“Tired Panda” on how rural tax authorities specialize in targeting foreign taxpayers for audit. And Japan aims to be Asia’s #1 financial hub? Hah.

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Hi Blog. In the wake of treating Non-Japanese Residents like they’re riddled with extra Covid contagion, here’s yet another example of how Non-Japanese taxpayers are treated with extra suspicion — with bored tax auditors even in the most rural areas of Japan dedicated to ferreting out rank-and-file sneaky foreigners’ assets and earnings socked away overseas. Courtesy of Debito.org Reader “Tired Panda”, edited and reproduced here with permission.

According to numerous sources, “Japan has explicitly stated its goal is to make Tokyo the number one financial city in Asia… Japanese officials see an opportunity to lure the Asian headquarters of global financial firms to Tokyo as Hong Kong struggles under new scrutiny from Beijing.” In a business climate like the one being described by “Tired Panda” below, who wound up giving up Permanent Residency status after being zapped by local tax authorities, this seems unlikely to happen in Japan.

Any Readers out there who can help this person out? Debito Arudou, Ph.D.

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From: “Tired Panda”
Subject: Foreign taxation accountants in Japan
Date: January 2, 2021
To: debito@debito.org

Hi Debito,

Firstly, thank you for the tireless work you have done over the years to uncover the systemic racism in Japan and demystify many of the baffling issues ever present for a non-Japanese living in Japan.

I arrived on these shores in 199X, and after leaving the JET program, I went on to do various gigs and also teach in some of the Universities around the [Katainaka Prefecture] area.

In 201X, I joined a Japanese company, under the umbrella of a global company, and still work there to this day, now as a contracted employee. My salary has never increased and I have never received a bonus.

However, my beef is not with the contract (that’s a separate issue), it is with the ever increasing harassment by the [Katainaka Prefecture] Tax department.

I have scoured your columns to look for information on the “exit tax” which came into effect in July 2020, and also for any links to taxation experts.

Of course, there are the giants like KPMG and Price-Waterhouse Coopers, but they are geared more to the highly paid CEOs and other foreign workers whose taxation is more of a corporate nature.

It started with my tax accountant in [Katainaka Prefecture], who I have used for several years, suddenly asking me to declare my worldly assets, including how many mountains I owned. Being unaware of any such requirement, I was stunned by this and resisted but my accountant said just roughly write it down and as long as it’s under 5,000,000 you’ll be OK. Just sign it.

The tax department audited me a couple of years ago covering a period of 5 years. They have two young recruits whose full-time job is to concentrate on foreigners. They speak no English. They produced figures suggesting I had been evading taxes over this time and the amount of tax payable. They would not say what shares or investments were the source of the income and I had no way of disputing any figures. I’m aware that tax losses can be carried over to offset gains but they would not recognize this for my foreign investments, saying something about a “blue paper”. I made a start on trying to track everything over the years, but gave up when it became evident that unless something was in the format they required, such as a statement from Monex Japan, they would not accept it. They also slapped a penalty on each of the year’s taxes, compounding over the five year period. It became obvious that it was futile and I paid a substantial amount.

I thought this was the end of that horrifically stressful saga and I would make sure to try and do everything required and account for everything down to the last cent. I decided to revoke my permanent residency as I can’t see myself living indefinitely in this country which is forever tightening the tax noose in an effort to pay for the aging population. With the sponsorship of my company and using the new points system I changed to “Highly Skilled Professional (i) (b)” status.

I recently received an email from my accountant saying that the [Katainaka Prefecture] tax department is asking if I actually had more than 5,000,000 yen when I signed the statement over 5 years ago. I have ignored this.

I remember seeing that with the visa status I have, I do not need to declare foreign income. I don’t remember where I saw that, but I have no doubt that my current tax accountant is blissfully unaware of the implications of my current visa. I advised him for his information but received no response. The last communication was a relaying of the question from the [Katainaka Prefecture] Tax Office.

So, after that long-winded explanation, my question is; are you able to direct me to an English speaking tax accountant… who would be able to correctly lodge a tax return for me and offer advice? As I mentioned, the international tax specialists mentioned above are quite exorbitant, so I’m looking for a smaller scale accountant firm.

