Inquiry letter regarding foreign remittance (海外送金に関するお尋ね)

[bonnie21]

Hi everyone,

I recently received an inquiry letter regarding foreign remittance（海外送金に関するお尋ね）from my local tax office and I’m wondering if anyone else has experience filling it out. A few years ago I sent the money to myself to help buy a house here in Japan. The money came from stock sales back home on which I paid capital gains tax there. All my assets abroad are from before I moved to Japan

I did a free consultation with a tax accountant over the phone, but their best advise was to just go redo the past 5 years of tax returns in Japan to see if I owed any additional capital gains tax beyond what I paid abroad. This would be a very time consuming (and possibly expensive) process, especially as I have never done it before so I’m hoping it won’t come to that.

Obviously I want to end this as quickly and quietly as possible without getting drawn into a full blown audit. But I also don’t want to lie, in case I do get audited. So I thought about just writing that the money was from savings since the money transfer originated from my personal checking account and not directly from the sale of assets. The form itself seems to be written in a away that it assumes someone else is sending you the money which is a likely case for many Japanese people with assets abroad. So I’m thinking of just showing my US bank statements that show the money came from my account. But something tells me they will probably come back with more questions regarding the original source of the funds so it may just be delaying the inevitable.

Any advice would be greatly appreciated.

Cheers

[RetireJapan]

Hi Bonnie

Can't give you advice unfortunately

I have friends who were called in to the tax office to explain large money transfers: they said the money was from savings and that was the end of it.

If you were permanently resident in Japan (lived here for five years) for tax purposes when you sold the shares you will be liable for Japanese taxes on the gain (but can deduct the taxes paid in the US). The Japanese tax office seems to be less punitive than the IRS or IR (UK) with honest mistakes (or first-time mistakes).

If you tell them it was from savings and they believe you that will be the end of it.
If you tell them it was from savings and they don't believe you and discover it was from sales of stocks, they will probably go over you with a fine-tooth comb.
If you tell them it was from sales of stocks they will probably sit down with you and figure out how to do the paperwork.

[Jamo]

Up to now I haven't declared overseas income (relatively small fund distributions) on my Japanese tax return. I was under the impression that I should keep the tax separate (I have to pay the tax in my "home" country anyway, so is there a need to pay it here?). I'm Australian and have lived in Japan for nearly 4 years. Sorry to kinda hijack your thread.

[RetireJapan]

My understanding is that for the first five years you are in Japan you are not permanently resident for tax purposes, so only have to pay taxes on income earned in Japan.

After five years you do become PRfTP and then have to declare all worldwide income, as well as assets over 50m yen abroad.

[bonnie21]

My understanding is the same as RetireJapan, BUT if you bring the money to Japan then it is taxable regardless of being PR or not.

If you ever have a sleepless night, the NTA has kindly provided an English version of pretty much all the tax law information you need as well as instructions on filling out the Japanese forms here:
https://www.nta.go.jp/tetsuzuki/shinkok ... pdf/43.pdf

Page 5 (of the file, not page number) has a chart that explains what is taxable for whom.

[RetireJapan]

Great link, Bonnie, thanks! Hope you find a good solution to your problem

[eyeswideshut]

HI Bonnie,

Not a tax expert (in any jurisdiction) but I don't think that is correct. If you were not a permanent resident of Japan for tax purposes at the time of the sale then you owe no tax on that transaction. I don't think bringing the money to Japan should in any way change that situation unless I am misunderstanding your point. Not even Japan taxes cash savings.

Best

[Jamo]

HI Bonnie,

Not a tax expert (in any jurisdiction) but I don't think that is correct. If you were not a permanent resident of Japan for tax purposes at the time of the sale then you owe no tax on that transaction. I don't think bringing the money to Japan should in any way change that situation unless I am misunderstanding your point. Not even Japan taxes cash savings.

Best

According to the document even non-residents owe tax on transactions, if remitted to Japan. I'm assuming this means remitted in the same year as the transaction?

[bonnie21]

Of course Japan does not tax cash savings, but I believe they do if you sold stocks etc. to get said cash savings and then sent it to yourself in Japan. The document I referenced says "only the portion deemed remitted to Japan is taxable" for non-permanent residents. If this does not apply to the sales of securities, dividends, interest etc. and only applies to earned income, then that's great news for me, but I am not that optimistic.

[bonnie21]

According to the document even non-residents owe tax on transactions, if remitted to Japan. I'm assuming this means remitted in the same year as the transaction?

That's a good question! My initial reaction was "no", but considering that it would require you to amend a previous year's tax return for the purpose of retro actively taxing a previously non-taxable sale, that definitely seems strange.

So that means you could sell Dec 31st, and send Jan 1st the next day assuming instant transactions. Seems a little too easy to get around, but again I'm not sure.