Do You Need to the Statement of Overseas Assets in Japan?
【Koshida Accounting Firm Column Date:】
Many foreign residents in Japan are unaware that they may be required to report overseas assets even when no Japanese tax is due.
Hello, my name is Taisei Koshida, and I am a certified public accountant and tax accountant.
I aim to assist non-Japanese business owners who need help with reading or writing in Japanese. If you find the Japanese tax system challenging, I can help you with your tax filings.
If the total value of your overseas assets exceeds 50 million yen as of December 31, you may be required to file a Statement of Overseas Assets with the Japanese tax office.
In this article, I will explain who needs to file, what assets are reportable, and the penalties for failing to comply.
1. Who Must File a Statement of Overseas Assets?
Individuals who are tax residents of Japan and whose overseas assets exceed 50 million yen as of December 31 may be required to file.
2. What Assets Must Be Reported?
Bank deposits are classified according to the location of the financial institution.
Real estate is classified according to where the property is located.
Securities are generally classified according to the location of the issuing company or institution.
3. How Are Overseas Assets Valued?
Assets are generally valued at their fair market value as of December 31. If the market value is not readily available, a reasonable estimate may be used.
4. When Is the Filing Deadline?
The filing deadline is June 30 of the following year.
5. Penalties and Benefits of Filing
If you file the Statement of Overseas Assets on time and cooperate during a tax audit, certain penalties may be reduced by 5%.
On the other hand, if you fail to file the statement properly, the penalty may increase by 5%. Furthermore, if you refuse to provide supporting documents, the penalty may increase by up to 10%.
Knowingly submitting false information may result in imprisonment of up to one year or a fine of up to 500,000 yen.
Many foreign residents also ask how IRAs, Roth IRAs, and 401(k) retirement accounts should be reported in Japan.
6. Foreign Securities, IRAs, and 401(k)s: Cost Basis and Japanese Tax Rules
Regarding securities, cost basis information is required. This means that, in principle, you need to calculate the average acquisition cost in yen using the moving-average method whenever you purchase additional securities. This is the official method used in Japan.
In addition, each stock or fund should generally be reported separately. If you report them on an aggregated basis and later realize capital gains, there is a risk that your capital gains may be understated. If this results in an underpayment of tax, additional penalties may apply.
As for IRA and 401(k) retirement accounts, the most conservative approach would be to track each stock and fund separately in yen and report them individually. This would allow you to accurately calculate gains and losses when the investments are sold.
In Japan, distributions from IRAs, including Roth IRAs, are generally taxable. However, you can deduct the cost basis when calculating taxable income. The same principle applies to distributions from 401(k) accounts, and employer matching contributions may also be included in the cost basis.
Therefore, maintaining accurate cost basis information is very important from a Japanese tax perspective.
In my experience, many foreign residents are unaware of this reporting requirement because no tax is due merely by filing the statement.
However, penalties may apply if the form is not filed correctly. If you are unsure whether your overseas assets are reportable, consulting a tax professional may save you considerable time and trouble.
7. Frequently Asked Questions
Do I need to file a Statement of Overseas Assets even if I don’t owe any Japanese tax?
Yes, possibly.
The filing requirement is based on the value of your overseas assets, not on whether you owe Japanese tax. Even if no additional tax is payable, you may still be required to file a Statement of Overseas Assets.
Does a Non-Permanent Resident (NPR) have to file a Statement of Overseas Assets?
No.
A Non-Permanent Resident (NPR) is generally not required to file a Statement of Overseas Assets in Japan.
However, if you meet the filing requirements for the Statement of Assets and Liabilities, you may still be required to submit that form instead. Please see the following article for more information:
Japan’s Statement of Assets and Liabilities: Reporting Worldwide Assets
Do I need to report my IRA, Roth IRA, or 401(k)?
In many cases, yes.
These retirement accounts are generally reportable if they meet the filing requirements. It is also important to maintain accurate cost basis information in Japanese yen for future Japanese tax reporting.
What happens if I forget to file the Statement of Overseas Assets?
Failure to file, filing incorrect information, or refusing to provide supporting documents may result in additional penalties. In serious cases involving intentionally false statements, criminal penalties may also apply.
How should foreign stocks and investment funds be reported?
Foreign stocks and investment funds should generally be reported separately rather than as a single combined total. Keeping accurate records of the acquisition cost in Japanese yen is important for calculating future capital gains correctly under Japanese tax rules.
Can your office help me prepare a Statement of Overseas Assets?
Yes.
We regularly assist foreign residents with Statements of Overseas Assets, overseas investment reporting, Japanese tax returns, and international tax planning. We can also help calculate the Japanese yen cost basis for foreign securities, IRAs, Roth IRAs, and 401(k) accounts.
Our accounting and tax office has been actively assisting foreign business owners in Japan with accounting and tax matters.
In addition to tax and accounting services, our office can assist foreign residents and business owners with visa matters, company registration, social insurance, and legal issues through our network of trusted specialists.
We also work with professionals in web marketing, website development, and business consulting for the Japanese market.
All services are available in English.
If you are unsure whether your overseas assets must be reported in Japan, please feel free to contact us through the inquiry form.
We regularly assist foreign residents with Statements of Overseas Assets, overseas investment reporting, and Japanese tax filings.