Japan's tax agency gears up to pursue hoarded funds abroad


Here's one message from the tax office you no doubt hope you'll never receive: "Concerning the income you declared, we are giving you prior notification of an audit. While we're truly sorry to interfere with your busy schedule, you are requested to make contact with the responsible auditor." 

Following up on the written request by telephone, relates Shukan Shincho (Nov 22), the involved party is informed by the gentleman at the tax office, "You transmitted money abroad and bought financial instruments, didn't you?"

It appears that the tax office is able to get wind of money you've squirreled away in a tax haven -- something you even concealed from your own family. In the end, you wind up filing a revised tax return, and are hit with punitive fines. 

This kind of scenario, the magazine warns, is likely to be increasingly common from 2019. How do we know this? Because on Oct 31, the National Tax Agency made public that it has obtained data on 550,000 overseas accounts held by Japanese (more specifically, Japan residents), in no fewer than 64 countries, regions and territories.

"The tax agency was able to obtain the information on accounts through the CRS (Common Reporting Standard) set up by OECD," a reporter who covers the tax agency is quoted as saying. "The CRS provides for tax departments in the respective countries, to which Japan also belongs, to automatically exchange data. All the data is digitalized and by agreeing to participate in CRS, it becomes obligatory to provide the data."

The account data includes name, address and the name of the institution, account balance and so on. Tax havens such as Hong Kong and Singapore have also joined, and the system makes it virtually impossible to hide transmission of funds from Japan for deposit in hidden foreign accounts.

This isn't the first time the Japanese tax office has attempted to go after those who would attempt to evade taxes by sending the money abroad. Six years ago, it became compulsory to report overseas assets exceeding 50 million yen. Thanks to tax treaties concluded with other countries, information was obtained on about 100,000 cases.

But in 2016, reports submitted to the tax agency numbered only 9,102.

"The agency was convinced there were a lot more people out there who weren't reporting," said the aforementioned reporter.

On the surface, then, the possibility of getting its claws on 550,000 overseas accounts may sound like a lot, but based on the general opinions of several private investment bankers, that figure "comes across as quite low."

Hidetoshi Kiyotake, author of the book "Private Banker," which realistically tells the story of private bankers in Singapore and efforts by Japanese tax officials, suggests the figure of 550,000 may be only "one tenth of the actual number."

"There's no mistake that because of the data exchanges based on CRS, the net is closing on capital flight overseas," Kiyotake tells Shukan Shincho. "There are still some loopholes, however. For instance, if a wealthy Japanese establishes a residence in Singapore and opens an account, the tax agency won't have access to his data. The law only pertains to residents of Japan who hold foreign accounts. And one more thing: there's still no way to tax gains obtained from dealing in crypto currencies."

In any event, analysis of account data by the tax agency is just now gearing up, the article concludes, so it may be a while yet before they start lowering the boom of tax evaders.

© JapanToday

©2019 GPlusMedia Inc.

Login to comment

Japan has always been behind other countries in cracking down on tax evasion.And with My Number,squirreling your money away is getting harder.Um...

1 ( +1 / -0 )

How ODD that the article makes no mention of MY NUMBER. That system requires you to provide your MY NUMBER in order to move or exchange money. The govt of Japan must be trying to keep people from getting wealthy. We here at Japan Today just saw an article about the govt making a flying car. The Japanese govt stopped trying to pay down debt a long time ago so they are only trying to prevent the accumulation of wealth.

4 ( +4 / -0 )

To get around this you need to keep your overseas assets registered under an overseas address. When sending money abroad send it to an account with a different name, then move it to your own account afterwards.

2 ( +3 / -1 )

Not sure about the current figure but about a million or so Japanese nationals live outside Japan's borders and presumably most of them do their banking locally. Thousands of them are posted by their companies and they eventually return to Japan, but keep their overseas accounts active for various reasons, such as to receive pension payments in the local currency. The checking process promises to be a real can of worms. Also I wonder how the Japanese tax agency will deal with joint accounts made with a foreign spouse or other family member. (As far as I know, Japanese banks are not able to offer a similar system.)

