Income or saving?

[Beaglehound]

My understanding of the rules is that this would not be categorised as income since it was not earned in the same year that you sent it. However if for example you sent that money over in early 2020 and received overseas income later in 2020, tax would be due on the 2020 amount, even though you didn’t actually send that particular money.

[Beaglehound]

Yes, this is the point. In the example you give, my understanding of the rule is that the amount sent is deemed to include any income gained in the year the money is sent.

Having said that, I sent some money in 2018 (also under five years residency), from an overseas savings account, assuming that because I sent it before any interest had been paid, I didn’t need to declare it. I then found out after filing my tax return that I should have declared the 2018 interest. I rang the local tax office to confess but they didn’t want to know, saying because I was under five years’ residency it was OK not to declare. I didn’t trust that so rang the national tax helpline to clarify. They said the same thing. So it seems they either don’t know or don’t enforce the written rule sometimes...

[Kanto]

Yes that can be tricky.

For instance if an investment of 100 is redeemed at 120 then I can remit 100 (the principal) and leave the 20 (gain) abroad. So no tax to pay but one could argue that the 100 I remitted is 20 gain plus 80 principal and then need to pay tax on the 20.

Guess just need to keep all relevant documents in case I am asked.

That would very much depend on where home is and whether you already are subject to capital gains tax in that country right? As well as the current status of the tax treaty between Japan and country X.

Sorry if I am off on my understanding here.

[RetireJapan]

Taxes were 7.5% so below what it would have been in Japan but since there is a tax treaty I guess it is considered as non taxable if I move the net amount to Japan even if taxes in Japan would have been higher.

My understanding of this is that paying [some] taxes abroad does not mean you are free from [all] taxes here in Japan. In the example above if you paid 7.5% abroad and owed 20% in Japan, they would deduct the tax paid abroad and then charge you 12.5% here...

[RetireJapan]

Unless the treaty says exactly that (and none of the ones I have read do), then yes.

If there is no treaty you just pay both taxes

[captainspoke]

Yes that can be tricky.

For instance if an investment of 100 is redeemed at 120 then I can remit 100 (the principal) and leave the 20 (gain) abroad. ...

Those games are not allowed (and pretty much everyone approaching this has had that same idea).

Beaglehound is correct that "the amount sent is deemed to include any income gained in the year the money is sent."

If you remit any of it, you are deemed to have remitted the income. And tho I'm not sure, I think that the entire amount then needs to be declared so that you can be taxed on it.

In your example you invest 100, gain 20 for 120. I think if you remit 5 of that you then need to declare the entire gain (20), whether or not the other 15 is remitted to Japan or not.

**

Also, retirejapan is correct--tax treaties prevent double taxation, they don't grant you a free ride.

[rasselbiluga]

Yes that can be tricky.

For instance if an investment of 100 is redeemed at 120 then I can remit 100 (the principal) and leave the 20 (gain) abroad. ...

Those games are not allowed (and pretty much everyone approaching this has had that same idea).

Beaglehound is correct that "the amount sent is deemed to include any income gained in the year the money is sent."

If you remit any of it, you are deemed to have remitted the income. And tho I'm not sure, I think that the entire amount then needs to be declared so that you can be taxed on it.

In your example you invest 100, gain 20 for 120. I think if you remit 5 of that you then need to declare the entire gain (20), whether or not the other 15 is remitted to Japan or not.

**

Also, retirejapan is correct--tax treaties prevent double taxation, they don't grant you a free ride.

I'm in the same situation as OP: less than 5 years in Japan, and want to remit part of a foreign interest-bearing saving account to Japan. Are the rules you mention written down in English somewhere, or only in Japanese? In the English tax guide it says that "only the portion deemed remitted to Japan is taxable.", without explaining the details.

[Beaglehound]

I never found an official blow by blow account of how it works, but as I understand it, ‘the portion deemed remitted to Japan’ will include any foreign income you have in the year the remittance is made, up to the total of the remittance. And foreign income includes interest from your overseas bank account.

It’s as clear as mud and, in fact, as I say in a previous post, I didn’t understand this while making a remittance a couple of years back. And the tax office didn’t understand either when I found out I should have declared, and subsequently tried to explain and pay what was due.

One way to reduce the liability would be to send in early January so that at least the money you send will not have earned any interest that year.

[rasselbiluga]

Remitting in early January is an excellent idea. That would actually avoid any taxes.