# silly question but need more info on how paid and where i am taxed



## traceyjane76

Hey all,

I have been approached by my company with a very generous offer to work as an expat in Tokyo for a 2 year assignment. I am really excited about this (I have previously helped out for a couple of week stints and enjoyed it).

I know that this question will have been asked before, and probably sounds very naive but.... I am a UK employee, and the company tell me I will remain a UK employee... but they have offered me money in yen. Does this mean that they pay me in GBP, and I pay tax in the UK and it is then converted to yen? I am a bit confused... because surely if they pay me directly in yen i need to pay tax in Japan.... how will this be done? and will they have to pay the Japan authorities tax for me? any help will be greatly appreciated because I would like to be clearer on this before I speak with HR....


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## larabell

traceyjane76 said:


> I am a UK employee, and the company tell me I will remain a UK employee... but they have offered me money in yen. Does this mean that they pay me in GBP, and I pay tax in the UK and it is then converted to yen? I am a bit confused... because surely if they pay me directly in yen i need to pay tax in Japan.... how will this be done? and will they have to pay the Japan authorities tax for me? any help will be greatly appreciated because I would like to be clearer on this before I speak with HR....


If you're physically present in Japan and performing work for which you are being compensated, you will have to pay income tax in Japan. It really doesn't matter where you receive the money or in what currency -- what matters is where the work is being performed (the tax treaties make exceptions for short stays but 2 years is hardly short). You'll get a bit of a break in the 1st year, as local taxes are based on the *previous* year's income, which in the 1st year is zero.

Whether you *also* have to pay tax in the UK depends on the UK's tax laws. For example, the US taxes their citizens on worldwide income, even if they're working abroad, but there is an $80K exclusion and deductions for Japanese taxes paid on anything above that $80K. Practically speaking, that usually means zero US tax for all but the highest paid ex-pats -- but the paperwork required to get down to zero US tax is somewhat daunting. Someone from the UK who has worked abroad can probably answer that question or you can ask a tax expert in the UK.

If the company quoted you a salary in yen, you'll probably be paid in yen. In that case, they will probably pay you in Japan. You will have to ask your employer about that because either way is possible. When I first came to Japan, I was paid in US dollars in the US. But they could pay you in yen in Japan and it wouldn't really make much difference tax-wise.

That said... if they pay you in Pounds, you should make sure there's a clause that allows for a salary adjustment in the event the Pound/yen rate changes significantly during your assignment. You're probably not in a world of hurt if they say no -- the yen is at a historic high right now and it's less likely it will go much higher. But, then again, "they" said that at 100 yen/$ and look what happened. Since most of your day-to-day expenses will be in yen while you're here, you should either agree on a fixed salary in yen or get a clause that protects you from a sudden rise in the yen's value (or a drop in the Pound, either of which would mean less money for you to spend here).

As for tax paperwork, you should push to have the company agree to prepare your Japanese tax return and, if required, your UK return. The Japanese tax return is not complex and, if you're paid in yen, may not even be required. Even so, any additional complexity will be due to the assignment so your employer should be willing to pick up the cost of preparing whatever paperwork is required.

There is one more tax-related issue you should be aware of. If the company is giving you anything extra as part of your assignment -- like cost-of-living or housing allowances, those will also be taxable. You should either get the company to "gross-up" the allowances (ie: add a little extra in to compensate for the extra tax) or propose a tax equalization plan where the company pays your taxes and then you pay them what you would have paid back home, based on a contrived UK return. That way you won't end up giving half your allowance back to the UK and Japanese governments.

One thing to consider, though, is that tax equalization payments are also taxable but in the following year. The subtle effect is to make you more expensive to the company each year you remain in Japan, making it harder to convince them to let you stay beyond 5 years or so, should you decide you really like it here. If there's no way that your initial 2 years can be extended, this isn't an issue. But it you're hoping to convince them to extend the assignment later, a straight gross-up each year is less likely to thwart your plans.

Things to ask about when you talk with HR would include: health insurance (if you're still a UK employee do you still get Japanese health insurance), housing (not just who pays but whether they'll actually help you find a place), trips back home (if you're into that), repatriation if you happen to get laid off (which I believe may actually be a requirement for a working visa but... mentioning it anyway will make it sound like you've done your homework). There are probably other things so maybe others will reply if I've missed something.

Good luck on your new adventure...


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## traceyjane76

Thank you so much this rteally helps me! My biggest worry is making sure I pay tax in the right country at the right time


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## Joppa

traceyjane76 said:


> Thank you so much this rteally helps me! My biggest worry is making sure I pay tax in the right country at the right time


As far as UK income tax is concerned, if you become non-resident for tax purposes, you are only taxed on income arising in UK, such as savings, investment and rental. To become non-resident, your work needs to cover a complete tax year, you live abroad for 183 days minimum and don't spend more than 91 days per year visiting UK over 4 years.


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## larabell

traceyjane76 said:


> My biggest worry is making sure I pay tax in the right country at the right time


All the more reason you need to talk to your HR representative and make sure your company provides a local tax specialist to take care of the paperwork. They can't just assume you'll know all this stuff and take care of it yourself.

Speaking of deadlines, the deadline for personal income tax returns in Japan is March 15 and there are no extensions. Salaried employees with no special issues (ie: no stock sales or non-company income) usually have their last paycheck adjusted such that their witholdings exactly match their taxes for the year and no separate return is required. That's not available if you're paid outside the country.


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