From: neilf@natinst.com (Neil Feiereisel)
Subject: Working in Japan (relocation, tax issues)
Organization: National Instruments, Austin, TX
Date: Mon, 17 Aug 1992 23:21:33 GMT

I'm currently working for an American company in Austin, Texas.  Next year my
company will send me to Japan for a 2-4 year stint in the Tokyo office.  I
would like to be sure that I get the best relocation package possible, and
would also like to save on taxes wherever possible.  

I will be paid by the Japan office in Yen and will most likely choose to pay
taxes in Japan.  At the same time, I will continue to receive some benefits
from headquarters (401K program, profit sharing).  (I have no idea how to work
this part out.)

The following issues and questions are those that I am currently aware of, but
would appreciate any information on other issues that I should consider with
regards to working overseas for an extended period of time.


Negotiating a favorable relocation package with my company
----------------------------------------------------------
   In the hopes of negotiating a favorable relocation package, what kind of
   issues should I consider?  Obviously I need to know how the cost of living
   compares between Austin, Texas and Tokyo, Japan, but what else should I
   emphasize when justifying a significant cost of living allowance?  I
   currently have come up with the following:
   
      - significant increase in cost of living (housing, food, transportation)
      - need to purchase many new appliances (TV, VCR, microwave, etc.)
      - need to purchase new furniture (that we don't bring with us)
      - vacations, leisure activities will be quite expensive
   
   Is it reasonable to ask for a yearly trip back to the states for the
   family?  What other non-salary benefits should I consider?
    
   How can I retain the same level of benefits (very good and cheap health and
   dental insurance)  If the Japan office pays the difference between what I
   would have paid for health and dental here and what it actually costs in
   Japan, will that be considered a taxable benefit in Japan?
   

Reimbursement of Moving Expenses
--------------------------------
   In the U.S., moving expenses are considered taxable income but are
   deductible if you itemize your deductions.  It only makes sense to itemize
   your deductions if they will be larger than your standard deduction ($5,700
   for a married couple filing jointly).  If my moving expenses are $9,700, I
   really only get to deduct $4,000 since I would have gotten the standard
   deduction of $5,700 if I had not itemized.  My questions are:
   
      1.) Is there a more favorable way of handling moving expenses if
          reimbursed by headquarters in the U.S.?
      2.) Does anybody know how moving expenses are regarded in the Japanese
          tax code?  Are they considered taxable income?  If so, are they
          *completely* tax deductible?  Perhaps I could get the Japanese office
          to reimburse me for the moving expenses rather than the U.S.
          headquarters.


Paying Taxes In Japan Rather Than In The States
-----------------------------------------------
   I thought that paying taxes in Japan would be favorable compared to paying
   them in the states.  However, I'm having second thoughts.  While working in
   Japan in 1988, my take home pay was 88% of my gross taxable income of 7.5
   million yen.  But this was before I started paying significant amounts of
   local tax (it seems that the first year you don't have to pay any local
   tax), and did not include my health insurance, which I was paying
   separately.  If I adjust for those, I was really taking home only 75%.  At
   that rate, perhaps paying U.S. income tax wouldn't be all that different.
   
   1.)  Does anybody have any ideas on whether it would be better to pay taxes
        in Japan or in the U.S.?
   
   
Health Insurance, Welfare Insurance
-----------------------------------
   Last time I worked in Japan, I avoided the welfare tax [kousei nenkin
   hokenryou] (which at my company was lumped together with the health
   insurance) altogether by having my own health insurance.  Before starting
   work, I was studying in Japan and had the national health insurance [kokumin
   kenko hoken I think].  Since I already had this insurance, I had the choice
   of continuing with this insurance or going with my company's combined health
   and welfare (really a pension) insurance.  Although the health insurance
   wasn't too expensive, the welfare insurance was quite significant, and I
   knew I'd never be collecting a pension in Japan.  Even though I paid 38,140
   yen (US$300) per month for the national health insurance [kokumin kenko
   hoken], it was cheaper in the long run to pay the national health insurance.
   
   1.)  Can I do this again?  I'm guessing I can't since I'm not currently
        paying the national health insurance.  But maybe I can since I was
        paying national health insurance for a couple of years.
   2.)  Is it normal to have health insurance and welfare insurance lumped
        together?  Is there any way to choose *not* to pay the welfare
        insurance?  After all, I'll never collect!
   3.)  Since I'm currently enjoying good health and dental benefits in the
        States, I expect to have similar benefits in Japan.  If the Japanese
        branch of my company pays for my health and dental insurance, will
        those be considered taxable benefits?


(Non-)Taxable Benefits, Deductible Benefits
-------------------------------------------
   1.)  What kind of benefits are not considered taxable income (besides
        transportation allowance)?  Namely, when a Japanese company pays for
        your housing, or at least gives you a partial housing allowance, is
        that considered taxable income?  How about a yearly "home leave," where
        the company pays for my family's plane tickets for a trip back to the
        States?
   2.)  When would a company want to/not want to pay a housing allowance?  The
        only reason I can see that a Japanese company would not want to pay a
        housing allowance is that the employees who are not getting a housing
        allowance might find out and feel they are being unfairly treated.
   3.)  This question is also asked in a separate section, but is reimbursement
        for moving expenses considered taxable income?
   
   
Local (ku) Tax
--------------
   Can anyone clearly define the rules behind the local tax?  Is Resident tax
   (Juminzei) the same thing as Ward tax (Kuminzei)?  I seem to remember
   getting hit for the local tax after I had worked for one year.  Do you just
   get your first year for free?  Or does the tax get prorated the second year
   to make up for the first?  Is there a significant difference in local tax
   depending on which ward or city you are in?  Should this be a consideration
   at all when choosing where to live?
   

Finally what other issues should I consider with regards to relocating to
Japan.  Moving expenses, housing issues, etc...

I assume many people are interested in the issues I've raised here.  Please
respond to the net rather than send e-mail if your response would be of value
to many people.  Of course I'd be happy to get e-mail responses as well.  If
you'd like a copy of the responses I get by e-mail [with names and e-mail
addresses stripped out], send me a short message indicating such.  I'll send
you a copy of the responses in about 5 weeks.  If you don't want your response
distributed at all (for example, you give salary details), please indicate so;
I promise I will not to distribute it to others.

If anybody can point me to a good reference that explains the Japanese tax
system in English, that would be very much appreciated.  Or even a Japanese
reference if it was particularly easy to read (if it reads like our tax
documents, I don't think I'd get through it too easily!)

If you have gone through this process yourself, and would be willing to share
your experience with me, I would very much like to call and talk with you over
the telephone.  I'll keep it as short or as long as you like, and would truly
appreciate any tips and advice you could give me.  Please send e-mail if it's
OK to call you.  For those living in Japan:  I'll be there for the first three
weeks of September on a business trip.  If you'd be willing to share your
understanding of these issues over the telephone with me, I'd very much
appreciate it.  Please send me e-mail if you're willing.

Neil Feiereisel
neilf@natinst.com
512-343-2753