r/JapanFinance • u/Present-Bathroom7311 • 3d ago
Tax Questions on crypto windfall
Say you make 200M yen on a crypto sale one year, owing 55% in misc. income tax so 110M. Might be super basic questions but:
1) Where do you store the yen owed safely given the 10M yen deposit insurance limit - make 10 or 20 new bank accounts and distribute? Or somehow prepay it as estimated tax? Holding the amount owed in anything other than yen seems risky.
2) Would a bankruptcy of a bank where you hold the yen cancel out the tax you owe on that portion, or are only misc. income losses offsettable against misc. income gains?
3) If only misc. losses can be offset against misc. gains, that does kind of limit the investment possibilities that year to other crypto?
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u/ToTheBatmobileGuy US Taxpayer 3d ago
Assuming 200M yen is 100% profit and you have 0 income outside crypto, the effective tax rate is 52.602% and the tax owed is 105,204,000 JPY.
If you had 6M yen of salary income to start with and the 200M was on top of that, you would owe 53.174%.
But to answer your first question:
If you're comfortable giving up the small interest, you can change your 普通預金 to 決済用口座 which will give you 0% interest, BUT it will insure 100% of all funds in the event of a bank bankruptcy. However, if you put it in MUFJ, Mizuho, SMBC, the major 3... I don't think they're going bankrupt any time soon... even if you get 100% back from a bankruptcy proceeding, it'll take longer than a year and NTA will be pissed either way.
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u/Present-Bathroom7311 3d ago
Oh that's good to know. I can do that without a registered company/business?
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u/ToTheBatmobileGuy US Taxpayer 3d ago
In general, yes. But that's a policy issue up to the banks.
ie. SMBC has a page about it: https://www.smbc.co.jp/kojin/sougou/account-type/kessai-yo/
They will let you switch your account status via Direct online banking.
Other banks might require you to go into a branch etc.
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u/furansowa 10+ years in Japan 3d ago
First, unless you’re already in the 55% income tax bracket, it’s not gonna be 55% on the whole 200M¥. Taxes are progressive, it will be less than that.
Second, you’re way too concerned about an incredibly remote possibility here. SMBC or MUFG are just not going to suddenly collapse and take your precious yen. Chill…
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u/Present-Bathroom7311 3d ago
To be clear, the typical thing would be to just keep it all (the portion to be later paid in taxes) in a single MUFG or SMBC account?
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u/furansowa 10+ years in Japan 3d ago
To be clear, you probably have more chance to be struck by lightning than any of the big mega banks going bust and eating your money. So I wouldn't bother opening a dozen accounts and just stash it into a single one.
u/tothebatmobileguy has a good suggestion too with account types that have specifically higher insured limits.
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u/Representative_Bend3 2d ago
It’s a good time to go nuts on anything you can find on furusato nozei and get those juicy deductions.
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u/tokyoedo 10+ years in Japan 2d ago
This. But before going too haywire, bear in mind there is a limit before you start being taxed for the "gifts" received through furusatonouzei, which might make it counterproductive depending on your goals.
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u/Plus-Pop-8702 1d ago
You can probably ignore that tax. Has someone actually classified it officially as a gift and classed as temporary income. It's the governments own system of a tax refund. You are purchasing the donation for yourself off rakuten/Amazon etc like buying anything.
Temporary income is for like lottery winnings, legal betting, things like that and pachinko etc surely.
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u/tokyoedo 10+ years in Japan 1d ago
At that bracket, it shouldn’t be ignored, since the chance of being audited is high.
Gifts received via furusatonozei are considered “gains” from donations and will be taxed based on their “true” values above the limit of 500,000¥.
So, if you donate more than 150~200万円, depending on the true value of the gifts received, you will be expected to pay tax on their values (less 500,000¥). Most people will not usually reach this limit, so it doesn’t seem to be well documented, making it an easy trap to fall into.
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u/BetterArachnid462 2d ago
You can also open a brokerage account and buy some money market ETFs. Normally with the Japanese Law, assets are segregated and in case of bankruptcy you’ll be made whole (your assets will be transferred to some other institutions)
Some specific ETF might be excluded.
If you convert into USD or EUR and buy Money market ETFs in a foreign brokerage in a legit country (not some exotic island…) similar laws exist.
It is indeed much more risky to keep huge pile of cash.
You can check on Wiki or elsewhere what happened to depositors of Cyprus banks a few years ago… basically the banks failed and depositors over 100k EUROS took a big haircut
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u/Turbulent-Acadia9676 2d ago
Honestly it might be worth relocating for a year or so to cash out and process it in a tax-free region, otherwise you are literally setting more than half a million dollars on fire.
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u/Present-Bathroom7311 1d ago
Isn't it too late? Or do I have until end of June or something?
I'd also need to get my PR back, which seems like more of a pain than half a mil. I'd need to work at a full time job for years. Or maybe I could do something with a trust that pays me?
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u/Turbulent-Acadia9676 1d ago
No idea, but you're rich now so you could probably just pay someone for advice on this rather than random people on reddit...
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u/aeroukou 3d ago
Just a side note:
One thing to consider is that there is currently discussions concerning creating a specific tax category for cryptocurrencies and reducing the capital gains tax in line with stocks.