Knowing the ingrained laziness of Japanese civil servants, it's likely they will only go after large-size departments and only target the most flagrant violators. So most of us have nothing to worry about.

4 ( +4 / -0 )

My Jersey bank sent me a letter last year informing me that under CRS they will have to inform the Japanese tax authorities of all the details of my account.

2 ( +2 / -0 )

@NCIS has an excellent point. Japanese passport holders are supposed to report their worldwide income (like the US), so if they live overseas, there is a duty to report. The taxes they pay in their host country is offset against Japan taxes which are usually higher. However, other than those on company assignments, I don’t know anyone who is doing that. Yet these overseas Japanese nationals were screaming about their right to vote in Japanese elections (not sure where this currently stands) without proof of tax payment.

-2 ( +0 / -2 )

Yet these overseas Japanese nationals were screaming about their right to vote in Japanese elections (not sure where this currently stands) without proof of tax payment.

Er, what do taxes have to do with voting? Millions of Japanese vote without paying taxes, because they have no income. They are called "students" and "retirees." I seriously doubt that proof of tax payment is a voting requirement. All one needs is a registered domicile and/or proof of citizenship.

5 ( +5 / -0 )

This action, I must say good action, pls find all tax evaders especially in the united states ,

all other countries too.It will help Japan. Bravo.

-3 ( +0 / -3 )

Just waiting for the day nations break down and all become one, forming A central government. This would make things soo much easier.

Sorry..dreaming out loud.

-5 ( +0 / -5 )

Starting with Mr Ghosn

0 ( +1 / -1 )

Hidetoshi Kiyotake ... suggests the figure of 550,000 may be only "one tenth of the actual number."

I can't imagine that there are 5.5 million -- roughly 5% of the population -- Japanese people each holding more than 50 million yen in foreign bank accounts. I'd be amazed if 5% of the population even has a net worth that high domestically.

Or maybe the older generation is just a lot wealthier than you would think.

3 ( +3 / -0 )

"assets exceeding 50 million yen" or US $500,000-isg. Anything less deposited abroad and you are going to fly under the radar. They are the tax authorities - they will begin at the top of the list with the accts w/the longest trail of zeros.

1 ( +1 / -0 )

Don't forget that transfers into and out of Japan in excess of Y1million can be and are regularly monitored by the Japanese tax office. It's not just a matter of overseas accounts, but also movements to and from them.

0 ( +0 / -0 )

What happens if you win the lottery in your home country? (Not that I have - wishful thinking).

0 ( +0 / -0 )

if you are a permanent resident and you file taxes in Japan, then any foreign income including lottery winnings are taxed here (less what you paid overseas). And you don’t even want to know what happens if you receive an overseas inheritance while living here.

0 ( +0 / -0 )

Any large overseas inheritance would find me out of Japan in a flash!

Not only would the Japanese attempt to tax it, the overseas country would too.

Would I really be able to keep two tax regimes off my back at once?’

I wouldn’t want to, neither would I want to be in detention and deprived of my liberty whilst being investigated by the Japanese tax authorities.....

1 ( +1 / -0 )

Inheritance taxes can and should be dealt with by having the person giving the inheritance put the money into a trust fund in your or anothers' name. Boom, less taxes.

I would suggest that anyone attempting to reduce tax payment in Japan be very careful about how they go about things. As the Ghosn case illustrates, as a foreigner you will be treated much more severely than an ethnic Japanese person will be. The tax authorities will also likely have info on you from the government in your native country, since tax info sharing has become a bigger thing in recent years.

If you are reducing taxes legally, it needs to be done in ways that keep your name out of the picture as Japan is liable to charge you anyway even if following the letter of the law. Offshore corporations are one tool that can be used cleverly. Playing with revenue and loss statements can impact taxability.

Be careful out there. With Japan raising the retirement age to 70, it appears that the government is beginning to claw at the proverbial walls as they close in on the nation. They're more likely to go after a foreigner than ever.

1 ( +1 / -0 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites