Some beginner questions in prep for moving to Japan

[leeblessings]

Hi all!

As some background:

I'm a U.S. - Japan dual citizen, graduated from college a few months ago, and will be moving to Japan in a few months to work at the Tokyo office of a U.S.-based multinational. Lived in the U.S. my whole life.

Up until now, haven't really thought about personal finance too much, but am now grappling with A. learning about the world of personal finance / budgeting / investing / saving for retirement, as well as B. learning how to deal with all of that while living in Japan as a dual citizen.

Being young, with no kids/assets/etc, I'm pretty flexible in where I want to work. For now, I see myself working in Japan for 1 - 3 years, and then perhaps going back to the United States for grad school/jobs with higher salaries/being closer to friends and family. But of course, that's still conjecture, and afaik I might spend a lot more of my life in Japan than I expect right now.

I foresee that I'll be posting in this sub more in the future, but had some general questions I wanted to ask in order to get a head start on PF as well as adjusting to PF in Japan. Apologies if any of these questions are bad.

1. Since I still have a few months before I go to Japan, would love to hear y'all's advice: U.S. - taxpayers, what are some things you're glad you did or wished you had done before moving to Japan, in terms of PF?
2. Given the uncertainty about long-term residence in Japan, I don't plan on closing my US bank accounts (can use my family's address). I'll also be making Japanese bank account to deal with day-to-day stuff there. Should I have the majority of my assets U.S. based or Japan based? Such as having my pay sent to my U.S. account in $$, then transferring some of it to a Japanese account for utilities, etc use. Or is this stupid
3. Savings account - from what I understand, Japanese savings account are practically useless. Is there any merit in transferring part of my income to the U.S. to keep in a U.S. savings account? Or does inflation in the U.S. offset whatever interest I would accrue anyways?
4. Read the wiki and seems like due to PFIC requirements, NISA and iDECO are both no-goes. And don't think I can do Roth IRA either due to FEIE. Am I shit-out-of-luck, or what methods do I have to invest some of my savings for medium/long-term?
5. Will working in Japan for a few years where I 1) don't have access to an employer-contribution retirement plan like a 401k, 2) can't take advantage of US investment vehicles like Roth IRA or Japanese ones due to PFIC, and 3) unfortunately have a significantly lower salary compared to the same exact job at a U.S. office, set me back significantly when I do go back to the U.S.? And if so, what strategies are there that I can take in Japan to offset this?

Thanks so much everyone!

 

[brentonderenn]

@leeblessings To follow on with this, Is there anything a prospective mover might want to do ASAP to soften the landing? I know folks moving to the US often scramble to quickly establish credit files at the bureaus. Is there a way to start an equivalent Japanese process while still living here?

 

[l0v3dr34m]

@leeblessings I live in Japan, but have a company in the US, so I am easily able to have a “legal footprint“ in the US, and a legal mailing address etc. It’s very convenient and I recommend it were possible. Investing in Japan, or using Japanese brokers, is quite frustrating and sometimes limiting to Americans because of the FATCA requirements, so honestly I recommend you have a brokerage account in the US so you can do things like Roth IRA contributions, which everyone should do as early as possible. The ability to do all of your US related banking from the other side of the world is just amazing.

 

[resjudicata]

@l0v3dr34m

I live in Japan, but have a company in the US

If you passively own a company that is run by other people and you are just getting income from it, this can be good.

However if you are using your US company to conduct business that would otherwise be done by you personally this can be very bad and result in you owing double taxes with no way to use business tax paid in the US to offset the income tax you owe in Japan.

Therefore for about 99.999% of people it is a really bad idea to have a company in the US.

 

[l0v3dr34m]

@resjudicata It’s an S corp and I’m the I’m the only employee. My former company was also an S corp and we manufactures and warehouses Japanese visual novels and T-Shirts but I had the good luck to sell it in march of 2020. Taxes are declared in both places but the tax treaty takes care of (most) dual taxation. Actually one problem is that America doesn’t follow its own tax tree, and insists I pay certain taxes as an American that they are not allowed to take based on the treaty. I would actually like to sue the government someday to fix this.

 

[resjudicata]

@l0v3dr34m Maybe /@kristhuy can answer how a US s-corp with (I assume?) pass-through taxation would work for someone who is a tax resident of Japan.

 

[l0v3dr34m]

@resjudicata Any business income, from an S corp or sole proprietorship proceeds, are just listed as income on the Japan side. Which is quite business-unfriendly in the end as the rates are much higher, and that’s one reason I decided to sell the first business.

 

[kristhuy]

@l0v3dr34m Individuals can't declare income paid to an S Corp as personal business income, because Japan does not recognize pass-through taxation. The S Corp must file a corporate tax return in Japan, and then payments made to the owner are taxed as dividends. This is why it's almost always a very bad idea to run a US LLC or S Corp from Japan.

 

[kristhuy]

@l0v3dr34m Yeah there were some court cases and this was the outcome. You can't use a US personal tax return to calculate your Japanese business income if there is an intermediate US corporate entity, because Japan doesn't allow foreign corporate entities to pass their income untaxed to their owners. It used to be a bit ambiguous, but it isn't anymore.

 

[resjudicata]

@kristhuy Thanks Stark, I knew you'd know the answer and have the sources ready to back it up. Always impressed by how much you know and your willingness to share the information. Big thanks, I've learned a ton from you over time.