US Employer - Employee Living in Japan (US Military)

[kpriceromano]

I'm hoping someone can help me. We have an employee who is currently located in Hawaii and they are working remotely for our Chicago office. They are moving with their military spouse to Japan for US military purposes. Can we keep her employed once she moves to Japan and pay her the same way, or do we need to do something on our end to make this work?

 

[johnnyG]

If they will be on SOFA status, I'm not sure.

If they are not, and their status of residence is spouse of japanese national, working visa, some other status, etc., then the are two tracks/possibilities. One is that they are a contractor--the simplest and easiest.

Second, if they are an employee, then the company--your company--needs to have and maintain some kind of branch in Japan (legal presence) to comply with employment law. If you already have this, then you can go from there. If not, I've read that there are companies that offer this as a service, but it's on a per-employee basis and is expensive (tho probably less than setting up a branch here). With this would come japanese employment rules/law employer-employee relationship.

 

[Buntaro]

kpriceromano,

Yes, you can keep her as your employee. No reason not to. Since she is a US military dependent, she should have access to American-style banking on base in Japan. Or will she be living "in Japan" with no access to an American-style bank?

How do you pay her? Paypal? Direct deposit to her American bank account?

 

[Majestic]

This might only be possible if the person is on SOFA status.
Otherwise, it creates an administrative knot that will have all sorts of yellow flags, and possibly red flags, flying on the field. Remote working is opening up a new world of possibilities that governments have yet to grapple with.

 

[JPeters]

Firstly, there is no reason for her not to fall under the SOFA status. That seems to me to be an absolute. On this one I have many years of experience, so I am confident of that statement.

But the employment situation could be a horse of a different color.

Being headquartered in Chicago may not be a problem, as long as she confines to doing her work on a U.S. military/government facility. That will also keep the tax situation more manageable. Be strict about that working inside a U.S. government facility. Not even work related calls in a coffee shop off base or such. Working in the New Sanno Hotel is also okay even though it is owned by the Japanese government.

But what you best concern yourself with is whether she is doing work that could fall into security laws recently enacted in the U.S. for all sorts of things in high tech. That one has gotten really tricky and even for those under SOFA status in other nations.

And you may even have to take a look at some news security laws the LDP is trying to get passed this year that also relate to high tech stuff and supply lines and all manner of stuff. Again, being under the SOFA status may not be helpful. That first pointed out just above about U.S. laws is already super tricky. And this one that may become law in Japan could be tricky, too. Get some good law folks to help you out.

 

[mdchachi]

MOFA: Agreement regarding the Status of United States Armed Forces in Japan

Members of the United States armed forces, the civilian component, and their dependents shall not be liable to pay any Japanese taxes to the Government of Japan or to any other taxing agency in Japan on income received as a result of their service with or employment by the United States armed forces, or by the organizations provided for in Article XV. The provisions of this Article do not exempt such persons from payment of Japanese taxes on income derived from Japanese sources, nor do they exempt United States citizens who for United States income tax purposes claim Japanese residence from payment of Japanese taxes on income. Periods during which such persons are in Japan solely by reason of being members of the United States armed forces, the civilian component, or their dependents shall not be considered as periods of residence or domicile in Japan for the purpose of Japanese taxation.

 

[JPeters]

MOFA: Agreement regarding the Status of United States Armed Forces in Japan

Members of the United States armed forces, the civilian component, and their dependents shall not be liable to pay any Japanese taxes to the Government of Japan or to any other taxing agency in Japan on income received as a result of their service with or employment by the United States armed forces, or by the organizations provided for in Article XV. The provisions of this Article do not exempt such persons from payment of Japanese taxes on income derived from Japanese sources, nor do they exempt United States citizens who for United States income tax purposes claim Japanese residence from payment of Japanese taxes on income. Periods during which such persons are in Japan solely by reason of being members of the United States armed forces, the civilian component, or their dependents shall not be considered as periods of residence or domicile in Japan for the purpose of Japanese taxation.

Excellent idea for posting, but one should maintain excellent records of all their Net activities that are conducted when residing on a U.S. facility or actually can prove work was being conducted while on a U.S. facility , even if one resides off post/base, BUT does not conduct their civilian duties while off base. That doesn't stop them from doing their homework and then bringing those results back to the base/post and conducting their actual employment duties using communications systems on that U.S. government facility. And that is also where that point I made about not picking up the phone and calling your boss or fellow employee and ask a work related question, IF you happen to be off base/post.

