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Tax: non-resident citizens vs. resident foreigner (permanent

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Joined: 29 May 2011
Posts: 310

PostPosted: Tue Jan 27, 2015 5:14 am    Post subject: Tax: non-resident citizens vs. resident foreigner (permanent Reply with quote

Thanks guys. Wondering…

How many years do you get in Taiwan as non-resident citizen before you become a resident foreigner (permanent resident)?

Does Taiwan tax “worldwide assets” after becoming a resident foreigner (permanent resident)? Before?

I live in Japan. Here you get 5 years of hassle free living. The day after the 5 year mark, you become a permanent resident and tax authorities then attempt to tax income on all “worldwide assets” (all foreign accounts, property, trusts, inheritance, property... everything).

It’s warped. I am already taxed for my income in Japan, which I send home, and then taxed again by the IRS on my capital gains (brokerage account). The third tax comes then, from japan on these same capital gains in my brokerage account. 20%!!! Japan and the IRS share tax documents if requested.

Naturally I want to leave before I get to 5 years and am asked to retroactively pay massive late fees, penalty’s ect. Looking for a new home for a longish stay.

Thanks in advance for your advice…
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Joined: 30 Apr 2014
Posts: 277

PostPosted: Tue Mar 03, 2015 7:15 am    Post subject: Reply with quote

Well, you do have to have a fair amount of gains/dividends before the IRS starts taxing you. Though if your income in Japan, and/or your investment income there is high enough, yes, you could end up paying some US tax, I think. It might depend on how much trading you do, too. If you're a buy & holder of index funds, gains should be small, but if you're regularly harvesting big gains...!

Also, to my understanding, Japan will not go back and hit those first 'free' five years retroactively (and there won't be any penalties/interest on that). But you need to start declaring overseas income/gains for your sixth year. (And I'm not sure at all how a person's years here are calculated, given that most folks don't arrive on Jan. 1st.)

So start declaring it during (or before!) your sixth year and you should be okay. Also, consider the averages--if you stay for 7-10+ years your effective average tax rate is actually lower than it looks when those first five years are averaged in.

The "trap" that many are lulled into is that having been given that five year waiver, they then don't start declaring overseas gains for their sixth and following years. Then, when the taxman knocks, they are liable for interest & penalties on unpaid taxes.

A wise investor who lives in Japan might use that initial five year period to take all the gains they can, and then position themselves in the lowest turnover index funds for the following few years. Likewise with dividends--switch to or favor funds with low payouts.

Finally, if you're making enough in Japan, and/or have enough invested to be worried about this, you should be thanking your lucky stars that you're in the top 1% of english teachers. Wink
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