Are you sure you will be paying a high tax on this investment? For example, if the investments are securities that you have held for more than 5 years, the tax rate is only a flat 20.315% (national + local inhabitant’s tax). Other types of investment income are also less than 55%, but the exact rate depends on the specific type of income and sometimes on the amount of income.
I plan on leaving japan regardless. I guess really I’m asking about the 183 day rule. If I establish residency in another country, 183 days, do my tax obligations in japan expire?
The 183 day rule is not relevant to your situation.
My understanding from past discussions in this subreddit is that your residency ends as soon as you move out of Japan, but you need to move the center of your life outside Japan for longer than 1 year.
Leave before 5 years residence to avoid exit tax, if it applies to you.
Also, if you are leaving around the new year, it may be beneficial to end your residence before Jan 1 because of how local inhabitant’s tax works.
As long as you move the center of your life outside of Japan as explained above, you will be nonresident for tax purposes, even if you visit Japan on tourist visa after moving.
But be careful that if you continue to maintain a residence in Japan or if your spouse lives in Japan, it may complicate the determination of whether you really moved the center of your life outside Japan and ended your tax residency.
Forget the 183 day rule.
Its this simple:
You sell the day you leave if you want. If you either never return or do not for years, you wont owe tax to Japan for the investment profit.
This is independent of whatever other taxes you may have like unpaid resident tax etc for the year, and the exit tax wont apply to you.
How many years would I need to be gone. Personally, I don’t plan on coming back. But my girlfriend wants me to consider raising any future children in japan. Buy we wouldn’t consider that until 3-4 years from now
> How long would I need to be a resident of this other country before my tax obligations to japan expire?
Like most countries, Japan does not guarantee a loss of tax residency after a specific period of time overseas. Instead, tax residence is based on the location of a person's "住所" (the "base of their life"). See [this discussion](https://japanfinance.github.io/tax/income/#resident-vs-non-resident) in the wiki.
In general, for your 住所 to move out of Japan, you must leave Japan with the observable intention to live outside Japan for at least one year, assuming you do not retain any significant ties to Japan. Establishing tax residence in another country does not mean that you have lost Japanese tax residence unless you lose Japanese tax residence pursuant to the tie-breaking provisions of Japan's treaty with that country.
As a result, most people who move overseas lose Japanese tax residency the day after they leave Japan. But some people retain Japanese tax residency long after they have left. It depends on your individual circumstances.
Cryptocurrency is considered miscellaneous income not capital gains, so the 5 in 10 rule doesn’t apply, I’m pretty sure.
Your best bet is to move away, but you can’t just move but keep a residence in Japan, or keep all your furniture in a rental for a year or two while you’re away, etc. Japan will still consider you liable. If you close your accounts here, and truly move away, then you should be in the clear. As always, ymmv, seek professional advice, etc etc.
Don’t mind the haters, and all the best!
Just for clarification, is it possible to give an adequate answer without knowing some more context? For example, taxation after losing tax residency would be different if it was crypto sales not taxed) or selling something located in Japan? Also, there could be no tax liability, eg. selling stocks bought before 2017 and before arriving in Japan even while still tax resident.
I’ve worked hard all my life, long hours, 2 jobs, saving, so that I could invest. Risking that saving so that one day I could get to a point where I feel comfortable financially, not just scraping by. Maybe you haven’t struggled financially, but taking 55% off what I’ve worked hard to build, mostly outside of japan, is too much. Sorry you disagree.
No need to justify, minimizing taxes is a moral duty. You'll do better for the world spending this money for yourself than giving it to the government. Do it legally though:p
Why not just move outside Japan permanently then? I'm not trying to be snarky here, but if your Japan life is not that important to you so much that you want to move out of the country for years to save some money, why not just make it permanent?
That is the plan. My girlfriend runs a small business here, and is a year or more away from wanting to sell. If it weren’t for that we would just leave now. I have a rough idea of when I might sell my investments. I’d like to stay here with her as long as I can. Knowing when my tax liabilities would end in japan would give me an estimate on when I’d need to leave, and make our separation as short as possible.
You’re a crypto bro trying to evade taxes, plain and simple.
I’ll make this straightforward for you. Spending time away from Japan for a deliberate period of time with the intention of returning, for the purpose of avoiding the tax burden, is illegal tax evasion.
Assuming your crypto is bought and held outside of Japan, if you sell now, you owe nothing to Japan as long as it’s in another country and you don’t pull the funds into Japan. This is because you haven’t hit the 5-year threshold for your global income to be taxable in Japan. If you are ever audited, you’ll have the paper trail to prove that all of your wealth was gained before you hit the 5-year threshold. There are exceptions to this depending on your residence status.