Thanks again and kind regards, “Tired Panda”
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ENDS
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9 comments on ““Tired Panda” on how rural tax authorities specialize in targeting foreign taxpayers for audit. And Japan aims to be Asia’s #1 financial hub? Hah.

  • Jim Di Griz says:

    My initial thought is that ignorant tax officers don’t know the difference between PR and citizenship, and bankrupt citizens lose their voting rights…

    Reply
  • Loverilakkuma says:

    I read an article featuring a similar story some years ago, but I don’t remember which one. It’s from JT. A former JET teacher was dispatched to a rural town, and he was similarly bothered by local tax accountants over his tax payment. They thought he didn’t pay enough taxes, which he did, but they refused to admit their clerical errors.

    I don’t know this is because some Japanese employers neglect to do proper tax deductions for NJ employees, or it’s just the matter of ignorance by local tax office. This tax policing is so creepy and menacing. Changing “high skilled professional” status may not be enough to escape that for good.

    Reply
  • For Tired Panda:
    I know a good English speaking accountant who is very honest and does work for some of us having foreign businesses in Japan. Not sure of the mechanism to get the information to you but I can do so if needed.

    — Dave, please contact me off list at debito@debito.org with your information and I will forward it. Thanks very much.

    Reply
    • Patrick Bal says:

      Dave, is your accountant familiar with the reporting of assets that I have in the US (over US$1.5M) and if there are any Japanese taxes
      that are due, for transferring savings to a Japanese bank account.
      Although I have Eijuken, I have only been residing full time in Japan for 2 years.
      Thanks in advance.

      Reply
  • This story as written doesn’t make much sense. I’m not aware of any tax rules based on nationality, apart from the ones that exempt some foreign residents from gift and inheritance taxes here.

    The ‘overseas assets’ reporting requirement begins when you have more than 50m yen’s worth of assets outside Japan, including cash, real estate, wine, or anything really. The requirement is to report the existence of the assets, and does not mean you will have to pay tax on them.

    The exit tax applies to people with more than 100m yen’s worth of share-like assets (not including real estate, cash, etc.) who leave Japan permanently. It was created because a Japanese billionaire successfully evaded paying tax on their inheritance which annoyed the tax office enough to make a new law.

    Reply
  • This “I decided to revoke my permanent residency as I can’t see myself living indefinitely in this country which is forever tightening the tax noose in an effort to pay for the aging population.”

    And that is why, when offered PR 15 years ago and about to receive Govt benefits in my home country, did I have the foresight to decline. People at the time said things like ” I am a PR and they have never quizzed me on any overseas earnings”
    but we now see that they could and now they do.

    Reply
    • Tired Panda says:

      The reason I got PR in the first place was so I could build a house. Banks in my area would not entertain the idea of lending to any foreigner who didn’t have PR. So, I jumped through those hoops and built the house. Interesting experience!
      When I caught a whiff of the planned exit tax which I could envisage tax authorities getting progressively aggressive about, as they have with inheritance tax exemptions gradually getting lower, I went to immigration and told them I wanted to give back my PR. It was worth it for the flabbergasted responses and they cried, ” But you can’t do that! It was bestowed to you by the Minister of Justice!”

      So, in the end the fee was paid to switch to another visa.
      I really do feel that Japan is “going down the tubes” to some extent. Maybe I’m just jaded.

      And to TJJ below…. “Why would you pay it if you think you don’t owe it?” Try fighting the authorities and see who wins. Logic is irrelevant, fairness non-existent. If I had loads of free time and court battles were of interest to me, maybe I would have.

      To Dave above, I got a contact from Debito and emailed them but received no reply. I don’t know if those were your contact details or not. I would still be interested to talk to your honest accountant.

      Reply
  • “They also slapped a penalty on each of the year’s taxes, compounding over the five year period. It became obvious that it was futile and I paid a substantial amount.”

    Why would you pay it if you think you don’t owe it? I don’t understand.

    Reply

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