I'm wondering how money gifts are viewed or handled when they're between spouses when the giver is a non-Japanese citizen with no Japanese visa living outside Japan and the recipient is a Japanese citizen who hasn't lived in Japan or owed any Japanese taxes for several decades. This matters because we're likely to return to Japan one day and we don't know how past monetary gifts from one spouse to another are viewed or treated once in Japan.
I'm pretty sure that even if there's officially no tax involved that it's crucial that only the one receiving the monetary gift has their name on accounts containing the monetary gift. It's also possible, though, that the Japanese government basically says "Nope" to gift giving between spouses outside Japan, instead insisting that any financial savings based on money earned by one spouse are treated as that spouse's money, period, and that gift giving can only take place after becoming resident in Japan. At which point gift tax can apply to any amount in excess of the allowed maximum non-taxable gift amount for any given year.
This is a technical detail I've not been able to pin down in my reading of Japanese tax law, to date. And, the tax consequences of having assets in my wife's name if they disregard that and only look at source of income for that money are potentially quite severe. So, any light that can be shed on how this issue is handled would be very helpful and much appreciated.
On a related note, my wife is wondering whether / how she can prove (or if she needs to show evidence to prove) that she's been outside Japan for well over 10 years and that she's not been a tax resident of Japan for a very long time.
by InteRest_LEtuCe2467
5 comments
Had a similar conversation with my tax advisor recently on this for a similar but not exactly the same so it might not be applicable in your case.
Did you Japanese spouse break tax residency when they left japan and have they been outside of japan for more than 10 years?
If not, the giving money to your spouse is already treated as gift, based on the Japanese limits.
Caveat, if money is giving explicitly to cover shared living expenses and you can prove it, then it is not counted as a gift.
Practical response: If you are transferring money to them and that receiving account is not in Japan. There is no direct way of the Japanese tax authorities knowing as it’s doubtful that the bank would notify japanese tax authorities. But note if they ever found out.
What matters is not whose name is on the accounts but who is exercising actual control over the assets. E.g. for investments, you should ensure she picks her own stocks and buys and sells on her own schedule if you want to be sure that the NTA will recognise them as hers rather than yours.
Evidence that you’re not tax resident in Japan is worth keeping in case you’re audited. Things like payslips or utility bills that show you’re maintaining a living in whatever country you are in.
You MUST hire a CPA in Tokyo who has knowledge of your two countries. Gift tax is what you are talking about. Do it very soon before you ever move here.
Do gift taxes have the same 10 year look back as inheritance taxes?
The rules for gift tax are summarized in [this PWC webpage](https://taxsummaries.pwc.com/japan/individual/other-taxes). It’s frankly a little tricky to read, but the result is that if your wife receives gift of foreign assets from you while you are both non-residents AND she has not been a tax resident for more than 10 years, then the gifts are exempt from gift tax.
What do you you consider a gift? If you get audited, you may find that the tax authority has a different opinion. Did you put the house in her name? Is she funding her own investment account using funds from you? Did you execute a partition agreement? Something else?
Before you move, it’s wise to figure out how the tax authority is likely to view the ownership of your and your wife’s assets, and to try to organize the accounts accordingly.
If you provide more detail about your situation, you’ll get more specific advice (from me and others).
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