Japan to tighten tax rules on wealthy people

There's that "urge" again. I'm sure if I had that much off shore it would take more than an "urge" for me to tell the theif where to find my money.

The vice grip of Big Brother tightens once again. The Daimyo must pay there tribute to the royal bureaucrats in Edo.

This is a great idea, but the law lacks teeth. Why does the Japanese government constantly waste its time passing laws that have no actual penalties.

For instance, the equal pay for equal work law that will come into effect on April. If a company is found in violation, it will be put under advisement. Oh no! Not advisement.

The vice grip of Big Brother tightens once again. The Daimyo must pay there tribute to the royal bureaucrats in Edo.

Yeah! Why should everyone have to pay their fair share?! It's ridiculous that the wearily shouldn't be able to avoid their obligations to society in relation to taxes. Only the poor and middle class who cannot afford to hide their cash offshore should pay.

*wealthy

Urge, how about jailing a few of them, taking all their money away from them? The tax department seems to have no problem doing it for companies.

If they were willing, they'd have done it already. Sigh....all show, no dough.

@Chip Star

I can't agree with you about this being a good idea. In essence, it's a tax break for the rich.

If they submit such records when found failing to declare foreign assets, authorities will reduce the amount of penalty taxes

If I have multiple accounts and I already declare one such account to the Japanese government. In essence, all I have to do is submit a transaction report for an inactive account and my tax liability on that account would be lower that what it originally would have been.

This is just another way for rich people to play the system and pay an even smaller amount of their share. Especially if it's already part of the assets that you declare. You don't need to declare new accounts in tax havens or provide transaction reports for all accounts. Simply provide a transaction report for an inactive account that you already declare.

I can't agree with you about this being a good idea. In essence, it's a tax break for the rich

Fair enough. It's a step in the correct direction despite its glaring failures. Appreciate the cordial reply.

This is basically just a measure to make enforcement easier for the government. If the wealthy report this voluntarily, they will be hit with a reduced penalty than if government investigators uncover it themselves. So more of them will will come forward and report it, or at least so it is hoped.

They have a similar scheme to deal with cartels under the Anti Monopoly Law, which is also hard to enforce.

This is being done so that they will have something to hit Ghosn with.

The move is expected to help the authorities look into people who allegedly hide assets using offshore havens or avoid taxes through overseas transactions, the sources said.

Like that joker who was running NOVA and siphoned all funds from the company into banks in Canary Islands.

While I can understand why they are chasing these investments, there is a bigger problem for the tax agency. People who hoard cash in their houses that is never declared.

Chip Star

Why do you think the law lacks teeth?

The elite have the most to lose, so the law will be interpreted case by case.

So basically, if a friend is in trouble, don’t throw the book at him.

Far better the government slim itself down than insist it be fed more.

I think there is a fine line between tax avoidance versus tax evasion. As long as you are within the law and want to minimize what you pay regardless of whether you are “wealthy” or not, that should be okay (I won’t get into whether it is “moral” or not). On the other hand, breaking the law, not reporting income, etc. would be evasion and illegal.

Things are getting desperate for Japanese government finances.

Got to raise revenue by whatever means.

More and more red tape. I don't have that much money overseas, but I occasionally seek the help of Japanese banks and they were a little helpful before but now they're quite useless. This move is just more crappy icing on top of what's already a really bad cake.

Ok realistic proposition. As Japan doesn't have double taxation or duel citizenship lets try the following for Japanese citizens;

Every 5 years you have to disclose all domestic assets plus their value and disclose foreign assets. Doing so satisfies the governments "urge of disclosure agreement" and entitles a person and ,to a specified limited extent, legal entities access to tax exemptions for the next 5 years. Every 4 to 7 years a mandatory audit will occur once randomly. If the audit comes back clean, nothing happens. If the audit concludes that the "urge of disclosure agreement" was not honored, the person loses access to all government tax exemptions for 5 years and legal entities loose all tax exemptions for 10 years and trigger a secondary audit for criminal exposure. Their will be an appeal process, but unless overturned, the punishment will be wholly enforced.

The reasoning behind this system is that the government should reward those who do what is "urged" of them while disincentivizing those who would like to game the system. The choice would become between paying all of the taxes vs hiding the assets.

This affects me, and probably many other foreign residents. I keep or have access to my overseas financial statements anyway, so this shouldn't be a big deal.

My worry is if they want them all translated or the amounts to be converted into yen at the exchange rates at the time the transactions took place. Yikes.

No way the authorities here would find out if you keep your mouth shut.

There is an exchange of information between OECD countries. Country A will report to country B if accountholder lives in country B. If this information shows income in country A which is undeclared in country B the account holder has a problem. The new proposed regulation is meant to have documentation at hand that facilitates the calculation of taxes for past undeclared income.

Why should I continue to a pay into a bureaucratic system that doesn't benefit me and can easily keep cash and spread out the wealth.

@k realistic proposition, here's an idea; go back to California they need you.

Gov will try for example to track if you remove money from an ATM with foreign account while you declare light revenues in Japan.

Indeed they may also get intel from a friendly country.

As far as I am concerned, my country is way too hopeless to deal with foreign demands if not relating to very fortunate people.

I'll go back and forth with cash money if possible after retiring (gold if necessary lol) wishing before I'll be that rich.

Meanwhile my number is barely usable and there's no way to track sales tax.

Other countries have shown that a wealth tax doesn't work as they can afford to find ways around the system.

