RetireJapan

Hello everyone! I've been lurking for a while and I have to say, this place is awesome!

I'm planning on moving to Japan soon for an unknown amount of time (at least 2 years, maybe more). I have a portfolio with Interactive Brokers LLC which I'm planning on keeping. I'm wondering now what would be wiser: continuing to contribute to IBLLC or to open a NISA with a local broker.

From what I understand you only have to declare foreign assets once you've reached 5 years in Japan, so might it be a good idea to contribute to IBLLC for 5 years and open a NISA after that if I decide to stay? I know NISA is tax sheltered, but I would only have to start reporting capital gains after 5 years in the country and wouldn't be paying tax for gains in my IBLLC account during that time, right?

Am I missing anything here? Any thoughts?

Thanks!

OkLah! wrote: ↑Thu Apr 02, 2020 11:07 am I have same understanding on the 5yrs thing. But if you remit to Japan some of the gains you will have to pay tax even before the 5yrs.

Wouldn't you be declaring your cost basis after the 5 years, and calculating capital gains from then on?

OkLah! wrote: ↑Thu Apr 02, 2020 1:58 pm This i don’t know. Have not reached the 5yrs yet.

But I would think so. Unless you realize gains before the 5yrs and then buy again to reset if transactions costs and liquidity are reasonable.

One thing I am not sure also is if you can count off time spent out of Japan. For instance if you travelled a total of a combined few month does it push the deadline also by this amount to start declaring?

Also there is the exit tax that should kick in this June but that’s another discussion I guess.

I think the time would be measured by the length of your visa and your tax residency. I'd guess that if you establish tax residency elsewhere for a year and come back, it might restart the time? Maybe you'd need to get another Visa then?

OkLah! wrote: ↑Fri Apr 03, 2020 8:56 am The actual rule is that you start declaring worldwide income if you have been in Japan 5yr in the past 10 yr so not easy to reset the clock.

What I don’t know is say you spend 2 month out of Japan every year, does it push back the 5yr thing by 10 month?

Ah, interesting to note.

OkLah! wrote: ↑Fri Apr 03, 2020 8:56 am What I don’t know is say you spend 2 month out of Japan every year, does it push back the 5yr thing by 10 month?

Highly unlikely, as being out of Japan for 2 months in a year does not mean you are no longer a resident. To stop being a resident you would have to fully move out of the country, either by giving up your visa status (and going through the moving out procedure at your ward office, give up your pension and health insurance), or getting a re-entry permit (one you actually apply for at immigration, not one of the ones at the airport).

Either way, I don't think 2 months would be long enough to break residence for tax purposes.

Tony wrote: ↑Sat Apr 04, 2020 9:47 pm Either way, I don't think 2 months would be long enough to break residence for tax purposes.

Per my experience working with tax consultants (but don't quote me on this), any time in/out of the country is counted down to the day. 2 months might not make a huge difference in the long term, but if you've been exactly 5 years in Japan, but in those 5 years you spent e.g. 5 months abroad, then the paperwork will say you have been a total of 4 years and 7 months in Japan, not 5 years yet. After a few years though, that game gets impossible to play as you'd basically have to spend more than half of your time outside of Japan, meaning another country would probably want to talk to you about taxes anyway . So I think it just matters when you're getting close to the 5 years threshold.

Another question: when you become PR for tax purposes (so automatically after 5 years) how does Japan treat the cost basis of your foreign assets? In Canada, foreign assets are consered to have been sold and reacquired at fair market value when you become a resident... anyone know how this works in Japan?

linkthe2nd wrote: ↑Mon Apr 06, 2020 6:28 pm Another question: when you become PR for tax purposes (so automatically after 5 years) how does Japan treat the cost basis of your foreign assets? In Canada, foreign assets are consered to have been sold and reacquired at fair market value when you become a resident... anyone know how this works in Japan?

In all of my interactions with the tax office (and there have been far too many) they prefer to treat the cost basis by going back to the date of purchase and having you calculate the equivalent yen value at that time (using the exchange rate for that date) and so when calculating capital gains subtract that from the yen equivalent sale amount on date of sale. If they can't get that exact sale date information they are willing to go by what your statement shows the foreign currency equivalent value was for the gain and calculate the yen equivalent based on the exchange rate on date of sale. They have never suggested they would allow a re-setting of basis based on value at the time I was considered to become a tax resident in Japan.

TokyoWart wrote: ↑Tue Apr 07, 2020 9:04 am

linkthe2nd wrote: ↑Mon Apr 06, 2020 6:28 pm Another question: when you become PR for tax purposes (so automatically after 5 years) how does Japan treat the cost basis of your foreign assets? In Canada, foreign assets are consered to have been sold and reacquired at fair market value when you become a resident... anyone know how this works in Japan?

In all of my interactions with the tax office (and there have been far too many) they prefer to treat the cost basis by going back to the date of purchase and having you calculate the equivalent yen value at that time (using the exchange rate for that date) and so when calculating capital gains subtract that from the yen equivalent sale amount on date of sale. If they can't get that exact sale date information they are willing to go by what your statement shows the foreign currency equivalent value was for the gain and calculate the yen equivalent based on the exchange rate on date of sale. They have never suggested they would allow a re-setting of basis based on value at the time I was considered to become a tax resident in Japan.

So perhaps it would be worth selling everything about six months before you become permanently resident for tax purposes, then rebuying it to reset the price?

RetireJapan wrote: ↑Tue Apr 07, 2020 9:13 am

TokyoWart wrote: ↑Tue Apr 07, 2020 9:04 am

linkthe2nd wrote: ↑Mon Apr 06, 2020 6:28 pm Another question: when you become PR for tax purposes (so automatically after 5 years) how does Japan treat the cost basis of your foreign assets? In Canada, foreign assets are consered to have been sold and reacquired at fair market value when you become a resident... anyone know how this works in Japan?

In all of my interactions with the tax office (and there have been far too many) they prefer to treat the cost basis by going back to the date of purchase and having you calculate the equivalent yen value at that time (using the exchange rate for that date) and so when calculating capital gains subtract that from the yen equivalent sale amount on date of sale. If they can't get that exact sale date information they are willing to go by what your statement shows the foreign currency equivalent value was for the gain and calculate the yen equivalent based on the exchange rate on date of sale. They have never suggested they would allow a re-setting of basis based on value at the time I was considered to become a tax resident in Japan.

So perhaps it would be worth selling everything about six months before you become permanently resident for tax purposes, then rebuying it to reset the price?

Great to know guys. Very interesting and annoying - I will have to do some thinking! It doesn't seem too bad to sell and re-buy same day if commissions are low anyway, right?

Cheers!