Family loan (USD) repayment. Taxes?

[cocacola]

Hello,

I had loaned a family-member a sum of money about 5-years ago and they are preparing to return the sum back to me. I am wondering if there may be tax implications on this. I will describe the situation below.

• About 5-years ago, I loaned $10,000 USD to a family member. This was converted from my Canadian bank (CAD) to USD. I don't remember the exchange rate at the time.
• They are preparing to pay back the loan to me. I would like them to transfer the repayment in USD to my Japanese bank.

Would I be facing some sort of Japan-side tax on the USD amount? This was a family loan, so there was no additional interest involved in the repayment. Of course, I would like to avoid paying any tax (or as little as possible), within legal bounds.

Thoughts/advice?

Thank-you!

[beanhead]

If there was no official agreement and no interest, Japan may see this as a gift to you and apply gift tax.

[captainspoke]

Have them break it in two--half this year, and the other half in Jan 2025. No worries about gift tax.

Or a more now ($6800), the rest later. Still under the ¥1.1m limit.

[cocacola]

Good points and advice from both @beanhead and @captainspoke.

Yes, there was no agreement/contract... kind of wish I had made one... will do next time.

Since the transfer was done from my Canadian bank account to their US bank account, could I avoid complications by having them transfer the funds back to my Canadian account? And from there, I transfer the funds to my Japan bank account?

[Deep Blue]

I would not try to split up the transactions into multiple chunks. This could raise all kinds of red flags for money laundering etc.

Transferring the money to your Canadian bank account first is a good idea though. Then you can bring it to Japan and if asked simply explain the truth, it is a transfer of your savings here.

[cocacola]

I would not try to split up the transactions into multiple chunks. This could raise all kinds of red flags for money laundering etc.

Transferring the money to your Canadian bank account first is a good idea though. Then you can bring it to Japan and if asked simply explain the truth, it is a transfer of your savings here.

I think I will go with the transfer to my Canadian bank account method. Will double-check with my Japan-side accountant first.

Thanks for the sounding board, everyone.