Home
Back

Dear visitor, if you know the answer to this question, please post it. Thank you!

Note that this thread has not been updated in a long time, and its content might not be up-to-date anymore.

Page 1 of 2: Posts 1 - 20 of 24
 
1 2
next

Taxes for self-employed 2017/8/15 05:02
I haven't experienced this yet personally, but I was wondering how taxes would work for those that are self-employed(ish).

For instance, if have a student-visa and I'm going through school I need money right? So let's say I owned a a few properties in the states, and I'm getting paid annually from all the rent money that's coming my way. Do I have to deal with any form of tax when I make my money this way?

Do I have to pay taxes for the U.S, Japan, or both?

And if I were to graduate and have a working visa and I'm doing teaching jobs at Japan, will taxes affect me differently? Obviously, I get taxed through the money I make in Japan through the teaching job, but I was wondering whether that holds true for those that make their money outside of the country as well?

I should mention I'm still a student, and I haven't really experienced what's it truly like in the adult world, but I was just wondering how this type of situation would turn out. I also learned about the taxes you have to pay are a lot higher when your income is high. However, that doesn't really (kinda) relate the question since I'm just talking about generalities of tax, but if you want to include that, that'd be cool too! Thank you in advance.
by boombaa1  

Re: Taxes for self-employed 2017/8/15 11:00
About paying taxes "in Japan" on sources outside Japan, please read the section on "Income Tax." So whether you need to pay taxes "in Japan" on incomes gained from outside Japan depends on how long you've been living in Japan.

http://www.japan-guide.com/e/e2206.html

Please check with the US IRS for what you have to pay in the States.

And if you (in the future) find a full-time teaching position in Japan, of course you will pay income taxes on the salary; in that case you are not referred to as "self-employed." You will be considered a full-time salaried employee with side income.
by ........ (guest) rate this post as useful

Re: Taxes for self-employed 2017/8/18 10:06
I've read this article and I'm a bit sad that the reality is much harsher than the it seems. So for simplicity's sake let's say I've stayed in Japan for 5 years now, and I make an annual income of (again for simplicity's sake) $1,000,000 that would mean I would have to pay %30 ($300,000) of taxes in the american side, and %45 ($315,000 assuming I've been taxed by the U.S first) for the Japanese side. That would leave me with only $385,000.
Isn't that a bit... how has some of you who have lived in Japan dealt with this type of situation before?
by boombaa1 rate this post as useful

Re: Taxes for self-employed 2017/8/18 10:27
And to add on to the previous question (since I just thought of it now) would it make any difference if the majority of the income I make overseas stays overseas? For example, all the money I make through the real estate would automatically transfer into my U.S bank account, and when I occasionally need the money I take out only a portion of the money to transfer and convert to yen (like $10,000 out of the $700,000 I made after paying the %30 american tax cut) to be used here in Japan.
Would the tax laws previously stated still affect me that way?
(By the way can you see if I did my calculations above this question right? Thank you)
by boombaa1 rate this post as useful

Re: Taxes for self-employed 2017/8/18 11:38
If you plan to make 1 million USD a year, I would suggest you get yourself a tax adviser, rather than some random people on an internet forum, that isn't even about taxation.
by LikeBike rate this post as useful

Re: Taxes for self-employed 2017/8/18 11:59
Good thing I said it's for simplicity's sake. I don't actually make that much. I'm only using that high amount of value because I personally find the concept easier to understand if we're using that high of a value. As a young student I don't have a real reference to compare it with... adults do. Considering they personally faced this situation with their type of income. Weird I know but that's just how mind works I guess.
by boombaa1 rate this post as useful

Re: Taxes for self-employed 2017/8/18 12:10
On the US side, you aren't taxed on up to $100,000.00 (depending on a lot of factors obviously). An average full-time ALT job makes maybe $30,000-$35,000 a year depending on the exchange rate, just for reference. So if you've got an average job, you'll never actually have to pay taxes. If you make more than that, then you'll probably be paying someone else to handle everything for you anyway, so you wont have to worry about it.

The US is one of 2 countries in the world that still taxes its overseas citizens. So basically, sucks to be us! But if you don't make that much money, then it isn't a bit deal, just a bit of annoyance filing the forms every year.
by scarreddragon rate this post as useful

Re: Taxes for self-employed 2017/8/18 13:10
if you have investment in your country before coming to japan .. you dont need to pay tax in japan .only the work in japan will reflect in japan tax system.
so many japanese living in abroad and never pay tax to japanese government .. i think only USA is practicing double taxation rule.

you don`t need to worry about this.
by chike20 rate this post as useful

Re: Taxes for self-employed 2017/8/18 13:20
Ah I see, thank you. I'm going to take finance and business classes here at college (freshman) so these are things I'm just interested in.

I always wondered though... since there are so many wealthy here living in the states I'm sure some of these wealthy decided to live in Japan for a (long) while, so it's not like the situation I set up isn't impossible.

I'm sure these questions will pop up in the future for me (maybe not to extent of the situation I made up) because I'm interested in living in Japan. I'm guessing all I have to do is contact the Japanese embassy and some form of financial service to aid me and my questions.

