12 Here

https://www.nta.go.jp/taxes/shiraberu/s ... df/050.pdf

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am Just to understand/clarify, the monies we would bring over for this purchase have come from various sources over the years - monthly savings, part of sale of a house (last year), family members giving Christmas gifts or birthday monies. Basically, savings that you'd stick under your bed with some money from here, there, etc. Then, "hey...I want to use that savings to buy a car."

A taxable event in the tax year will be taxable if you remit funds to Japan in the same tax year.

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am So it's a chunk of money that is NOT from an employment income as the person is retired (i.e. they get pension which is already taxed by the time it gets to them) and the part of the money that has been topped up from the sale of the house came in last year in October. Other parts of the money, as I said, are accumulated gifts and presents.
/quote]

As you are resident in Japan, Japan has first call on your taxes.

Under the US Japan Tax Treaty
https://www.mof.go.jp/tax_policy/summar ... _ST_en.pdf

Article 17 refers to Pensions (first 5 years... If you remit funds to Japan in any form; wire transfers, WISE transfers, ATM withdrawals, purchase car, etc..)

"ARTICLE 17
1. Subject to the provisions of paragraph 2 of Article 18, pensions and other similar remuneration, including social security payments, beneficially owned by a resident of a Contracting State shall be taxable only in that Contracting State.
2. Annuities derived and beneficially owned by an individual who is a resident of a Contracting State shall be taxable only in that Contracting State. The term “annuities” as used in this paragraph means a stated sum paid periodically at stated times during the life of the individual, or during a specified or ascertainable period of time, under an obligation to make the payments in return for adequate and full consideration (other than services rendered)."

A taxable event in the tax year will be taxable if you remit funds to Japan in the same tax year. (first 5 years... If you remit funds to Japan in any form; wire transfers, WISE transfers, ATM withdrawals, purchase car, etc..)

If taxes are due in the US, you can claim the Foreign Tax Credit in te US for taxes paid in Japan.

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am By all accounts that I see...if we bring this money over to purchase a car I cannot fathom why the NTA would lop off 20% of money...that is ours, that has already gone through the American tax system, that is portioned from various sources of money over the years, etc. Not invested, no capital gains that I know of (at least negligible considering the savings account interest rate which I don't know).

It depends on the type of income being taxed. Japan doesn't care that the income may have been taxed in the US... The NTA wil assume it is Pension Income taxable at your Marginal Tax Rate...

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am I get the feeling that we would have to somehow convince the NTA that, "Yes, this is our money. No, it is not from a job, yes, it has been taxed, no it did not come this year, etc." since they would assume a lot of things.

You should consult a Qualified Professional on your particular situation.

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am Some things I've read here and reddit and other places make it seem so simple ("Yeap, I just transferred my money over and told them it was my savings.") while other times I hear a conglomeration of different experiences and tax issues and hearing others that had to go down to the tax office for questioning, calls from banks.

The devil is in the detail.

If they see a big transfer, the bank will contact you to find out where it came from.

Your tax status and amount of time spent in Japan will affect the potential tax exposure.

solo7100 wrote: ↑Tue Feb 06, 2024 1:25 am We just do not want to get into a sticky situation, do the right thing, and make sure all governments and people are happy! It's just a head scratcher when simply trying to bring our own money to Japan to buy a car. Like, literally how hard can that be? I have asked about bringing money over in this forum a number of times and am totally grateful for the guidance. It's just sometimes I get confused by the various responses and experiences.

Thank you!

You should consult a Qualified Professional on your particular situation, so that you don't get caught by an unforeseen tax trap.

Hi Ben and others, thanks so much.

Understood all that has been posted so far, but now I'm deeper in the rabbit hole.

Ok, hopefully an easy example from my muddled brain: (as you will see I am still learning/not privy to all of this tax stuff...hence the appreciation of support here!)

1. I make $10,000 gross in USA from pension income (private, not government).
2. I get taxed at 15%, so in my bank account I see $8500.
3. We sell our house/car/whatever and get $50,000 for it. After taxes, capital gains tax, whatever else are all taken out, we only get $40,000. So in my bank account I see $8500 + $40,000 = $48,500.
4. That all happens in 2023.
5. Now it is 2024 and I want to buy a car for $48,500USD. I go to the dealer, choose the car, and wire transfer $48,500 USD directly to the dealer.

The NTA will call me and ask where that money came from (I've heard that before, Tkydon confirmed it).

If so, I tell them the above. But then, from what I understand, they won't believe me and say it is income from 2024? Then 20% is gone? Do they take it from the dealer? Do they question the car dealer?

As Beaglehound said, "...that any money sent to Japan includes any overseas income in that year. You can't, for example, argue that the particular money you sent is from under the mattress and not from pension or savings income."

So that's another question: would bringing over or paying with our savings be "income" in the NTA eyes? With the above example, that $48,500 happened in 2023. If we bring it over, for example, this month...they will assume we made $48,500 in one month as income and brought it over/paid with it?

Sorry to keep dragging this, but like Tkydon said I think we'll have to consult a qualified tax person again. We did last year and he said as long as you bring the money in the following year (NOT the same tax year) there will be no problem. The tax office won't bother you.

But from what I hear here, if the NTA sees a huge amount come over or pay for a car...they WILL bother us and ask where the money came from, assume it's income, and we can't argue/show/prove that the money was in fact from last year from last year's activities.

(As a side note: how in the world do people bring big money over here then? I've been doing WISE for about 7 years, but small amounts. Never a problem. For example, I recently transferred $2400 from my US account to my Japanese account. No NTA person contacted me. I never got a call from the bank. Should I have been reporting this on my Japanese tax? That's 7 years of transfers from like $30 to $3000. No way I can go back and calculate all of that. The money I brought over has already been taxed in America...so I am bringing after tax money.)