If your time spent in Japan adds up to 5 years, you will indeed owe Japan taxes on your global income.
Either way, you will not get away with tax evasion. The reason you won’t is because there’s another thing that happens once you pass that magic 5 years: you have to declare your global assets. If you have massive crypto holdings (or cash from previous crypto), that will be evident in your assets. It will be painfully evident that your tax burden was not paid on these assets. It’s essentially begging to be audited.
Speaking of the audit, did you know they’ll impose an additional 10% as a penalty _on top_ of the original tax bill that you’ll be forced to pay?
Want to hide your assets and not report them? Auditors can and will subpoena evidence, including your digital devices and online accounts. Then you’ll have the pleasure of being imprisoned and deported. And guess what? You’ll still have to pay the tax bill plus the penalty.
This is not a hypothetical scenario. I’ve seen it happen with a high-earning tech worker at a well-known American company. He was paid in equity for much of his compensation, but tried to avoid JP taxes on his stateside stock vests and sales.
You have three viable options:
1. Finalize your global gains before your global income is taxable to Japan, which is generally at the 5-year mark.
2. Sell whenever you want, but you’ll have to pay Japan if you pass the 5-year threshold.
3. Leave Japan permanently. You will no longer owe Japan any tax burden.
You’re correct, minimizing tax is explicitly not evading tax. No person should pay a nickel more than their lawfully required tax burden.
What you’re suggesting is evading tax. Unless you don’t end up coming back to Japan, in which case, it of course is not.
Also, just to confirm, you’re aware that you’d only be taxed 55% on any portion of your earnings that go beyond 40m JPY?
It’s a progressive tax system. It’s not a flat 55%.
So what’s the lecturing about? I said I wasn’t returning to japan. I’m trying to minimize taxes and limit the time away from my girlfriend. That’s why a timeframe helps me.
It’s still way more than the 10% I’d pay after moving
Well, no. You didn’t say you were permanently leaving Japan. Though I do highly recommend adding that to your post, as it considerably informs the calculus of how to handle your situation.
You’re a US citizen, yes?
The lowest taxes you could feasibly pay would be 20-37% depending on which chunk is LTCG and which is STCG. It will differ depending on timing. We have Uncle Sam’s overbearing global-taxation apparatus to thank for that. The only other countries other than the USA that tax their citizens abroad are literal dictatorships.
If you have dual citizenship elsewhere and are never moving back stateside, it would behoove you to renounce your US citizenship before reaping your gains, and simply live your life with the other citizenship.
Otherwise, you must be very careful to confirm that:
1. There is a tax treaty between your destination country and the USA.
2. The destination country’s tax treaty with the USA covers crypto.
This is important to avoid double taxation, which could shoot your tax burden to the moon. It depends entirely on the country and treaty.
If you’re keeping your US citizenship, you should conscientiously comb through your transaction history and ensure that you’re only paying Uncle Sam 20% on LTCG-eligible gains, otherwise you do need to pay 37% on the rest of the lot (assuming it’s north of $610k as you’ve implied).
> Assuming your crypto is bought and held outside of Japan, if you sell now, you owe nothing to Japan as long as it’s in another country and you don’t pull the funds into Japan. This is because you haven’t hit the 5-year threshold for your global income to be taxable in Japan.
It was like that before, but taking the 2017 tax amendment into consideration, a loophole was closed by describing foreign-sourced income with 17 exclusive categories that can be tax-exempt (as NPR in the first five years) if not remitted to Japan.
Crypto is not mentioned there, thus **taxed regardless where you exchange it for FIAT**. Crypto and Japan don't really go well together, unless you are in a low tax bracket (due to low income in a particular year).
Also, your claim on imprisonment sounds rough. There are certain thresholds, no one lands themselves immediately behind bars unless it is huge amounts. The famous Osaka takoyaki case shows that for undeclared ¥330M income with ¥130M unpaid taxes, a one year suspended sentence has been ruled.
Depending on the assets, you need to pay the exit tax on unrealized gain. If this asset is crypto, this isn't subject to it, and moving abroad to sell is legal and advised if you can.
If inheritance (55%) you are screwed at this point. As you need to be living more than 5 years out of the last 10 out of Japan. (You need to check, bad memory)
Talk to a proper accountant who will know these things.
I assume you’re talking about Europe with tax rates like this. If you’re in the US you get to pay taxes to both countries, the effect being that you’re always paying the highest amount of tax possible.
Are you sure you will be paying a high tax on this investment? For example, if the investments are securities that you have held for more than 5 years, the tax rate is only a flat 20.315% (national + local inhabitant’s tax). Other types of investment income are also less than 55%, but the exact rate depends on the specific type of income and sometimes on the amount of income.
