Japan: Tax Rebates For Those With Dependents

During the year 2016 some days saw as much as 5 trillion dollars being remitted across the globe in foreign exchange. Now, to say that not all of it was people sending money to their relatives in other countries is an understatement of epic proportions -the vast majority of it will be transactions among banks and other institutions- however,

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some of it will indeed be people sending money to their families overseas. There isn’t a single nationality that is not prone to sending back the spoils of overseas employment to their home country; whether it be to capatalise on advantageous rates of exchange,

accumulation of wealth or to support a family member. That said, some people send more than others. Your average Japanese person living overseas sends “home” 3,800 USD every year. Compared to your average Saudi Arabian expat, who only sends home an average of 933 USD, that sounds like quite an impressive, if not surprising difference. You might even be impressed with the familial commitment shown by Mr. Average Japanese Remitter -until- you learn that your average Filipino expat is sending home 4,800 USD every year. All are put to shame by the remittances of Chinese expats, sending an average of 6,800 USD every year….

For those in full time employment in Japan it can be beneficial to know the various methods to reduce your income tax in Japan. Whether this be in the form of tax-breaks, deductions, allowances or conditional rebates the old adage still rings true in as much as, “A penny saved is a penny earned“, and every one of those pennies not taken by the tax man, is one that you can keep for yourself. The good news is that if you too send money from Japan to relatives living overseas then you may well be able to use these remittances to reduce your tax bill.

How To Register Dependents

The catch here is that you can only register a dependent if you are related by blood. In short, no sending money to your friend to buy his car, and then claiming it as a deductible expense (that withstanding, if you are buying that same car from your brother, then you may be good to go…). In terms of how you prove the relationship, the tax office would like to see some form of official government documentation. Ordinarily, this would be a copy of the supplementary family register (if in Japan), along with a copy of the non-resident relatives passport. Realistically, the likelihood of having this documentation issued in Japan, pertaining to a relative who has likely never lived in Japan is slim. Accordingly, for documents issued by foreign

governments (i.e. your home country), the tax office needs to see a document containing the name, date or birth and address of the non-resident relative.

Acceptable Documents:

– Family Register

– Birth Certificate

– Marriage Certificate

If a single document does not show all of the name, date of birth and address then you are allowed to combine various relevant documents in aim of creating the complete picture. Ordinarily, governments have online services whereby these documents can be ordered for a nominal sum. Turnaround time will vary from country to country.

What Documents Do I Need To Get A Tax Deduction?

As is to be expected, you have to provide evidence that you have sent the money to aforementioned relative or dependent. The biggest caveat here is that if you are not sending money from a Japanese bank, you are required to get the remittance receipt translated into Japanese. Alternatively, if you have not remitted money, but instead allowed your dependent to use your credit card, or made purchases on their behalf then you must provide a copy of the relevant credit card statement. Another point to be aware of is that dependents must be sent to separately; i.e. if your wife and child are non-resident and you remit an amount of money to your wife overseas for living expenses for herself and your child, the documents relating to that remittance are treated as a remittance to your wife only, and not your child. Finally, if you remit money to the same dependent more than 3 times in any one given tax year then you may be required to submit a statement (upon request) detailing the reason for the remittances.

Getting together the necessary documentation to file for deductions may be tiresome at first but the benefit  and refunds for higher taxpayers may be considerable, each and every year. There is also room to make certain expenditures tactically, for the benefit of relatives whereby the money would have been spent anyway, for example, some sort of fixed monthly expenditure in your home country. Although adding dependents alone will likely not produce such a drastic reduction as to take you down into a lower tax bracket than the one you are in currently, along with other tax planning methods, it is a quick and simple way to make sure that you are able to hold onto more of the money that you make.

 

[Sources]

– Remittance data: Remittances and migration unit data are provided by the World Bank Group. The estimates of total migrant population were obtained from the World Bank’s Bilateral-Remittance matrix. The estimates in this data set are compiled from various primary and secondary sources for international migrant population and remittance outflows, and may in some cases fail to capture the complete volumes of remittances.

– Ratha, Dilip; Shaw, William. 2007. South-South Migration and Remittances. World Bank Working Paper No. 102. Washington, DC: World Bank. ©

– Japan National Tax Agency

– Guide to Living in Japan – Ministry of Foreign Affairs of Japan, 2016

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Japan: Tax Rebates For Those With Dependents
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Japan: Tax Rebates For Those With Dependents
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Procedure and required documents to register your tax deductible dependents.
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