RetireJapan

My wife (Japanese) and I (Australian) are in the process of selling up in Australia and retiring back to Japan next year. We have some questions that we hope somebody on Retire Japan can help with.

1. One of the main issues that we are worrying about is caused by the fact that most of our assets in Australia are held in joint names. My wife has retained her bank account in Japan. But, we are concerned about Japanese gift tax　.
I am thinking that we split our jointly held assets 50% each while in Australia, and then set up two separate individual accounts and transfer the amount into each. My wife could then transfer her 50% to her Japanese account without worrying about incurring a tax liability. I would then wait until I have moved to Japan and set up my own bank account before transferring my 50%.
2. Also, we are hoping to purchase land and build a house soon. We would use the same approach, by doing separate transfers to the estate agent. I was wondering if people thought that this is would be successful or not. We are happy to pay tax, but if we get this wrong it would be pretty costly. Also, given that we have both worked to save our pennies jointly, it seems a little harsh to treat part of it as a gift.

3. One more request for help. It’s almost thirty years since we lived in Japan. Since then we have always shared our finances. But, in Japan, we can’t do this. Are there things we should know when running a household. Should you pay for everything 50% each, or are we worrying too much??

Any suggestions would be greatly appreciated.

I understand your concerns but you are probably worrying too much. Having said that, your plan outlined in #1 and #2 sounds pretty foolproof if you want to be ultra safe.

We were in a similar position a few years back and knew nothing about gift tax so sent the proceeds of the sale of our jointly-owned UK house to my Japanese account, from a UK account in my name. Then used it to pay for a house in our joint names here. I then found about gift tax so asked the local tax office if this was OK. They didn't have an issue. Didn't ask for proof that the UK house was jointly-owned either (though best to make sure you have it). I got the impression that there is a fair bit of latitude in the interpretation of gift tax rules, especially in relation to married couples, and that they will take a common sense approach and are not trying to catch people out. Which suggests that you don't need to worry about #3 either. Nobody sets up their utilities, for example, on a 50/50 basis. I have paid for flights with my wife's credit card. Etc.

I think it is less a matter of a common sense approach and more to do with how long the Japanese spouse is out of the country. If they are living overseas long enough, it is entirely possible and legal and swap assets around without incurring gift tax. Thirty years is well over even the revised thresholds. I would stil get some professional advice - the cost is likely to be de minimis and it will give you the chance to put your affairs in order BEFORE you return to Japan and become subject to the fucked up laws here.

Deep Blue wrote: ↑Sat Oct 19, 2024 3:30 pm I think it is less a matter of a common sense approach and more to do with how long the Japanese spouse is out of the country. If they are living overseas long enough, it is entirely possible and legal and swap assets around without incurring gift tax. Thirty years is well over even the revised thresholds. I would stil get some professional advice - the cost is likely to be de minimis and it will give you the chance to put your affairs in order BEFORE you return to Japan and become subject to the fucked up laws here.

Interesting, I hadn't realised time out of the country was relevant and that there were thresholds involved. Could you elaborate?

russturn wrote: ↑Sat Oct 19, 2024 8:37 am My wife (Japanese) and I (Australian) are in the process of selling up in Australia and retiring back to Japan next year. We have some questions that we hope somebody on Retire Japan can help with.

1. One of the main issues that we are worrying about is caused by the fact that most of our assets in Australia are held in joint names. My wife has retained her bank account in Japan. But, we are concerned about Japanese gift tax　.
I am thinking that we split our jointly held assets 50% each while in Australia, and then set up two separate individual accounts and transfer the amount into each. My wife could then transfer her 50% to her Japanese account without worrying about incurring a tax liability. I would then wait until I have moved to Japan and set up my own bank account before transferring my 50%.
2. Also, we are hoping to purchase land and build a house soon. We would use the same approach, by doing separate transfers to the estate agent. I was wondering if people thought that this is would be successful or not. We are happy to pay tax, but if we get this wrong it would be pretty costly. Also, given that we have both worked to save our pennies jointly, it seems a little harsh to treat part of it as a gift.

3. One more request for help. It’s almost thirty years since we lived in Japan. Since then we have always shared our finances. But, in Japan, we can’t do this. Are there things we should know when running a household. Should you pay for everything 50% each, or are we worrying too much??

Any suggestions would be greatly appreciated.

Japan has no concept of Joint Assets.

There are no Joint Accounts,

You can have an Account in one name with family cards, but the assets 'belong' to the account holder.

Better to separate your assets before you come to Japan.

Properties can be held in joint names, but you have to consider the actual contributions of the parties. Otherwise, the transfer of assets will be considered for Gift Tax, unless you use the Spouse Primary Residence Purchase Tax Allowance. So long as you contribute in line with your % of ownership, you have no problem.

An account in one name with Family Card is fine.
Cash transfers for support of living expenses are free of Gift Tax.

russturn wrote: ↑Sat Oct 19, 2024 8:37 am... Are there things we should know when running a household. Should you pay for everything 50% each, or are we worrying too much??
...

That would be worrying too much.