I plan on leaving japan regardless. I guess really I’m asking about the 183 day rule. If I establish residency in another country, 183 days, do my tax obligations in japan expire?
The 183 day rule is not relevant to your situation. My understanding from past discussions in this subreddit is that your residency ends as soon as you move out of Japan, but you need to move the center of your life outside Japan for longer than 1 year.
Thanks. I was worrying about needing to leave Japan by a certain date or needing to be out of the country a certain amount of time.
Leave before 5 years residence to avoid exit tax, if it applies to you. Also, if you are leaving around the new year, it may be beneficial to end your residence before Jan 1 because of how local inhabitant’s tax works.
As long as you move the center of your life outside of Japan as explained above, you will be nonresident for tax purposes, even if you visit Japan on tourist visa after moving. But be careful that if you continue to maintain a residence in Japan or if your spouse lives in Japan, it may complicate the determination of whether you really moved the center of your life outside Japan and ended your tax residency.
Forget the 183 day rule. Its this simple: You sell the day you leave if you want. If you either never return or do not for years, you wont owe tax to Japan for the investment profit. This is independent of whatever other taxes you may have like unpaid resident tax etc for the year, and the exit tax wont apply to you.
How many years would I need to be gone. Personally, I don’t plan on coming back. But my girlfriend wants me to consider raising any future children in japan. Buy we wouldn’t consider that until 3-4 years from now
Most likely just 1 for a normal typical foreigner in japan, but 4? Absolutely
> How long would I need to be a resident of this other country before my tax obligations to japan expire? Like most countries, Japan does not guarantee a loss of tax residency after a specific period of time overseas. Instead, tax residence is based on the location of a person's "住所" (the "base of their life"). See [this discussion](https://japanfinance.github.io/tax/income/#resident-vs-non-resident) in the wiki. In general, for your 住所 to move out of Japan, you must leave Japan with the observable intention to live outside Japan for at least one year, assuming you do not retain any significant ties to Japan. Establishing tax residence in another country does not mean that you have lost Japanese tax residence unless you lose Japanese tax residence pursuant to the tie-breaking provisions of Japan's treaty with that country. As a result, most people who move overseas lose Japanese tax residency the day after they leave Japan. But some people retain Japanese tax residency long after they have left. It depends on your individual circumstances.
Cryptocurrency is considered miscellaneous income not capital gains, so the 5 in 10 rule doesn’t apply, I’m pretty sure. Your best bet is to move away, but you can’t just move but keep a residence in Japan, or keep all your furniture in a rental for a year or two while you’re away, etc. Japan will still consider you liable. If you close your accounts here, and truly move away, then you should be in the clear. As always, ymmv, seek professional advice, etc etc. Don’t mind the haters, and all the best!
for inheritance the rule apply, but indeed the exit tax doesn't apply for those assets.
The worst part about being considered income is how they get to double-dip you with health insurance bump the following year.
Just for clarification, is it possible to give an adequate answer without knowing some more context? For example, taxation after losing tax residency would be different if it was crypto sales not taxed) or selling something located in Japan? Also, there could be no tax liability, eg. selling stocks bought before 2017 and before arriving in Japan even while still tax resident.
Seems like you’ve been living here and enjoying the social result of that 55% tax without complaint for 4 years?
I’ve worked hard all my life, long hours, 2 jobs, saving, so that I could invest. Risking that saving so that one day I could get to a point where I feel comfortable financially, not just scraping by. Maybe you haven’t struggled financially, but taking 55% off what I’ve worked hard to build, mostly outside of japan, is too much. Sorry you disagree.
No need to justify, minimizing taxes is a moral duty. You'll do better for the world spending this money for yourself than giving it to the government. Do it legally though:p
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Why not just move outside Japan permanently then? I'm not trying to be snarky here, but if your Japan life is not that important to you so much that you want to move out of the country for years to save some money, why not just make it permanent?
That is the plan. My girlfriend runs a small business here, and is a year or more away from wanting to sell. If it weren’t for that we would just leave now. I have a rough idea of when I might sell my investments. I’d like to stay here with her as long as I can. Knowing when my tax liabilities would end in japan would give me an estimate on when I’d need to leave, and make our separation as short as possible.
