Tax for income earned while physically outside of Japan

[varlin]

I've tried to find the answer but it seems like nobody's situation ever fits mine so I'm trying to figure this one out.

I'm a U.S. citizen. My wife is JP citizen. I want to buy an apartment cash and live in Japan. I'll be planning to immigrate on a spouse visa, but whether I'll get permanent residency depends on the tax implications.

My work is in a U.S. territory, Guam. I'll be working for an American company based there, getting paid USD, with a W-2 and all that. If we're talking a split, likely 100 days a year in the U.S., 180 days a year in Japan, and 80 days a year traveling to other countries.

My question is, will Japan tax this American income? Will they even know about it? I won't be earning anything in Japan at all. What about anything my wife does -- are we seen as filing jointly like in the U.S. or as individuals with our own tax liability?

How about other sources of income? Like say, my military pension, mutual fund dividends, or eventually, social security?

 

[wwjrd]

@varlin A resident taxpayer is an individual taxpayer (i) who has a ‘jusho’ (i.e. a residence) in Japan; or (ii) who has maintained a ‘kyosho’ (i.e. a temporary place of abode) in Japan for a period of one year or more. A resident taxpayer who is not a Japanese national and who has an aggregate stay in Japan of five years or less within the preceding ten years (60 months within the preceding 120 months) would be classified as a non-permanent resident taxpayer. If a resident taxpayer is a Japanese national, or a foreign national with an aggregate stay in Japan of more than five years within the preceding ten years, the taxpayer is considered a permanent resident taxpayer.

So long story short yes. You won't get a Visa nor PR if you fail to report. They changed the law so they can kick out people that don't pay taxes so also keep that in mind.

To be honest Japanese taxes are high so you shouldn't have to pay US taxes (their are tax treaties so you get some relief). Global taxation is a a thing once you are permanently tax resident (5-years)

 

[varlin]

@wwjrd Very much appreciate you taking the time. And I certainly dont want to risk getting kicked out, but rather play it smartly.

Edited because I've researched and answered a few questions but still have some others:

1) Taxable "foreign source income" seems to be defined as income that is earned abroad after you establish residency. Say I move to Japan in December, establish residency, open a bank account, and wire transfer 300k in savings to my new account before the end of the year.

Since I remitted funds into Japan, I'm required to report my foreign income, but the only income I have to report is what I earned from the day I became a tax resident up until Dec 31st, correct?

2) Assuming

 

[wwjrd]

@varlin Second question is one I can answer. You need to pay on all income earned. If you are working for a company I would have them give you the gross and you should pay taxes AND social security payments (national health and pension etc). If they can pay on your behalf in Japan it would be better.

The first question would likely not be feasible and I’m not sure why you’d do it. Banks need to report large transfers for AML reasons. Why not just use a credit or debit card for most expenses? Today there are few things outside of a mortgage that you would need a large cash balance for. I feel like you’d end up getting audited.

I would suggest you get a tax professional but basically tax avoidance is pretty hard and not advised.

 

[varlin]

@wwjrd Ok so it sounds like what I thought -- the remittance doesn't matter, only the foreign earned income in that tax year.

For the 1st question, sure they can audit me all they want, I've got nothing to hide and the receipts to prove the origin of the money. The point would be to remit in advance all of the savings that I plan to live off of for the next 5 years in a tax year where I have to declare a very low amount of foreign income.

After those 5 years, who knows.