And paperwork... I've read a bit about that nightmare. As one has said before, "Japanese sure do love documents."
by boombaa1 rate this post as useful

Re: Taxes for self-employed 2017/8/18 21:56
"you dont need to pay tax in japan .only the work in japan will reflect in japan tax system."
that is not true.
you have to inform all incomes, including in US, to tax office in Japan, after you become a RESIDENT in Japan for one year.
by ken (guest) rate this post as useful

Re: Taxes for self-employed 2017/8/19 08:10
The normal rule is that you get taxed on your world-wide income in both countries at the full rate. if the rates are 30% and 45% you pay $300,000 AND $450,000.

Some countries/combinations you have to pay more tax than you earn - it is call double taxation. Some countries have double taxation agreements to offset these problems, but not all.

The most important aspect is something called "tax residency" and it relates to major ties to one country or another. Again, international agreements dictate the rules.

As an example, because I still own a car and house in my home country, I am considered to have ties there that would make be tax resident, but I live in Japan. I apply a "tie-break" rule that means I am only tax resident in Japan, and I pay taxes on worldwide income here in Japan.
by JapanCustomTours rate this post as useful

Re: Taxes for self-employed 2017/8/19 11:54
Thank you for that answer. I recently read something that delves deeper into what you just described in your answer, but sadly, I'm not well versed in the whole taxation situation. This is the website, and I'm sure it'll be a good read for many of you who are curious as well.

https://www.linkedin.com/pulse/expat-tax-japan-what-you-need-know-us-r...

I can kinda tell what they are trying to explain, but again, since I'm still a student I don't have much experience with tax, and so I have trouble truly coming to grips with it. If it's not too troubling could you explain what they're saying, or maybe try to explain how it has personally affected you.


by boombaa1 rate this post as useful

Re: Taxes for self-employed 2017/8/19 16:45
A few quick items:
1: the article is a bit out of date, but mostly good, there have been some changes since then. It could have been written better/clearer.
2: it appears the USA does not have a notion of tax residency, but rather a system of forms and declarations to reduce US tax liability (tax credits, if you will)
3: it confirms, if you are resident in Japan, that you file taxes in both countries (on world-wide income).

Just on the last point - and counter to a comment above - many countries tax their citizens on world-wide income, and it depends not necessarily on residency. That is where the fictitious 180-day Japan visa rule comes from. It is actually a taxation issue when you spend more than 183 days in any 365 days in Japan - then you become liable for Japanese taxes.

And another minor point, going to business school will not teach you this stuff. Among my qualifications I have a business degree (my Masters degree), and also a post-graduate qualification for running businesses (Chartered Secretary), and this stuff wasn't covered.
by JapanCustomTours rate this post as useful

Re: Taxes for self-employed 2017/8/19 18:45
Just on the last point - and counter to a comment above - many countries tax their citizens on world-wide income, and it depends not necessarily on residency.

I believe this is in regards to my comment (and if not, my apologies), so just to clarify a few of my sources:

http://www.internationalman.com/articles/this-appalling-practice-is-on...
http://time.com/money/4298634/expat-expatriate-taxes-us-myths/
https://en.wikipedia.org/wiki/International_taxation#Citizenship

If you are Canadian but considered a "non-resident" and living in Japan, you are not taxed on your Japanese income, bank accounts, property, or other assets. US citizens are taxed regardless of where they consider "tax home", and the only other country that handles taxes like that is the small African country of Eritrea.

So, again, sucks to be us ;p
by scarreddragon rate this post as useful

Re: Taxes for self-employed 2017/8/19 18:50
Oh, and for the OP:

I always wondered though... since there are so many wealthy here living in the states I'm sure some of these wealthy decided to live in Japan for a (long) while, so it's not like the situation I set up isn't impossible.

No, it isn't impossible! But if you're making enough money to be taxed by the IRS, then you're making enough money to hire a CPA to do all that for you. If you're filing your own taxes, you're probably not making enough money to worry about getting taxed on it anyway. So I think either way, it's a moot point. I'm sure there ARE high-rollers who do their own taxes, but let's be honest, taxes SUCK. If you can afford to pay someone to do them, you will, and probably be a lot better off at the end of it all than the average person doing it themselves!
by scarreddragon rate this post as useful

Re: Taxes for self-employed 2017/8/20 01:58
Both of you bring up very good points. Especially the last comment haha where you can hire someone to do taxes for you. And to the person who brought up their qualifications thank you for that insight, I'm glad to know what I'm getting into, and thank you for your comment.

But let me get this straight; I know after staying in Japan you will start getting taxed on both countries (U.S and Japan (I'm a U.S citizen)) but their are ways to get a reduction in tax for the U.S right? Like if you don't own any assets in particular that you left behind in the U.S then you don't have to worry about payng too much taxes right?

Like, if you don't own any house or cars then you can use that to an advantage to lower the tax level. However, what are your thoughts on the amount of income tax?
I just googled this real quickly but here it is, "The Federal income tax currently consists of 7 rate brackets: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The amount of tax you owe in April depends on your filing status and income level."

