Moving Large Sums from Canada to Japan

[Yatsushiro]

Hello everyone!

My (Japanese) wife and I are currently planning to retire in Japan (from Canada) in June (approximately). We have found a home remotely and we are going to try to purchase and close it remotely. We've made an offer but the seller does not want to wait several months to finalize the deal. This isn't ideal, but I understand that it can be done.

What I need to know is what is the best way to move a lot of money to Japan without falling in a tax trap.

My wife has an account in Japan and we both have Wise accounts. I have used my Wise account recently to send ~50,0000 yen twice. I am glad I stopped there because apparently there is a 100,000 yen limit before gift tax kicks in.

This is messy stuff. It is our money and we have already paid (way too much) tax on it. We should be able to transfer it without issue and I am guessing we can if we do it the right way. Perhaps the best way is to do a direct wire from our Canadian bank to the seller when the deal gets done? But we are moving there, so it is still critical for us to know how to move some quite large sums of (already taxed) money to Japan.

A related question. Most of our money is currently tied up in RRSP accounts, and in TFSA accounts which we regrettably locked in to non-redeemable GICs until August. We still have most of the cash to buy the house, but will need to borrow about 3,000,000 yen from my mother-in-law for a short time. She can take the cash out easily and we can add it to the pile and pay for the house. When we return the cash, how does she avoid gift tax?

Thanks in advance for any help offered!

[RetireJapan]

The good news is that you seem to be somewhat misinformed on tax. It is probably much better than you are thinking.

Are you and your wife resident in Japan?

[TokyoWart]

I don't think this is a gift tax issue (which in any case doesn't apply until 1,100,000 yen in gifts are received in a single tax year). When you send your own money to yourself that is not a gift and both spouses can contribute to the purchase of a house.

[captainspoke]

...We still have most of the cash to buy the house, but will need to borrow about 3,000,000 yen from my mother-in-law for a short time. She can take the cash out easily and we can add it to the pile and pay for the house. When we return the cash, how does she avoid gift tax? ...

Well, ¥3m from you MIL, and then ¥3m back to her--it won't be a gift. Also, it seems like it will happen within the same tax year, so kind of doubly advantageous (before any chance of it being questioned, you'll pay it back, so it's only a very short term loan to facilitate the purchase).

*

Not sure about canada, and which of the largest banks you might have access to do the deal with, but from the states to japan, or japan to the states, and for property and house-level amounts of money, you should explore using a wire transfer instead of Wise. And, know that while I have not used Wise, some of my family members have, and it is certainly a smooth and easy user experience, besides being quick and avoiding some of the issues that might arise with a wire transfer. But above about ¥500,000, perhaps a little more, a wire transfer and a local multi-currency account here for good f/x rates, may be better than Wise. (And, not sure about canada/japan, but Wise has some kind of ¥1m limit on balances and transfers, while a wire transfer does not.)

[Beaglehound]

I agree bank transfer for large amounts is best. Moving money in itself is not a taxable event but if you are resident in Japan when you, for example, liquidate assets in Canada, or receive any interest on the cash before sending it, then those gains /income would become taxable here.

I was in a similar situation to you a few years back and checked with the tax office whether they cared whose account the cash was sent from and to. They said no, that gift tax would not apply in that situation, but it is a grey area and you may wish to keep you and your wife's cash separate going forward for clarity.

[Yatsushiro2]

Hi everyone. Thanks for the advice so far. I had to create this new account because I changed my email address on my old account (Yatsushiro) and the account got locked. No matter what email address I use, I get no emails from this forum, so I am a bit confused. For example, I have never received any emails about my account being activated. I just have to wait and keep trying my login until it works.

Anyway, as I said, thanks to all who have offered advice.

@RetireJapan, we are still living in Canada, but plan to move to Japan permanently in June.

So it seems like I am overthinking this too much. I guess the constant warnings (in forum posts here) about avoiding tax traps and seeking professional help has me a bit anxious.

So we can just go ahead and transfer money to my wife's account in Japan (from my wife's accounts here) and there should be no problem?

[Yatsushiro2]

I don't think this is a gift tax issue (which in any case doesn't apply until 1,100,000 yen in gifts are received in a single tax year). When you send your own money to yourself that is not a gift and both spouses can contribute to the purchase of a house.

I realize now that I made a mistake in my original post. I have done 2 transfers of 500,000 yen (not 50,000 yen as I stated), so I am just under the limit.

[Yatsushiro2]

I agree bank transfer for large amounts is best. Moving money in itself is not a taxable event but if you are resident in Japan when you, for example, liquidate assets in Canada, or receive any interest on the cash before sending it, then those gains /income would become taxable here.

I was in a similar situation to you a few years back and checked with the tax office whether they cared whose account the cash was sent from and to. They said no, that gift tax would not apply in that situation, but it is a grey area and you may wish to keep you and your wife's cash separate going forward for clarity.

All great info. Thank you!

Regarding some of my assets in Canada, I have another question. In Canada we have what is called an RRSP, which is a tax-deferred retirement savings account. When we contribute to it, we get a tax return. All gains are tax free. Later in life, when we start to withdraw an income, we pay income tax on whatever we draw. We do not pay capital gains tax on the gains within the account, because it would not be fair to be taxed on the gains and then be taxed again on the income withdrawals. That would be a double-tax.

How does this work in Japan? It makes sense to me that Japan will tax me on any income I draw from the RRSP, but it would not be fair for them to tax me on the capital gains. To be clear. If they tax me on the gains, and then tax me again when I withdraw the gains as income, that's a double-tax.

[LivinginJapan]

Hello,

Thanks for your post. Unfortunately, I don’t have any answers to your questions.

However, I’m keenly interested in the taxation process in Canada and Japan, as you mentioned you paid a great deal.

If it’s not too much trouble, could you share some info about the process and rough percentages?

Many, many thanks in advance, particularly for your time.

[Yatsushiro2]

Hello,

Thanks for your post. Unfortunately, I don’t have any answers to your questions.

However, I’m keenly interested in the taxation process in Canada and Japan, as you mentioned you paid a great deal.

If it’s not too much trouble, could you share some info about the process and rough percentages?

Many, many thanks in advance, particularly for your time.

Hi,

I actually don't know anything about taxation in Japan, as I am only in the planning stages of moving there. Regarding Canada - if you make a decent income they take almost half your money. That's all I can really share without getting into personal details.