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Tax enquiry

winstonwinston

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I lived in Japan for the last 4 years, self-employed, and filed a tax return (kakutei shinkoku) in each of those years.

On July 15 this year I moved back to the UK, where I am now resident. The money that I earned from Japan tax year runs from Jan 1 to Dec 31, thee UK tax year runs from April 6 to April 5. So:

a) What do I do about the income I earned from Jan 1, 2014 to April 5, 2014? Cant include it in my UK return. So I have to file a Japanese tax return?

b) What do I do about the income I earned from April 6, 2014 to July 15 (when I moved). Is this included in the Japanese tax return or the UK tax return?

Thanks for your help.

winston
 

Majestic

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Hello Winston,

What you should have done is file a 2014 tax return just prior to leaving Japan. I don't know how you go about doing this from outside of Japan, but I think Google-sensei will be a big help to you in this regard.

Note the Japanese tax office (NTO) doesn't care about the UK tax year, so if you file a return for 2014 it will include all income earned while you were resident in Japan for that year.

Japan doesn't care about the UK income you earned while you were not a resident of Japan. So if you left Japan on July 15th permanently, you are more or less finished with Japanese taxes. I don't know if the UK considers your Japanese income taxable. If so, I presume you get a refund or credit for taxes paid to Japan. If they do not tax your income earned while you are not a resident, you have nothing to worry about. Again, Google-sensei can help you determine if your Japanese income is taxable in the UK. My guess is that the UK does not tax the income earned while you are not a resident of the UK.
 

JaffaCake

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I think this is how it should be (but I'm no expert).... you can be a tax resident for part of a tax year. so any money you earned whilst in japan must be declared in that tax year, even if it is not a complete tax year. Your UK income would not be included as you ceased to be a Japanese tax resident when you moved. same with the uk. only declare your uk income for the part of the tax year that you were resident there.

But to be safe consult a tax accountant in the UK. They are not expensive, mine is around £180 a year to complete my return for the sake of piece of mind!

Its different if you are a uk tax resident for the whole tax year but earn foreign income. Then you have to declare all your worldwide income and pay tax on all. (but if you have paid tax abroad this can be offset against your uk tax bill)
 

johnnyG

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The above may be true, and I would hope it is... (for income)

But, I have a friend who has explored inheritance taxes on the Japan side. Apparently, for this kind of tax, they can (or will try to follow you for a while.

For example, if you're inheriting a lot, and get word that so-and-so is about to go, you might think that you could hop a plane and break/relinquish Japanese residency on the way out. And that if your relative passed on a few weeks or months later that that timeline would keep you safe from Japanese inheritance taxes.

From what this guy said, the Japan tax people are still able to make a claim on that...!
 

Majestic

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I think inheritance tax is outside of the scope of the original post, but from what I could learn from a few random searches you will not be subject to Japanese inheritance tax if you are not a Japanese resident and have not lived in Japan for the past 5 years, and if your inheritance is located outside of Japan (i.e. cash or stocks held in overseas bank accounts, overseas real estate or other assets).
http://www.grantthornton.jp/pdf/newsletter/international/international_200706.pdf
http://www.hashimoto2005.com/kokusai/archives/cat25/index.html
 

johnnyG

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Majestic--yes, I agree that inheritance tax is something different, I offered it as an example of certain quirks that might be encountered. This friend's father owns a couple hundred acres+ along with some other properties. The local town has grown up to it, and it's worth several million $ or more. He and his wife have talked to a licensed accountant, and I'm sure the word they got was the same as in your links (which are quite nice). He's been here quite a while (family) and his dilemma is to uproot & leave Japan soon, and possibly inherit it all, or to stay here for his own life and then have to sell it all in order to pay the 50% that Japan would want.
 

Mike Cash

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The above may be true, and I would hope it is... (for income)

But, I have a friend who has explored inheritance taxes on the Japan side. Apparently, for this kind of tax, they can (or will try to follow you for a while.

For example, if you're inheriting a lot, and get word that so-and-so is about to go, you might think that you could hop a plane and break/relinquish Japanese residency on the way out. And that if your relative passed on a few weeks or months later that that timeline would keep you safe from Japanese inheritance taxes.

From what this guy said, the Japan tax people are still able to make a claim on that...!
Inheritance tax is a special case in that it is premised on the notion that ultimately all assets are the common property of the nation as a whole. The tax is on the property being passed along...not on the person receiving it, which is why they don't give a hang what the recipient's tax residence is; it is irrelevant. The dead are gone and unable to pay the tax themselves, leaving it to the living to handle the paperwork and giving the common impression it is a tax on the recipient (like a form of income). The recipient is free to exercise his option not to handle the matter by simply refusing the property and letting it revert to the state.

This notion of "private property" ultimately being the common property of all the people at large and that some temporary (yet transferable and inheritable) rights to possession/use/occupancy of the property is also the founding principle on which the doctrine of eminent domain and the ability to assess property taxes are based.
 
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