So the Federal taxing doesn't really involve you having to have any assets in the U.S to tax you depending on your income level... so from your knowledge (on the current ways the tax treaty works) how have you been able to reduce the taxes you had to pay in order not to lose as much money.

Minor point: I'm asking just out of pure curiosity, I do hear how much of a pain having to file and pay taxes are especially from my parents lol. So if the time does come and I (hopefully) can afford it I will definitely hire someone else to do for me. Other than wanting to know how it works I think doing taxes every single year would become mundane lol.
by boombaa1 rate this post as useful

Re: Taxes for self-employed 2017/8/20 10:02
I am sorry to bring this subject again after closing.

Are you talking about your situation after your graduation from your school? I have a son with the same situation.

There are minimum income amount to file income taxes for both countries, U.S. and Japan. I am sure you will make more than that amount if you work full time and full year. If you have to file your tax return, you can use "foriegn earned income exclusion" for US side (There is an instruction to find out your filing status for this exclusion.), and if you pay tax on your Japanese income in the U.S., you can claim "foriegn tax credit" to Japanese tax office. There is a tax treaty between U.S. and Japan to avoid "double taxation."

If you are a full-time student, your filing will be different.



by Naoki (guest) rate this post as useful

Re: Taxes for self-employed 2017/8/20 10:13
@scarreddragon - yes, sometimes it does suck to be from the USA, that can also apply for other countries too, and there are different rules all over the world. When I was commuting for work between NZ and Australia I had to be careful on my days in each country otherwise I would have been paying around 80% tax (45% for Aussie and 35% NZ I think) even though I lived in one and only visited the other for work.

Same thing now I am in Japan. Because I still own a house, have my car available for use and things like that, normally I would be taxed in both countries on worldwide income. But (and a really important "but"), there is a tie-break rule so I am only tax resident in Japan. This is different to resident status. (There are other minor points about obligations to file returns in NZ, and for my companies I still have to do that of course.)
by JapanCustomTours rate this post as useful

Re: Taxes for self-employed 2017/8/20 11:27
@JapanCustomTours, yeah, re-reading my first comment I did make it seem like ONLY US and Eritrean citizens pay taxes abroad, which isn't true, so sorry about that. As a US citizen living only in Japan, I don't own any assets like property or a car in the US, and my "tax home" is Japan; nevertheless, I must still pay US taxes on things like my Japanese bank account (if it ever had any money in it, ha... ha...), which is reported to the IRS. For those that go between 2 countries, or maintain their tax home in one but often work in the other, it is indeed complicated. But in my case (and I think, in the long run, the OP's), my tax home is only Japan so I should only have to pay Japanese taxes... but that's not the case. I still have to file US taxes too even though I am legally a resident in another country for the entire year.

@the OP, as I said in another comment, and Naoki said again, there is a threshold where you will not be taxed, if your income is under a certain amount, which is calculated by how many days you have been in the US versus the country that is considered your "tax-home". The form is called the 2555 (there is also the 2555-EZ, which I file), which along with the 1090 (not the EZ version) proves to the government that I a) work and live in Japan and not the US, and am therefore able to take the exclusion, and b) that I am not liable to pay any taxes on my Japanese income because it does not exceed appx. $90,000 that is my credit. This amount is determined by how many days I live in Japan in a given year, so since I usually visit my family in the US for about 2 weeks a year, those 2 weeks count against me, and so the credit goes down. If you spend the entire year in Japan, you'd have a credit of up to about $100,000. Again, an average ALT job teaching English is going to make somewhere from $30,000 to $40,000 a year. This is simplified obviously, because other things like assets, bank accounts, dependents, and college debt change things.
by scarreddragon rate this post as useful

Re: Taxes for self-employed 2017/8/20 14:49
Ah thank you for that. I actually realized I asked the same question twice so I apologize for that. It just seems SO MANY go with trying to figure this out haha. It's hard to really connect things when (as you said) so many variables are out there.

I definitely realize that each situation is unique, and so it's important to contact an embassy or some financial advisor to understand how to properly deal with the situation that the person in particular is in. But since I have no need nor urgency to do that right now, I'm using this platform. lol

To add on to this discussion however, I tried to find a reliable source to read this but I can't seem to find one in this particular situation but:

If this is another repeating question don't answer. But what happens if you have a working visa, and you had an English teaching job. You've lived in the Japan for years now, and you have a freelance job. (I think I still need to report having a freelance job to the embassy - but let's say this freelance job doesn't interfere with the teaching job.) And with this freelance job you're business is involved inside the U.S... would the situation be different? Since you have to two jobs in two different countries I guess you have to file for both and pay a lot more had you only one job which is teaching job, right?

Lastly, can bitcoin be utilized in order to make transaction smoother so you don't lose as much money when you try to bring the money to Japan? I know this doesn't relate, but I thought it would be a good add-on.
by boombaa1 rate this post as useful

Page 1 of 2: Posts 1 - 20 of 24
 
1 2
next

reply to this thread