I am an American freelancer living in Japan. I have been paying my self-employment taxes to the US government as required for a few years now. However, because I am classified as my husband’s dependent here, I have never paid for the Japanese pension (kokumin nenkin) myself as I’m exempt under classification 3 – dependent spouse.
However, I am expecting to begin a new part-time job in addition to my self-employment income. This new income will surely push me over the threshold to be considered a dependent, but I will still not be eligible for shakai hoken. So I know I will need to start paying into the kokumin nenkin system.
My question is: does anyone have experience being required to pay BOTH US self-employment tax AND kokumin nenkin? It seems to me that this means I’m simply paying into two pension systems simultaneously. I know Japan and the US have agreements to prevent this, but I’m not sure if that’s only in the case of employees without any self-employment income. Do the same agreements apply even to individuals with self-employment income? Or do I need to just suck it up and pay both? (haha)
Anyone have any experience in this area, or recommended resources? Thanks!
2 comments
Category 3 individuals get their pension and health insurance paid by their supporting spouse category 2 insurance (Shakai Hoken).
To qualify as a dependent spouse you need to be earning less than ¥1.3 million per year.
Additionally, you’re a tax resident of Japan. So Japan get taxation rights over your income, which if you had been correctly declaring would have likely shown you were earning more than ¥1.3 million per year….
So if you’re earning more than ¥1.3 million per year, not only are you committing tax fraud via the income tax act (income tax) and the local tax act (resident tax). BUT you’re also violating the national health insurance act and the national pension act.
Now if you’re earning less than ¥1.3 million per year and thus a genuine dependent spouse, then you still need to declare your income to Japan, because again you’re a tax resident of Japan, and thus Japan get taxation rights.
These are the documents to apply for a tax treaty exemption of self-employment tax due to Japanese coverage: https://www.nenkin.go.jp/service/shaho-kyotei/shikumi/shinseisho/usa/usa1.html
Be sure to use the correct one for the type of insurance (Kokumin or Shakai Hoken).
You probably could have been using this to avoid self-employment tax the whole time, as the requirement is to show proof of coverage, not payment.
If you are able to get one of these documents showing coverage going back to previous years, you could probably refile your US taxes up to three years back and get a refund.