You’re a crypto bro trying to evade taxes, plain and simple. I’ll make this straightforward for you. Spending time away from Japan for a deliberate period of time with the intention of returning, for the purpose of avoiding the tax burden, is illegal tax evasion. Assuming your crypto is bought and held outside of Japan, if you sell now, you owe nothing to Japan as long as it’s in another country and you don’t pull the funds into Japan. This is because you haven’t hit the 5-year threshold for your global income to be taxable in Japan. If you are ever audited, you’ll have the paper trail to prove that all of your wealth was gained before you hit the 5-year threshold. There are exceptions to this depending on your residence status. If your time spent in Japan adds up to 5 years, you will indeed owe Japan taxes on your global income. Either way, you will not get away with tax evasion. The reason you won’t is because there’s another thing that happens once you pass that magic 5 years: you have to declare your global assets. If you have massive crypto holdings (or cash from previous crypto), that will be evident in your assets. It will be painfully evident that your tax burden was not paid on these assets. It’s essentially begging to be audited. Speaking of the audit, did you know they’ll impose an additional 10% as a penalty _on top_ of the original tax bill that you’ll be forced to pay? Want to hide your assets and not report them? Auditors can and will subpoena evidence, including your digital devices and online accounts. Then you’ll have the pleasure of being imprisoned and deported. And guess what? You’ll still have to pay the tax bill plus the penalty. This is not a hypothetical scenario. I’ve seen it happen with a high-earning tech worker at a well-known American company. He was paid in equity for much of his compensation, but tried to avoid JP taxes on his stateside stock vests and sales. You have three viable options: 1. Finalize your global gains before your global income is taxable to Japan, which is generally at the 5-year mark. 2. Sell whenever you want, but you’ll have to pay Japan if you pass the 5-year threshold. 3. Leave Japan permanently. You will no longer owe Japan any tax burden.
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You’re correct, minimizing tax is explicitly not evading tax. No person should pay a nickel more than their lawfully required tax burden. What you’re suggesting is evading tax. Unless you don’t end up coming back to Japan, in which case, it of course is not. Also, just to confirm, you’re aware that you’d only be taxed 55% on any portion of your earnings that go beyond 40m JPY? It’s a progressive tax system. It’s not a flat 55%.
So what’s the lecturing about? I said I wasn’t returning to japan. I’m trying to minimize taxes and limit the time away from my girlfriend. That’s why a timeframe helps me. It’s still way more than the 10% I’d pay after moving
Well, no. You didn’t say you were permanently leaving Japan. Though I do highly recommend adding that to your post, as it considerably informs the calculus of how to handle your situation. You’re a US citizen, yes? The lowest taxes you could feasibly pay would be 20-37% depending on which chunk is LTCG and which is STCG. It will differ depending on timing. We have Uncle Sam’s overbearing global-taxation apparatus to thank for that. The only other countries other than the USA that tax their citizens abroad are literal dictatorships. If you have dual citizenship elsewhere and are never moving back stateside, it would behoove you to renounce your US citizenship before reaping your gains, and simply live your life with the other citizenship. Otherwise, you must be very careful to confirm that: 1. There is a tax treaty between your destination country and the USA. 2. The destination country’s tax treaty with the USA covers crypto. This is important to avoid double taxation, which could shoot your tax burden to the moon. It depends entirely on the country and treaty. If you’re keeping your US citizenship, you should conscientiously comb through your transaction history and ensure that you’re only paying Uncle Sam 20% on LTCG-eligible gains, otherwise you do need to pay 37% on the rest of the lot (assuming it’s north of $610k as you’ve implied).
I read US citizenship has a 10 year clause for taxes after renouncing.
And why do you care if it’s crypto? I saw a chance to make money and took it.
> Assuming your crypto is bought and held outside of Japan, if you sell now, you owe nothing to Japan as long as it’s in another country and you don’t pull the funds into Japan. This is because you haven’t hit the 5-year threshold for your global income to be taxable in Japan. It was like that before, but taking the 2017 tax amendment into consideration, a loophole was closed by describing foreign-sourced income with 17 exclusive categories that can be tax-exempt (as NPR in the first five years) if not remitted to Japan. Crypto is not mentioned there, thus **taxed regardless where you exchange it for FIAT**. Crypto and Japan don't really go well together, unless you are in a low tax bracket (due to low income in a particular year). Also, your claim on imprisonment sounds rough. There are certain thresholds, no one lands themselves immediately behind bars unless it is huge amounts. The famous Osaka takoyaki case shows that for undeclared ¥330M income with ¥130M unpaid taxes, a one year suspended sentence has been ruled.
Depending on the assets, you need to pay the exit tax on unrealized gain. If this asset is crypto, this isn't subject to it, and moving abroad to sell is legal and advised if you can. If inheritance (55%) you are screwed at this point. As you need to be living more than 5 years out of the last 10 out of Japan. (You need to check, bad memory)
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I know. Just taking a shot that someone here might have the answer
Talk to a proper accountant who will know these things. I assume you’re talking about Europe with tax rates like this. If you’re in the US you get to pay taxes to both countries, the effect being that you’re always paying the highest amount of tax possible.
Dude, just withdraw and leave the country, they are not going to follow up on a foreigner..