My apologies in advance if this has been asked before, but I was unable to find relevant info before posting.
I will be seeking PR on a spousal visa, and do not anticipate working as an employee here in Japan.
I have worked incredibly hard and saved aggressively for the past 10 years (in the US), and invested everything I made while living quite modestly. While I am by no means super rich, I can afford to live comfortably (not luxuriously) and support a family reasonably on my investment income from the US alone. I am already living in Japan, but have not yet received PR status.
I have no idea how my employment / income status will be interpreted in Japan, and what the expectation will be for me paying into Nenkin / Shakai-Houken. I am not opposed to the idea of paying into the system, but I have been (and still am) paying into the US Social Security system. Obviously, I would much prefer to purchase health insurance in Japan, but if given the choice, I would elect NOT to purchase into Nenkin. I have taken great effort to plan for my retirement and have been paying into Social Security (similar to Nenkin in Japan) in the US already. My goal is not to avoid contributing my fair share – I am happy to pay what is expected of me – but if I am already paying into a similar system in the US, and am not employed in Japan, will I be required to pay into Nenkin as well?
I expect some people will make the argument that I should contribute for overall societal benefit. But if I am spending all my income (made from abroad) domestically here in Japan, as well as paying taxes on this income which is coming from abroad, I would argue that I am already contributing my fair share. I also have no expectation to receive any entitlement benefits from the system if I am not paying into it. Again, I am not trying to avoid paying my fair share, but I would certainly prefer not to overpay. I will of course fulfill any obligation that is expected of me, as I am generally very grateful for the opportunity to live in this country.
While I don’t plan to work as an employee, I will not be sitting on my butt all day. I’ve enrolled in an apprenticeship for traditional hand-made furniture-making and will open a small workshop of my own. Of course, I do not expect to make a lot of money selling things that I make, but I enjoy working with my hands and don’t want to be lazy and do nothing all day. If I am self-employed in this capacity with very little income received from domestic pursuits in Japan, and mainly living off of my foreign investment income, how should I expect to be taxed and contribute to entitlement programs? Will not paying into Nenkin affect my eligibility for PR status?
Thank you all for your insight! I will of course be seeking the advice of an attorney and tax professional, but am trying to educate myself to the best of my ability beforehand. Hearing from others who have already gone through this or some similar circumstance would be invaluable and greatly appreciated.
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5 comments
r/JapanFinance will have all the necessary info you need
In a nutshell
– With residency in Japan, you will be opting out of US social security and you must enroll in the Japanese pension system between age 20-60. It’s not optional. You won’t be double taxed for this. Referring to totalization agreement between US and Japan
[https://www.irs.gov/individuals/international-taxpayers/totalization-agreements](https://www.irs.gov/individuals/international-taxpayers/totalization-agreements)
– You are required to contribute to the National Health Insurance. Not optional either.
– Both health insurance and pension plans can be covered without an employer. The former will be adjusted according to your previous year income. The latter is likely going to be flat rate for you on plan 1 or if your spouse has an employer you’ll be covered through the employer if some basic conditions are met.
– The first 5 years of during your residency in Japan, if without a PR status AND if you don’t remit any interest or dividend to Japan: your US earned interests and dividends will be considered foreign income and is generally non taxable here in Japan.
– After 5 years of residency in Japan: regardless of visa status, you will become a tax resident. Regardless of whether you remit that investment income, you will pay national tax and local taxes on that amount in Japan.
– All actively earned income worldwide regardless of which bank account you receive them, regardless of how many years you have spent in Japan, will always be taxed in Japan as income tax as long as you are a resident and on spouse visa.
– Income tax is also unlikely to incur double taxation for you. You are unlikely to pay for any to the US. Check out FEIE or foreign tax credit on the IRS site.
– If your income from the US is some other capital gains or royalties, then there may be some curveballs
– The best English summary is by PwC here:
[https://taxsummaries.pwc.com/japan/individual/taxes-on-personal-income](https://taxsummaries.pwc.com/japan/individual/taxes-on-personal-income)
more like net neutrality or net neutrality.
For PR you need to follow the law.
Paying pension is the law. So unless you’re utilizing some form of legal agreement to pay US social security instead of Kokumin Nenkin (I know there is an agreement where you can pay US social
Security instead of Kokumin nenkn, but I’m not sure how it works) then you gotta pay pension if you want PR. As does your spouse.
Also when you apply for PR you have to submit your whole pension record. And if enrolled in Kokumin Nenkin only within any months in the last two years, you also need to include the receipts to prove they were paid on time too.
So even if you pay the last two years perfectly on time, because you need to include your whole pension record, if immigration suspect you’re only paying pension for two years in order to get PR and then stop paying after PR is granted… then they will refuse PR.
I got an exemption from pension for a year when I arrived without a job. No idea how long that could have lasted for but as soon as I got a PT job I back paid it as I’d like to get 10 years paid as soon as possible (I’m 53!). Not sure how old you are but maybe aim for as close to 10 years as you can. That said it’s not expensive and you’ll get the money back (and more) if you live until 70ish and it will be in yen to offset any exchange rate fluctuations. The J pension isn’t as good as my UK or private pensions but for the little it costs and to keep legal it’s a no-brainer really.
Curious how you’re paying into Social Security with only passive income.