As for how and where one can perform work on a U.S. facility if they don't actually live in base housing, that might require a look at JAG regs or somebody posting here that knows about such things. I suspect there may be certain base restrictions about how much time one can use a terminal/work station in a given facility, and so on.

But, yep, an excellent paragraph copied up there and now I need to poke around and figure out how to put one of those 'i' thingies on that post up there.

EDIT: Well, I couldn't find the "i' button, but I'm not sure which browser I snatched when I logged in and may be missing it for that reason. Had to stick with that thumb image and I think I'm a bit aged to be sucking my thumb, although I understand you adults use your thumbs for other purposes.

 

[johnnyG]

MOFA: Agreement regarding the Status of United States Armed Forces in Japan

Members of the United States armed forces, the civilian component, and their dependents shall not be liable to pay any Japanese taxes to the Government of Japan or to any other taxing agency in Japan on income received as a result of their service with or employment by the United States armed forces, or by the organizations provided for in Article XV. ...

That's an interesting qualification--that SOFA only covers SOFA-related things. Which seems very reasonable and common sense-like.

If something is SOFA-related, then on- or off-base would not make any difference.

If it's not a SOFA biz, then I doubt keeping it hidden by doing it all on base is legal (tax fraud?). Probably not a high priority tho for the NTA.

 

[JPeters]

That's an interesting qualification--that SOFA only covers SOFA-related things. Which seems very reasonable and common sense-like.

If something is SOFA-related, then on- or off-base would not make any difference.

If it's not a SOFA biz, then I doubt keeping it hidden by doing it all on base is legal (tax fraud?). Probably not a high priority tho for the NTA.

My apologies here, but you are not interpreting the text properly.

If it is a U.S. company to whom you are communicating with from U.S. territory, which is basically what a SOFA status is used for, then there is no tax fraud involved. Or maybe I should state there is no such thing as working for a SOFA biz. SOFA stands for Status Of Forces Agreement and is actually negotiated differently in each nation where U.S. forces are stationed. No one is keeping anything hidden by conducting business on a base. For example, there are automobile companies selling cars on bases and their business only falls under U.S. tax laws and is all above board. In fact, there are some tax advantages to buying the car on a base here and picking up the vehicle when you PCS. No hidden stuff.

EDIT: Oh yes, under commercial agreements negotiated in each nation the commercial laws that apply under a SOFA agreement can change once you exit the gate and step onto the jurisdiction of the nation you are stationed in. Certain law enforcement for other than commercial law may be different, but the commercial business laws are very different than some criminal law in regards to possibly a violent act. We need a JAG Officer/NCO to help us, but maybe they aren't authorized to do so. I suppose you could dig deeper into the SOFA agreement for Japan and find the details of which I write.

 

[johnnyG]

Okay, I'm obviously not a SOFA expert.

But then why would one have to pay attention to things the way you describe in your previous post (#7)? If it's in support of the US mission, so SOFA, why would that record-keeping matter (or doing things on/off base, etc)?

If a soldier, or contractor, or their dependents do base/mission work, that should be SOFA, regardless of location.

But any of those same people worked on the local economy (e.g., some Eikawa lessons), I'd expect that to be taxed by japan. Similarly, if one of those same people were teaching Eikawa remotely, I'd expect this also to be subject to japan taxes--it's unrelated to the SOFA mission (whether it's done on or off base).

Again, not likely something that the NTA would be too interested in.

If SOFA status does kind of shield it from japan taxation, is it then an IRS thing? Social security deductions, income taxes, or anything else on the US side that might apply (being a contractor and 1099'd, or an employee and getting a W-2)?

 

[JPeters]

Now those questions related to teaching English lessons on the base are good questions. I'm not sure how the Japanese tax folks look upon that.

But if you are doing something like selling cars to SOFA personnel just on the base and not off base, then you nailed it; it's an IRS thing on the income one earns and then certain car tax stuff. I think the state tax isn't involved, so that is why there is a tax benefit to buying on base and picking it up Stateside.

So if somebody were selling Tupperware just on base, only IRS wants some cut.

Same sort of thing with the BX/PX or Commissary. Buying rice from the states is super cheap compared to Japanese prices. And that you can only take off base if it is for your own use.

Over the years and in certain AOs black market problems have been a big problem. Used to be folks would make runs to Japan from the ROK just to buy electronic stuff to use the also cheap APO to ship that stuff back to the ROK and then sell it off post.

There was a hotel that might still be in business right outside a gate at Yokota Air Base that made bunches of money because of that black market business.

But now I'm rambling like an elderly human with fingers typing away.