Paying expenses does not constitute a gift. Utility bills, groceries, dining out together, movies/concerts, reasonable travel, even a car and its expenses are all okay. The stuff of normal life.

On the other hand, I have read that giving someone a credit card in your name for shopping sprees can equal a gift, perhaps also a luxury car vs something more reasonable.

Beaglehound wrote: ↑Sat Oct 19, 2024 3:53 pm

Deep Blue wrote: ↑Sat Oct 19, 2024 3:30 pm I think it is less a matter of a common sense approach and more to do with how long the Japanese spouse is out of the country. If they are living overseas long enough, it is entirely possible and legal and swap assets around without incurring gift tax. Thirty years is well over even the revised thresholds. I would stil get some professional advice - the cost is likely to be de minimis and it will give you the chance to put your affairs in order BEFORE you return to Japan and become subject to the fucked up laws here.

Interesting, I hadn't realised time out of the country was relevant and that there were thresholds involved. Could you elaborate?

I just did a quick ChatGPT as I don’t know the up to date situation. As mentioned in my original post I’d recommend getting professional advice to make sure you are fully taking advantage of being outside of Japan and it’s ridiculous laws before moving back here.

We were fortunate enough to be outside of Japan for more than five years before 2017 so managed to split our assets quite well before we moved back here, but it was a bit of a rush to get it all done before the qualification period extended.

To avoid paying gift tax in Japan, Japanese citizens must reside outside the country for more than 10 years. This rule applies to Japanese residents’ worldwide assets, so if a person leaves Japan and remains abroad for 10 years, any gifts received after that period would not be subject to Japanese gift tax. This period was extended from 5 years to 10 years as part of the 2017 tax reform. For foreign nationals, the period remains at 5 years after leaving Japan before gifts are exempt from Japanese gift tax

These are the sources ChatGPT cited

https://heritagelaw.jp/wp-content/theme ... reform.pdf

https://kpmg.com/jp/en/home/insights/20 ... 10726.html

Also, if you have everything sorted and distributed (maybe liquidated) before coming to Japan, say by end Dec 2024, and you relocate in 2025, then there will be no confusion about other taxes, such as Capital Gains Taxes or Income Taxes on transfers, as the money will be 'From Savings' from before you relocated.

This is last year's Tax Doc. 2024 version will be available shortly. You would want to read the first 12 pages or so about Tax Status and definition of 'Foreign Sourced Income'. Not all income outside Japan is classified as 'Foreign Sourced Income'.

English
https://www.nta.go.jp/taxes/shiraberu/s ... df/050.pdf
Japanese Translation (yes it's translated from English to Japanese )
https://www.nta.go.jp/taxes/shiraberu/s ... df/060.pdf

When you first arrive, you will be treated as a Non-Resident for Tax Purposes until you find or purchase a residence, or until you 1 year anniversary.
Only Japan Sourced Income will be taxable.

You will then be treated as a Resident - Non-Permanent Resident for Tax Purposes until you have been in Japan for more than 5 years in the last 10 years. Foreign Sourced Income will only be taxed if funds are remitted to Japan. Remitted Funds are presumed to be from Income and Taxable.

After you have been in Japan for more than 5 years in the last 10 years, you will then be treated as a Resident - Other than Non-Permanent Resident (i.e. Permanent Resident) for Tax Purposes. Foreign Sourced Income will be taxable in Japan, whether funds are remitted to Japan or not.

Transfer of money is not, in itself, a Taxable Event. The income from which the funds are generated is the taxable event.

You would want to consult a Zeirishi to make sure you do not fall into any tax traps in your relocation.

There are certain types of Foreign Sourced Income that are taxable only in one or other of the countries and other types that are taxable in both countries.
You should be familiar with the Japan Australia Tax Treaty -
THE CONVENTION BETWEEN JAPAN AND AUSTRALIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
English
https://www.mof.go.jp/tax_policy/summar ... lia_EN.pdf
Japanese
https://www.mof.go.jp/tax_policy/summar ... lia_JP.pdf

Not knowing your details, the interesting articles are probably Article 10, Article 11, Article 17, and Article 18.

There is also a Pension Totalization Agreement in place between Japan and Australia
https://www.nenkin.go.jp/international/ ... index.html

You should also be familiar with the Japan Australia Pension Totalization Treaty -
Notes on Individual Rules under the Japan-Australia Social Security Agreement
https://www.nenkin.go.jp/international/ ... ralia.html
or
https://www.dss.gov.au/about-the-depart ... -questions

Thank you to everybody for your responses. That is a great weight off both our minds. We really appreciate your help.

It is good to know that tax offices in Japan use a “common sense” approach.

We will separate all our assets 50% each before transferring them to Japan.

Transitioning to retirement and then resettling will no doubt cause many problems that we have not anticipated, but we hope to avoid as many as possible. I hope that we don’t ask too m any questions. Our next step is to purchase some land in Japan to build on!

russturn wrote: ↑Tue Oct 22, 2024 11:57 pm I hope that we don’t ask too many questions.

No such thing