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I will call this a guest column. I appreciate anything like this at any time.
Hi I read your weekly Jurock dispatch this week. We are Canadian citizens who live in Japan. I am also a CA, who used to work for a big 5 firm in Vancouver where I had the chance to do expat and local tax returns.
We left Vancouver 6 years ago and now I work as the controller for one of the US investment banks here.
I thought I would add my knowledge on Japanese tax and buying an investment property in Canada as we did this last year.
In Japan you are taxed on your worldwide income only after you are deemed a resident. Of course as you point out any income you earn in Japan is taxable in Japan but worldwide income is only taxed once you are deemed a resident.
You are deemed a resident for tax purposes if :
1) you submit an application to the tax department deeming yourself a resident for tax purposes AND the tax department accepts this or
2) if you have lived in Japan for greater than 5 years, then you are automatically deemed a resident.
Because of 2) many US citizens who are equalized only on their employment income opt to leave Japan before their 5th anniversary.
If you are making U$ 400 k or so plus, then you start falling into a very expensive tax bracket.
So last year, we had our 5 year anniversary here. And we also bought an investment property on the West Side of Vancouver. In Japan, the depreciation on wooden buildings is allowed to be taken over 4 years and
the best part is when you leave Japan, there is no deemed disposition of your rental property.
Thus, you can depreciate the cost of the building against your Japanese taxes for 4 years and when you leave no deemed disposition. So if you bought a property worth $600,000 and the house was worth $200,000 of that, under Japanese tax, you can take $50,000 in depreciation per year for four years against your employment income!
It is probably the best way to tax plan for yourself while you are here!!!!!!!
My friend, an Ozzie, also bought a place last year, and she has only been here in Japan for 2 years, so she made an application to be deemed a resident, which was accepted by the tax department and she saved taxes.
Another friend, another Ozzie, has over $1 million in residential real estate in Sydney, and she saved a lot on her taxes last year doing the same thing.
Note that the period you can depreciate over depends on the type of building. Wooden is 4 years, I believe brick is 7 years and I am not sure of other classes. Because of this rule, this is also why you will see Japanese investors buying very old commercial buildings. The rate of
allowed depreciation on these is very favourable.
However of course the Japanese when they dispose of the property are going to have a capital gain.
I also have to say, that you do need to hire a proper tax accountant to prepare your return as to do so yourself is not a good idea.
Anyhow, thought I would share that with you. I do enjoy your advice on a weekly basis and some day, when we've saved enough money we will be home.
Sincerely,
LXXXXX SXXXXXXX
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The above touched on Canada, the USA, Australia and Japan and will become one of my "keepers"
Thanks LXXXXXX
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
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