I will show the second example which is similar to the first example.
Example 2
I am from Australia and have Australian nationality. I live in Japan and run my own business at home as a web designer. My wife is a Japanese and she is an employee. I just moved to Japan on June 20, 2018 after I got married and I am renting an apartment with my wife. Since I am working from home as a web designer for Australian companies and Japanese companies, I received monetary rewards from these companies in 2018.
I have another income from Australia. I bought an apartment 5 years ago and I am paying off the loan of my apartment. After I left Australia, I let my friend lease my apartment for 1,000 Australian dollars (AUD) per month.
I received 20,000 AUD before I left Australia and 30,000 AUD after I moved to Japan from Australian companies. I also received 1,000,000 yen (JPY) from Japanese companies after June 20, 2018.
Note : These incomes were from January 1, 2018 to December 31, 2018.
I receive the monthly rent of my apartment in my Australian bank account and it is not transferred to my bank account in Japan.
How can I calculate my taxable income and my tax payment in 2018?
Answer 2
You are a Non-permanent resident. Your taxable income is the amount with respect to their (a) income other than foreign source income, (b) foreign source income paid in Japan and (c) foreign source income paid abroad and remitted to Japan from abroad after you moved to Japan.
As an individual business owner, the taxable income is based on the calendar period. Therefore, your taxable income would be the monetary rewards from January 1, 2018 to December 31, 2018. However, 20,000 AUD which you received does not include your taxable income because it is the income which you received while you were a Non-resident.
Moreover your apartment rent is foreign source income paid in Australia, so it does not include (b) foreign source income paid in Japan. Since you also do not remit your apartment rent to Japan, it does not include (c) foreign source income paid abroad and remitted to Japan from abroad after you moved to Japan.
Your taxable income is the income except your apartment rent which you received after you moved to Japan. That is to say the taxable income is 30,000 AUD plus 1,000,000 JPY. Tax base amount to multiply by income tax rate is the amount that you deduct your expenses and deductions such as exemptions for children from your taxable income. When you calculate your tax base amount, you need to convert from AUD to JPY.
30,000 AUD is (a) income other than foreign source income.
Note : 30,000 AUD is paid from Australia but you offered your services in Japan. So, it is not (b) foreign source income paid in Japan.
1,000,000 JPY is (a) income other than foreign source income since you offered your services in Japan.
Calculation in your case
Taxable income : 4,000,000 JPY (30,000 AUD plus 1,000,000 JPY)
If the exchange rate of 1 AUD is 100 JPY, 30,000 AUD is 3,000,000 JPY.
Total expenses : 2,500,000 JPY
(Travel expense 500,000 JPY, Repair expense 200,000 JPY, House rent (50% for business) 200,000 JPY, Mobile phone and the internet bill 100,000 JPY, Advertisement 200,000 JPY, Supplies expense 400,000 JPY, Insurance expense 200,000 JPY, Depreciation expense for PC and software 700,000 JPY)
Taxable income after deducting your expenses : 1,500,000 JPY
Deduction for social insurance premiums : 440,000 JPY
Exemption for child : 380,000 JPY
Basic exemption : 380,000 JPY
Tax base amount to multiply by income tax rate : 300,000 JPY (1,500,000-440,000-380,000-380,000)
Income tax rate in this case : 5%
Tax imposed on the taxable income : 15,000 JPY