Japan to tighten tax rules on wealthy people...Just a perfect and ideal title to fairness. Not only those with overseas assets but those who are plotting with politicians and bureaucrats to pay less taxes.

This is no surprises to be found..........deductible income to taxable assets when Tax Assignment, paid in the local has to be fully appropriated.

No.12007　Foreign tax credit for residents

https://www.nta.go.jp/english/taxes/individual/12007.htm

This a ruse to harass the middle income earners, whose only crime is to invest some of there income in overseas investment bonds.

Funny all that dialog about fair share. Why can we not go all the way and start charging everything based on net worth. Let's start in kindergarten. If you have toys and I do not, you have to give me some. If you have some snacks and I do not, give me some. Same for your clothes and any thing else you may have that I don't have and want.

i feel an urge to ask if this is for public consumption more than chancing rich tax dodgers. Translation "See people we put up your tax but we are taxing the rich too....

@thepersoniamnow

@Chip Star was correct with his reasons why the law lacks teeth. The laws here tend to leave out the punishment part. When they do add a punishment, it tends to be something the equivalent of telling a child, "you can only have 4 hours of play time today instead of your usual 6 hours."

@expat

It's already impossible to wire more than 300,000 yen into the country without the banks slapping a hold on it and demanding proof of provenance, and don't even think about using a foreign-issued credit or debit card to withdraw cash from an overseas account.

That isn't true. As a former private banker, I know banks make exceptions for high net worth clients. Example. JPMorgan won't ask for many things and will freely wire up to $5 Million per month for high end private clients.

HSBC, a world bank, has a similar practice.

For services like that, you need to have at least $50 million in your accounts for personal customers. For businesses you need to have a revenue of at least $225 Million.

By "assets," do they also mean real estate?

The rich can avoid by hiring economists and lawyers. It is the average Joes that pay the price.

The only way to defeat offshore accounts is to create offshore accounts on your territory.

isoduckyToday  10:43 am JST

Ok realistic proposition. As Japan doesn't have double taxation or duel citizenship lets try the following for Japanese citizens;

zichiToday  04:19 pm JST

There's no double taxation in Japan

You are both completely misguided.

"If a resident pays foreign income tax in accordance with foreign laws and ordinances on the same income derived from sources abroad, there will be double taxation."

https://www.nta.go.jp/english/taxes/individual/12007.htm

@OreiO: For a resident there should be no need to pay income tax outside of Japan in the first place. Tax withheld at source can be deducted from income taxes payable in Japan.

I assume this doesn't apply to foreigners residing in Japan whose overseas bank accounts only include funds originally earned or otherwise gained in the countries where those funds reside, or non-monetary assets purchased with such funds. And, that they are only referring to funds earned/gained/acquired in Japan and transferred overseas, or assets purchased with funds earned/gained/acquired in Japan.

I mean, why would Japan be entitled to tax funds or assets that were earned/gained/acquired totally outside of Japan?

@garypen: There is no tax on assets abroad declared (if above 50 mio JPY). If you are residing in Japan the income derived from these assets is taxable though.

zichiToday  10:02 pm JST

No double taxes between Japan and agreed countries. I have assets in America but because I pay Japanese taxes I don't pay any American ones.

I do believe the US is the only country with a double taxation waiver agreement with Japan. Most other nationalities have to apply for foreign tax credit on their tax return, and it is very limited.

Who am IToday  10:23 pm JST

@OreiO: For a resident there should be no need to pay income tax outside of Japan in the first place. Tax withheld at source can be deducted from income taxes payable in Japan.

Not strictly true. The method of calculation is heavily in the Japan tax office's favour.

"a resident who pays foreign income tax is allowed to credit a 'certain amount' of the foreign income tax (hereinafter referred to as the "credit limit for income tax") against his/her Japanese income tax for the year. "

"Credit limit for income tax = Amount of Japanese income tax for the year × (Total amount of income from sources abroad for the year (after adjustment) / Total amount of income for the year)"

https://www.nta.go.jp/english/taxes/individual/12007.htm

There are other with mutual tax treaties like the EU and 20 of those countries.

"As of November 1, 2018, Japan has concluded income tax treaties with 71 countries/regions to avoid double taxation and prevent tax evasion. Tax treaties concluded by Japan generally accord with the principles of the OECD Model Tax Treaty."

Did you actually read the article?

I quote;

" Also tax treaties provide relief from double taxation through 'tax credits.'

To avail of the tax treaty benefit, an application form for relief from Japanese income tax should be filed and submitted to the tax office by the payer of the income before the date of payment."

Read my link if you want to know how tax credit works in Japan. It's certainly not exemption.

i hope the posters know that, for INHERITANCE tax, Japan will take its share on whatever you have overseas.

@OreiO: If foreign withholding tax cannot be fully deducted in the current year the remaining amount can be carried forward to the next year. Anyhow, foreign withholding tax is tax on foreign derived income that is not yet declared and taxed in Japan. So this is not a case of double taxation.

This looks like a very weak version of US FBAR/FATCA law.

https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar

US FATCA is even worse.

https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-us-taxpayers

US citizens and green card holders resident in Japan should be far more worried about what the IRS wants to know about your Japan assets than what the Japanese government wants to know about your foreign assets.

Are they going after unpaid income taxes, or is this about capital gains from overseas investments?

What about gifting money to children in a foreign country ? I know how beneficial this is for wealthier parents to get it out of Japan