Unlocking the Mystery: How AI Legalese Decoder Can Help Japan Residents Find the Best Places to Invest Their Money
- April 15, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Introduction
Hello all,
### Context:
As of the end of last year, I’ve exceeded a year of residency while under a student visa and am now moving in with my wife and switching to a spouse Visa. This transition marks a significant change in my immigration status and financial obligations.
I work as an independent contractor in the US at 20hrs/week, and will be going up to 30hrs/full-time after I graduate in March. The fact that I am paid in the US in USD and haven’t disclosed any income or done tax returns in Japan raises concerns about my tax responsibilities in both countries. I am currently paying taxes in full in the US, but I understand that I will have to start filing in Japan as of 2024.
### How AI Legalese Decoder Can Help:
The AI Legalese Decoder can assist in interpreting complex legal language and provide guidance on the specific tax laws and regulations that apply to your situation. By utilizing this tool, you can clarify any uncertainties regarding your tax obligations in both the US and Japan.
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### Questions:
1. Currently, all of the money I spend in this country is either through an American Apple card or by withdrawing it in cash from my American credit union bank account. The charges incurred for each withdrawal raise concerns about the most cost-effective method of transferring money. While I’ve heard about wise and other methods for transferring money internationally, I am unsure if it is worth the hassle. Considering the fluctuating exchange rates and potential fees associated with large transfers, I seek advice on the best approach for managing my finances efficiently in Japan.
2. I have significant holdings in American IRAs, a 401k, and a personal brokerage account. As I plan to live in Japan long-term and am still in my twenties, I am considering diversifying my investments in Japan. However, I am unsure about the tax implications and advantages of investing in Japan, including utilizing schemes like NISA for tax advantages. Additionally, I am interested in understanding the Japanese pension system while continuing to pay social security in the US. Guidance on optimizing my investments and financial planning for the future would be greatly appreciated.
3. Is it reasonable for someone like me to solely rely on an American tax attorney for guidance and file the JP return on my own? Given the complexity of international tax laws and potential challenges associated with preparing tax returns in both countries, I am open to seeking professional assistance. Recommendations for tax preparation services tailored to individuals in similar situations to mine would be valuable in ensuring compliance with tax regulations in both the US and Japan.
### How AI Legalese Decoder Can Help:
The AI Legalese Decoder can assist in translating and simplifying legal terms related to tax laws and international financial regulations. By leveraging this tool, you can gain a better understanding of your tax responsibilities and make informed decisions regarding your investments and financial planning strategies in both the US and Japan.
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FREE Legal Document translation
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I believe that income you are earning here while living here should be taxed by Japan, not US. Taxes are not so difficult here. You can hire a tax accountant for around 10万、go to the tax office and get it done in a day, or try to do it yourself(probably longest time).
> haven’t disclosed any income/done tax returns in Japan, but am of course paying in full in the US
That’s a problem. Work performed as an independent contractor in Japan for a US client is Japan-source income. Accordingly, under Japanese law, US law, and the US-Japan treaty, Japan has primary taxation rights with respect to that income. The only way to avoid being taxed by both countries is to claim the FEIE and/or a foreign tax credit when you file your US tax return.
It is possible that you were a tax resident of Japan while on a student visa, and it is also possible that you were not (it depends largely on your course of study), but either way you should have declared the income you received as an independent contractor to Japan. If you were a resident, you should have declared it by filing a normal income tax return. If you were a non-resident, you should have declared it by filing an [Article 172 Declaration](https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/shinkoku/annai/pdf/027.pdf) (see [this explanation](https://www.nta.go.jp/english/taxes/individual/12019.htm) from the NTA, for example).
If you didn’t become a Japanese tax resident when you first arrived (e.g., due to your course of study being shorter than one year), you will become a Japanese tax resident on the day after you have been in Japan for one year. The income you generated before that date should be declared on an Article 172 Declaration and the income you generated after that date should be declared on a normal Japanese income tax return. Either way, you will need to claim the FEIE and/or a foreign tax credit on your US tax return to avoid double-taxation.
> I’ve seen lots of people talking about wise and methods to transfer money, but is it worth the hassle or are there easy ways to do it?
If you are doing regular foreign currency exchanges, your priority should be paying the lowest possible commission on the exchange. Wise’s commission is fairly low but nowhere near as low as the commissions you can find at certain Japanese banks, such as Shinsei and Sony. Those are banks that specifically target people wanting to do regular foreign currency exchanges. If you search this subreddit you will find many discussions of the best way to transfer USD to Japan and then exchange it for JPY via Shinsei or Sony.
> Should I be looking into more investment in Japan?
Typically US taxpayers prefer to invest via US brokerages, for two reasons: (1) Japanese brokerages have QI agreements with the IRS that prevent them selling US products to US taxpayers; (2) most low-risk/long-term products that can be purchased via Japanese brokerages are [PFIC](https://www.investopedia.com/terms/p/pfic.asp)s.
> NISA can be used in a very specific way to be tax advantaged
I think the main category of US taxpayers who use NISA are people who want to buy shares in individual Japanese companies, while avoiding those companies that are PFICs. People who want to buy more diversified products (ETFs, etc.) tend to avoid NISA due to the two issues identified above.
> Also interested in Japanese pension (although I am paying social security).
Unless you were transferred to Japan by a US employer for a temporary stay of less than five years (or you moved your business to Japan for a temporary period of less than five years), it is mandatory to enrol in the Japanese national pension. You can pay US social security *as well*, if you want to, but it is not mandatory. Under the US-Japan social security agreement (see [here](https://www.ssa.gov/international/Agreement_Pamphlets/japan.html#coverage-self)), you have the right to avoid social security/self-employment tax.
> Is it reasonable for someone like me just have an American tax attorney and file the JP return on my own?
Very hard to say. Many people file Japanese tax returns without professional help. But others prefer to hire a professional. It comes down to your individual capabilities, preferences, etc.