Tax implications for sending large sums from US to Japan bank?

[leewjo]

Hello,
Apologies if this topic has previously been addressed. But curious if anyone has familiarity with tax implications for sending large sums from personal US bank account to Japan. I've not been able to concretely answer whether I may be taxed on doing this... I will have already paid capital gains in the US, but could I incur tax here? remittance tax? something else?

My situation:-
-Living in Japan for 2 Years, not planning to return to the US
-Currently NPR status, married to Japanese spouse, son in elementary school here
-Full time company worker with large Japanese corporation (no special expat status, just a regular Japanese company worker)
-Selling home in the US with the intention of using gains (minus US capital gains tax) from that sale to purchase a home in Japan
-Planned to use OFX to facilitate the transfer over $100K from US bank to Shinsei bank account (housing prices have skyrocketed in the US)

I figure I have two options:
1. Get a home loan in Japan - then slowly use US account to repay the loan
2. Send the large lump sum to Japan - outright buy home (or do something creative, keep cash in bank, still get a loan, etc.)

What I can't clearly understand is whether I'll get socked with some sort of tax for sending such a large sum to Japan. Has anyone dealt with this type of situation?

[Butterball]

Others here have much more complete knowledge about this topic, but I guess I can chime in.

I transferred a similar magnitude of money from Canada to Shinsei a few years ago.

There’s no tax on remittances from overseas. As long as you have no tax obligation in the US you should be okay.

What you do need to do is make sure Shinsei has your MyNumber, and you may need to fill out a fairly simple form declaring the source of the money and purpose of the transfer. When I did my transfer, this was only necessary for amounts over ¥30mm but I think they might have lowered that level. If you need to do this, they’ll send you a form by email when they receive the transfer.

It’s a good idea to call Shinsei’s customer support with any questions you have; the few times I’ve called them I’ve always found their English support impressively helpful.

[Beaglehound]

Even as a non-permanent resident for tax purposes, if you send that money over to Japan in the same year you realise it (i.e. sell the house), then I think capital gains would apply here as well as in the U.S. Double taxation treaty may leave you with nothing to pay in any case after the U.S has taken its cut (depends on the applicable tax rate in each country) but to avoid doubt you might want to consider leaving it until the following year to send the cash, or go with your first option of paying down a home loan gradually.

[leewjo]

Thank you both very much for the feedback and suggestions.

One other question from a slightly different angle, I can imagine that if I should send a large sum this may require answering questions - either from the bank or potentially tax office. Since I've been in Japan less than 5 years, am I legally obligated to provide detailed information regarding where the money came from? In other words, could I just say that I'm sending over my life savings to buy a home. Would I be required to show multiple months/years of US bank statements to show when the money arrived in my savings account for example? I'm a newbie in this terrain, so apologies in advance if this is a dumb question...

[Tkydon]

As you have only been in Japan for 2 years, you are not a Permanent Resident for Taxation Purposes, and so your global income and gains are not taxable in Japan, unless you bring the money to Japan.

Just transferring the money itself to Japan is not a taxable event, but it immediately opens you to Japanese Tax liability on the Capital Gain from the sale of your house.

How long did you own the house?
How much is your expected Capital Gain on the property after expenses for acquisition and disposal?
The Real-Estate Capital Gain Allowances are quite generous, and you may not make enough to qualify for Capital Gains Tax.

You would need to do the calculations, or speak to a qualified accountant.

[leewjo]

Tkydon, thanks for the your insights. To answer your questions,

- We've owned our house in the US for 21 years.
- Our cost basis on the home is around $420K and given the crazy home values on the west coast we expect to sell our home in the $1.4M range. After the $500K married deduction, the capital gain consideration for the IRS will be approx $500K, thus paying around $100K capital gains taxes @20%.

[Beaglehound]

Thank you both very much for the feedback and suggestions.

One other question from a slightly different angle, I can imagine that if I should send a large sum this may require answering questions - either from the bank or potentially tax office. Since I've been in Japan less than 5 years, am I legally obligated to provide detailed information regarding where the money came from? In other words, could I just say that I'm sending over my life savings to buy a home. Would I be required to show multiple months/years of US bank statements to show when the money arrived in my savings account for example? I'm a newbie in this terrain, so apologies in advance if this is a dumb question...

Anecdotal, but having done the exact same thing in 2019, albeit from the UK, the bank was happy enough with my telling them the cash was from a house sale, no proof required. The tax folk may or may not enquire, and may require proof of where the funds came from. Hasn’t happened to me yet but it’s a definite possibility. I don’t think you have anything to gain by not being upfront about where the cash came from.

As regards capital gains, Japan’s rate of taxation for the period you have owned the house is the same as the US it would appear:
https://www.angloinfo.com/how-to/japan/ ... itance-tax
But the allowances may well differ from those you are entitled to in the US. As I said before, and as Don confirmed, as long as you don’t send the cash to Japan in the same year that the gain is realised, there should be no Japan tax liability at all. If I were you, I would be aiming to do that to avoid complications.

[Beaglehound]

Tkydon, thanks for the your insights. To answer your questions,

- We've owned our house in the US for 21 years.
- Our cost basis on the home is around $420K and given the crazy home values on the west coast we expect to sell our home in the $1.4M range. After the $500K married deduction, the capital gain consideration for the IRS will be approx $500K, thus paying around $100K capital gains taxes @20%.

Picking up on the ‘we’ve owned the house’. Is the house jointly owned and, if so, is the co-owner your Japanese spouse?

[leewjo]

Yes that is correct the house in the US is under both of our names. Thanks for asking.

[Beaglehound]

Yes that is correct the house in the US is under both of our names. Thanks for asking.

As I understand it, the Japanese tax authorities would look at the capital gain on an individual basis, i.e. half the gain is yours and half is your wife’s. And as a Japanese national resident in Japan, she will be liable for tax here. Given the sums are rather large it may be worth your while taking advice on this from a professional. Or even asking at the Japanese tax office, they are generally helpful in my experience, not out to screw you.