One of the nice things about Japan is that the company takes care of the taxes. No April 15th, no frantic and confusing filling out of pages of forms. Your company (school, BOE) takes care of everything for you. Unfortunately, the same is not true for most other countries, and even though you’re over here, your home country may still want to hear from you on tax day. While the basics are here, please check with your local tax office in your home country for detailed information.
Something to look at for from your school will be your Statement of Earnings (源泉徴収表). Please take good care of it, as you will probably need it when you are filing your taxes later.
Canada and New Zealand
ALTs are subject to tax in Japan.
You are required to fill out form p85, “Leaving the UK”. ALTs must be out of the UK for one full Tax year if you want to avoid paying UK taxes. Therefore, if you leave JET after one year you will be liable to pay taxes to the UK on your return. If you stay for longer than one full tax year, then you do not have to pay UK taxes. Again, please check with your local tax office back home to be 100% sure or go to http://www.hmrc.gov.uk for more details.
ALTs have the choice of whether to pay Japanese or Australian taxes. We would prefer you to pay Japanese taxes, and that also works out better for you anyway. If you do choose to sign the tax exemption form, exempting you from tax payment in Japan, you will receive the same remuneration as other JETs not paying taxes, but will receive no financial assistance for paying tax on your return to Australia.
Important Update as of July 24, 2010
It has recently come to CLAIR’s attention that the tax agreement between Australia and Japan has changed. This will affect all Australians who are currently lodging tax returns for the 2009-10 financial year.
The major changes include:
1) There is no longer a blanket ruling that JET participants are residents of Australia for tax purposes. Your individual circumstances will now determine your residency status. Information about how to work this out can be found here.
2) It may not be possible to determine your tax residency status based upon the tests and tools provided on the website above. In this case, the Australian Tax Office encourages you to apply for a Private Ruling. Information on how to do this can be found here.
3) If you qualify as a non-resident for tax purposes, you will not be taxed in Australia on Japanese income. However, this may affect the tax status of any other earnings you have in Australia, such as investments, savings accounts, etc. We encourage you to discuss your residency status with banks and financial institutions with which you have dealings.
4) If you qualify as a resident of Australia for tax purposes, you are liable to pay Australian income tax on your JET salary. However,you will qualify for relief from double taxation. Bear in mind that because income tax is lower in Japan, this may mean you have a tax debt in Australia. Information about the ‘foreign income tax offset’ is available here.
For those who wish to read the entire explanatory memorandum, it can be found here.
It is CLAIR’s understanding that tax arrangements for Australians living and working in Japan will now be determined on an individual basis. Therefore it is no longer possible for CLAIR to provide blanket advice to Australians as it has done in the past. We regret this may cause inconvenience for you all.
These changes have only recently come to out attention, and we apologize for the delay in informing you all. The 2011 General Information Handbook will be revised to reflect these changes. We will continue talks with the ATO and let you know of any further developments.
Please also bear in mind that CLAIR does not specialize in tax matters (same goes for the Hyogo PAs!). All information above was gathered from the ATO directly, but we cannot take responsibility for its accuracy. We highly recommend you engage a professional tax consultant to determine your individual circumstances.
Income earned in Japan is tax-exempt for American JETs. When filing your taxes, you must apply for exemption through form 2555 or 2555-EZ. To qualify for exemption, you must be physically present for 330 consecutive days in a foreign country. The IRS allows an automatic 2 month extension on tax filing for citizens overseas, but to fulfill the 330 day requirement, you must apply in writing for another 2 month extension. See the IRS website for details. Also, the Japanese government requires all first and second year American ALTs to file for form 6166 “United States Residency Certification” to be exempt from Japanese Income Taxes. To acquire the form, first you must download and fill in form 8802 from the IRS website and send it in to them. If they accept the application, they will send you form 6166, which you can then turn into your school. Although there is no set deadline for turning in the form, most schools prefer to have it in by the end of the calendar year, and almost all require that it be turned in by the end of March. Ask your school about when you have to turn it in.
Step-by-Step Guide for Americans
|1||Download form 8802 from the IRS website and send it in (Click here for instructions on how to fill it out). If they accept your application (if they believe you are American), they will send you form 6166. Give this to your school.||Ask your school||ALTS||This is for Japanese tax purposes. Your school needs to prove you are American for you to be exempt from Japanese taxes. This only applies to ALTS, as CIRs are not exempt from Japanese taxes.|
|2||File change of address form 8822.||Apr 15||1st years||This form is technically not required, but highly recommended so that the IRS knows where you are in case they need to get in touch with you. Read more about it here.|
|3||File for an extension. To do this you must send in Form 4868.||Apr 15||1st years||You need to have been out of the country for at least 330 days to be exempt. We get an automatic 2 months extension for being out of the country, but since most JETs come late July/early August, they need a little bit more time to meet the requirement|
|4||Fill out Form 2555 or Form 2555-EZ and send it in with your Form 1040.||Jul 15 or
|Everyone||Form 2555 makes you exempt from paying US taxes on the money you earned in Japan.|
Americans living in foreign countries must send all forms to:
Internal Revenue Service Center
Austin, TX 73301-0215
I have also found an illustrated example of how a couple living abroad would fill out all forms on the IRS website. Click here if you want to see it. Another recommended resource is Publication 54, the Tax Guide for US Citizens and Resident Aliens Abroad.
April 15: File 1040 and pay the taxes due Approximately July 15 (330 days after arriving in Japan): Amend return and file form 2555. Recieved a refund on the taxes paid in April.
Please keep in mind : you must spend 330 days in Japan before you can amend your return. If you leave the country or went home for Christmas, you must wait until you have been in Japan for 330 days. An extension to file is not an extension to pay. If a parent has your power of attorney, you don’t have to file a change of address form.