Income tax deduction for dependents not residing in Japan

[TokyoWart]

You are expected to provide actual proof of funds remitted to support the dependent, and there is an unwritten expectation that the total amount remitted will be greater than the amount of the deduction, so more than Y380,000 per dependent, or Y630,000 in the case of students between 19 and 22.

Is my understanding correct that the funds can be remitted from a non-Japanese account as long as translation is provided? The NTA website seems to indicate so, but I want to make sure- https://www.nta.go.jp/english/taxes/ind ... m#page-top

"3 "Documents Concerning Remittances" refer to documents for the year that fall under either (1) or (2) or (3) of the following (if the document is in a foreign language, a Japanese translation is required), and prove that the taxpayer paid in the year for the living expenses or educational expenses of each of the relatives residing overseas as necessary."

My experience with providing proof of those remittances has been that simply providing the US bank account statements that show me sending money to my kids while they lived in the US was enough. The statements were in English and sent to my accountants and my final tax return did not include that documentation at all although I assume my accountants kept it in case of future audit.

[Matt_Black]

You are expected to provide actual proof of funds remitted to support the dependent, and there is an unwritten expectation that the total amount remitted will be greater than the amount of the deduction, so more than Y380,000 per dependent, or Y630,000 in the case of students between 19 and 22.

Is my understanding correct that the funds can be remitted from a non-Japanese account as long as translation is provided? The NTA website seems to indicate so, but I want to make sure- https://www.nta.go.jp/english/taxes/ind ... m#page-top

"3 "Documents Concerning Remittances" refer to documents for the year that fall under either (1) or (2) or (3) of the following (if the document is in a foreign language, a Japanese translation is required), and prove that the taxpayer paid in the year for the living expenses or educational expenses of each of the relatives residing overseas as necessary."

My experience with providing proof of those remittances has been that simply providing the US bank account statements that show me sending money to my kids while they lived in the US was enough. The statements were in English and sent to my accountants and my final tax return did not include that documentation at all although I assume my accountants kept it in case of future audit.

This is great info, thank you.

[RetireJapan]

Just saw this on LinkedIn. It appears the rules on non resident dependents are getting stricter this year: https://www.linkedin.com/posts/roy-ueha ... 07904-YtdG

[Deep Blue]

I never thought about this before. If I have three overseas dependents (my parents and sibling) in addition to my wife and three children here..... I could send 380k each to my parents and sister... and then have my tax bill reduced by approximately 500,000 yen? (I am a top rate taxpayer here).

Is this correct? It seems an easy decision to make...

[Tkydon]

I never thought about this before. If I have three overseas dependents (my parents and sibling) in addition to my wife and three children here..... I could send 380k each to my parents and sister... and then have my tax bill reduced by approximately 500,000 yen? (I am a top rate taxpayer here).

Is this correct? It seems an easy decision to make...

Correction
If you are a top rate tax payer, the government will pay 35.945% x Y380,000 + 10% x Y330,000 = Y207,591 out of the Y380,000 in National, Reconstruction and Residents' Tax savings... + saving on the Income related part of the Health Insurance Premiums...

[adamu]

https://www.mof.go.jp/english/tax_polic ... x.html#a03

I'm noticing this 3 years too late but this is a great resource. I like that it covers National and Residence tax, not just National tax like the NTA does.

the government will pay... Y212,591

They won't pay anything, right? They just won't get that amount of tax revenue. Also it looks like the deduction amount for Residence tax is different according to the above link, so that has to be calculated separately.

[Deep Blue]

I never thought about this before. If I have three overseas dependents (my parents and sibling) in addition to my wife and three children here..... I could send 380k each to my parents and sister... and then have my tax bill reduced by approximately 500,000 yen? (I am a top rate taxpayer here).

Is this correct? It seems an easy decision to make...

If you are a top rate tax payer, the government will pay 45.945% + 10% = 55.945% of Y380,000 = Y212,591 out of the Y380,000 in National, Reconstruction and Residents' Tax savings...

And I can multiply this by three, one for each “dependent”?

Seems like a very easy way to reduce some of the taxes we have to pay. Did anyone do this, any pitfalls or pratfalls?

One thing I can think of is my parents have a joint account, if I made two 380k transfers from my account here to their joint account I can see some Japanese tax official struggling with the
idea of a joint account and trying to say I’m only supporting one parent or something.

[Tkydon]

https://www.mof.go.jp/english/tax_polic ... x.html#a03

I'm noticing this 3 years too late but this is a great resource. I like that it covers National and Residence tax, not just National tax like the NTA does.

the government will pay... Y212,591

They won't pay anything, right? They just won't get that amount of tax revenue. Also it looks like the deduction amount for Residence tax is different according to the above link, so that has to be calculated separately.

Slight error:

If you are a top rate tax payer, the government will pay 45.945% x Y380,000 + 10% x Y330,000 = Y207,591 in National, Reconstruction and Residents' Tax savings... (Y5,000 off) + saving on the Income related part of the Health Insurance Premiums...

The Dependent Allowance is different for National and Residents' Taxes.

If you've already paid the tax through withholding through the year, and you add the dependents to your Nenmatsu Chosei or Kakutei Shinkoku at the end of the year, they will give you that money back... actually in this case 45.945% of Y380,000 = Y174,591 Refund
or
If you add the dependents at the beginning of the Year, they will just not withhold the tax... actually in this case 45.945% of Y380,000 = Y174,591

So they will pay that portion... Instead of giving it to the Tax Man you give it to the dependent.

And you will not have to pay 10% of Y330,000 = Y33,000 in the following year's Residents' Taxes...

Again, instead of giving it to the Tax Man you give it to the dependent, so Net Net, you will save that amount of tax, and so that is the same as the government paying that amount...

[Tkydon]

I never thought about this before. If I have three overseas dependents (my parents and sibling) in addition to my wife and three children here..... I could send 380k each to my parents and sister... and then have my tax bill reduced by approximately 500,000 yen? (I am a top rate taxpayer here).

Is this correct? It seems an easy decision to make...

Correction
If you are a top rate tax payer, the government will pay 35.945% x Y380,000 + 10% x Y330,000 = Y207,591 out of the Y380,000 in National, Reconstruction and Residents' Tax savings... + saving on the Income related part of the Health Insurance Premiums...

And I can multiply this by three, one for each “dependent”?

Seems like a very easy way to reduce some of the taxes we have to pay. Did anyone do this, any pitfalls or pratfalls?

One thing I can think of is my parents have a joint account, if I made two 380k transfers from my account here to their joint account I can see some Japanese tax official struggling with the
idea of a joint account and trying to say I’m only supporting one parent or something.

Should be fine, so long as you can produce all the required supporting documents.

[adamu]

you will save that amount of tax, and so that is the same as the government paying that amount...

Sorry to get pedantic but it's not the same. Net 0 is nobody paying anything, which is not equivalent to the government paying.

If you don't give me ¥1M yen, that's not equivalent to me paying you ¥1M yen.

Anyway... back to the dependents deduction