# Tricky (?) tax question



## ADHWGT (Feb 5, 2014)

Hey guys,

I work as a freelancer in Japan for a couple of Swedish companies. Although my income is Swedish-source, I only pay taxes in Japan (as this is what the Swedish tax agency instructed me to do).

So far so good, but here comes the confusing part: when I filed my Japanese taxes this year (which was actually the first time I've done this), I was instructed by the staff at the temporary tax office here in Shinjuku to only report income I've actually earned IN Japan. So basically, I excluded all income I'd earned while on business trips or vacation in other countries.

I asked the Swedish tax agency about this point just to be sure, but they insisted that I should pay no Swedish taxes, not even on the income NOT taxed by Japan.

So my questions is this: can it really be the case that whenever I leave Japan for a certain period of time, any income I earn during that period is not taxable at all? Sounds too good to be true, which is why I doubt it actually is...

Any help would be appreciated!


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## larabell (Sep 10, 2007)

Payment for work you physically perform (ie: income from your employer) is usually treated as having been earned wherever you did the work. So yes, you can exclude a pro-rated portion of your income for the times you were not in Japan when it comes to paying tax in Japan (there might be complications if you brought the money into Japan later but, for now, I'll assume the money stayed outside of Japan).

What you pay (or don't pay) in Sweden depends on the tax laws in Sweden. It's certainly possible that the law says that anyone outside of the country for more than some number of days doesn't even have to file. It's also likely there's some minimum you'd have to make before taxes even kick in (to avoid taxing people who make very little) so maybe the sum total of what you earned while in Sweden wouldn't be enough to incur a tax liability so they're just trying to save you and themselves a lot of useless paperwork. What you owe for times you're in some country other than Sweden or Japan depends on the laws of those countries but even the US, with it's draconian tax laws, doesn't expect a non-citizen, non-resident who is only in the country for a short period to file taxes on the income they made while they were there.

BTW, I've heard the US is one of the only countries that taxes its citizens even when they're living outside the US. So I have no problem believing that Sweden doesn't care what you made if you don't actually live in the country for a significant part of the year. I've been told that Britain's tax law works the same way... that if you're a resident of some other country, you don't even have to file (there are probably more Brits than Swedes on the forum so maybe someone could comment on how Britain would handle a similar situation).

Besides... you have an opinion issued by the Swedish tax office so even if what they say isn't true, it will be hard for them to prove you were negligent or evasive by following their advice. If that means that some part of your income isn't taxed at all... I'd consider that a lucky corner case and move on.


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## ADHWGT (Feb 5, 2014)

Thanks for replying – again! Your advice was really helpful back when I had some related tax questions before filing in March 

Your interpretation certainly sounds promising... As for the money I've earned in other countries than Japan, I can't swear that all of it has stayed outside Japan. (I still have to pay my Japanese rent every month while I'm not here, et cetera.) It would take me a while to go back and figure that out.

As for my obligations in Sweden, everything is absolutely clear: I'm not supposed to pay any taxes there at all, as long as I don't spend more than 72 days per year there. (This is what I've been told multiple times by the Swedish tax agency.)

As it is, I'm spending two to three months per year in countries other than Japan (mostly Sweden and the US, where I have a journalist visa, just like I do in Japan).

I've asked the same question on a couple of other forums as well, and a lot of the replies have been along the lines of "the Japanese tax people were probably wrong when they told you not to report income earned in other countries". Hope that's not the case...


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## BBCWatcher (Dec 28, 2012)

larabell said:


> Payment for work you physically perform (ie: income from your employer) is usually treated as having been earned wherever you did the work.


I'm going to disagree with that, certainly as a general statement.

Most countries' tax authorities have a concept of "tax residence." That concept may be based on various tests, such as physical presence, "center of interests," and/or some other factors. Individuals who are deemed tax residents are generally taxed on worldwide income, though they generally also receive credits and/or exemptions for foreign taxes paid on that income.

Having some experience with the Japanese tax system, Japan is one such country. However, Japan has an unusual "non-permanent resident" category which sounds like what you're describing. If the original poster qualifies for NPR according to the Japanese definition, then that should be favorable in the circumstances.

The United States, another country mentioned in this thread, would generally require filing a non-resident income tax return for U.S. source income in the case of journalists working there. New York State (to pick an example) also has tight rules that require paying state income tax on income attributable to work in New York State, even for one day. And again that'd involve filing a non-resident New York State income tax return. The United States is not Sweden, in other words. Each country (and locality) has its own tax rules.


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## ADHWGT (Feb 5, 2014)

BBCWatcher said:


> Having some experience with the Japanese tax system, Japan is one such country. However, Japan has an unusual "non-permanent resident" category which sounds like what you're describing. If the original poster qualifies for NPR according to the Japanese definition, then that should be favorable in the circumstances.


Hmm, I see. Since I've lived in Japan for about two years by now, I guess I would fall into the "non-permanent resident" category for tax purposes, yes.

And in that case, according to this tax guide... http://www.nta.go.jp/tetsuzuki/shinkoku/shotoku/tebiki2013/pdf/43.pdf
..."Only the portion deemed remitted to Japan is taxable."

So if the money I earn abroad is not remitted to Japan afterwards, I don't need to declare it as income when filing my taxes?


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