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The pain and the pleasure of paying taxes in Japan

I sold my house in South Africa a few years ago, partly because I knew I would not return, partly because it's a pain in the butt to be a long-distance landlord. Initially I invested the money in South Africa – the country has a booming economy and high interest rates – but eventually I transferred some of it to Japan. That's when the fun started.

I didn't declare this as income in Japan, because I'd pay the required tax on the transaction in South Africa. Oops. What I didn't know was that a) Japanese banks inform the tax authorities of any transfer larger than ¥1 million into your account and b) as soon as money enters Japan, it counts as income, regardless of what preceded the transfer. (Keep in mind that there's no tax treaty between Japan and South Africa. Different rules could apply to different countries.)

Thus it came to pass that I received a letter from my local tax office requesting an explanation of "foreign funds". I panicked. Bitter experience in my birth country has taught me that it's better to get on the wrong side of the police, even the secret police, than the receiver of revenue. The latter will screw you in every way impossible.

I started Googling for professional assistance, preferably tax consultants experienced in foreigners' tax problems. I found plenty of help for companies, but not much for private individuals. I did stumble across one Japanese consultant who practices in central Tokyo and does foreigners' tax. This person quoted me ¥250 000 for completing the "foreign funds" form and a new tax return form for that particular year. A quarter of a million yen, and that's after a 30% discount.

It made me realize anew how easily foreigners can get fleeced in their adopted country. It also made me determined to solve my own problem. So I went to the tax office myself, and what I thought would be a nightmare turned into a very pleasant experience.

Tax issues? Pleasant? Yes.

A friendly, sympathetic woman at the tax office helped me to complete the forms. It took about two hours in total. It didn't cost one yen. I must add that The Hero graciously accompanied me, translated when necessary, looked suitably serious throughout the process and flashed his most charming grin at well-timed intervals.

Fortunately I don't have to pay extra tax, because Japan allows you up to ¥30 million tax free when you sell your primary residence. That is dirt cheap for a house in Tokyo, but a pretty decent amount for South Africa. However, I still had to complete the necessary forms (explanation of foreign funds, statement of capital gain for real estate, confirmation of resident status, adapted tax return form) to prove that my funds aren't income from rhino horn smuggling, and to get official confirmation that I can legally claim tax-free income.

Although it involved endless detail, it was almost pain-free. Almost. I winced each time we had to force a freewheeling African situation into a rigid Japanese tax form.

"What was your house made of?" my tax angel asked.
"Bricks," I answered.
"Renga," The Hero translated.
"Renga?" she responded. "I don't think we have that on our list. Concrete?"
"Errr, no," I said.
"Renga, renga, renga," she repeated. "Ah, here it is." It was last on the list, after wood and hardboard and plaster and asbestos and straw and mud and concrete and steel and glass and blue tarpaulin and whatnot.
"Did you buy the house and the land?"
"Yes."
"How much was the house and how much was the land?"
"Errr. I don't know. You always buy them together in South Africa, for one amount."
"I must supply two figures, one for the house and one for the land."
"Oh."
"Land is very expensive in Japan. What about South Africa?"
"The house is more expensive than the land."
"Maybe 80% house, 20% land?"
"OK."
"Did you buy a new house?"
"It was five years old."
"You bought an old house?"
"Almost new. Just five years old."

I beamed. She looked baffled.

"I have to calculate your house's depreciation, because that will decrease the amount liable for tax," she continued.
"Depreciation? Errr. Houses don't depreciate in value in South Africa. They appreciate." I stared at her. I was stumped.
"It was worth more when you sold it?" She stared at me. She was stumped.
"Yes."
"Oh, but it has to depreciate."
"It has to?"
"Yes, it has to, on this form."
"Oh."
"We can calculate depreciation based on the Japanese situation."
"OK."
"I need to know the size of your house to calculate depreciation. How big was your house?"
"It was 250 m2."
"How much?!"
"250 m2."
"?!"
"I'm sorry. I know that's big in Japan, but it's small in South Africa."
"We don't have a size of 250 m2 on this list."
"I'm so sorry* for this trouble." I used the word meiwaku, 迷惑, which means to cause trouble, annoyance or embarrassment.

My tax angel and I stared at each other.

"Maybe the land was 250 m2," I offered as an alternative.
"That is acceptable," she said, relieved.

I was in a state of shock when I finally left the tax office. I had expected nothing but trouble, indifference interspersed with hard-arsed arrogance and an "out to get you" attitude. That's what awaits you in any encounter with South African bureaucracy. Instead, I was treated with courtesy, sympathy and endless patience. The tax office tried to help me. They even brought us coffee at the start of the meeting, and please note, it was a man who brought the coffee. A man. Not a woman.

That's it. This is a crazy country after all.

* When you don't know how to respond appropriately in any given situation in Japan, apologize. It doesn't matter what you apologize for: for breathing, for stealing your sisters' books when you were six, for being a clumsy ignorant southern barbarian who doesn't understand the intricate technicalities of Japan's tax laws. Just apologize.

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