Overseas Freelancer Taxes in Japan?

[Natasha Lutes]

Hi Everyone,

A long time ago I had taxes deducted from an invoice I sent to a company in Japan.  I haven't worked with a great amount of companies in Japan, but the ones I worked with previously did not do this.

I'm going to be collecting on an invoice with a new Japan-based agency soon and I'm wondering if it's common for taxes to be deducted for overseas freelancers?  If they do deduct the taxes, how would I go about getting it back?  Has anybody else come across this?

Thanks in advance!

Best,

Natasha Lutes

[Eleanor Goldsmith, Kinsho Language Services]

Natasha Lutes wrote

I'm going to be collecting on an invoice with a new Japan-based agency soon and I'm wondering if it's common for taxes to be deducted for overseas freelancers?  If they do deduct the taxes, how would I go about getting it back?  Has anybody else come across this?

 

 

I've been freelancing for agencies in Japan ever since moving to NZ 9 years ago and none of them deduct Japanese income tax because I'm not a Japanese resident. They should only deduct tax if you're resident in Japan, in my experience (e.g. the agency I did most of my work for at the time I moved to NZ stopped deducting tax the moment I left Japan; while living there, I did also work for Japanese agencies that didn't deduct tax at source). The agency's local tax office should be able to provide guidance if the agency doesn't know what it should do. If the agency deducts it without telling you, insist on it reimbursing you on your next invoice (or make a second payment, bearing all bank charges on both sides itself), rather than making you go through the rigmarole of trying to file a tax return from overseas as a non-resident.

 

Here's hoping it's a smooth process for you.

 

Best wishes,

 

 

 

 

Eleanor Goldsmith

Auckland, NZ

 

 

[Edwin Whenmouth]

What Eleanor writes is true, but not always possible to insist on.

I am also in New Zealand and have worked both here and in Australia for customers in Japan. Some don't deduct withholding tax, others do. It seems many tax offices in Japan want to classify payment for translation as royalties, which would mean it is subject to withholding tax. Though this is patently absurd, not all companies are willing, or able, to challenge the ruling. You might be able to convince a customer to take on the challenge, or you might lose some customers if you make them choose between you and the tax office.

Depending on where you are based, you can probably claim back the tax withheld in Japan from in your tax return there. The amount you can claim back depends on the tax treaty your country has with Japan, but the amount that Japan is allowed to tax you is set by the same treaty and should be the same percentage. (In Australia this was 10%, in New Zealand now it is 5%). To claim that rebate for tax paid overseas you do need to keep records, with documentary evidence that the tax was withheld. If in doubt, ask your country's tax authority for details of any tax treaty it has with Japan. You may be able to find this online.

Edwin Whenmouth

[Fred Uleman]

If a translation agency is willing to bow to the tax office and classify translation payments as royalties, does that mean you can get a letter from them stating that you (the translator) own the copyright on the translation? (Yes, this is a snarky rhetorical question.)

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Fred Uleman

[Natasha Lutes]

Thank you very much for all of the advice!

It turns out that this particular agency does not withhold tax for overseas-based freelancers, but this is all good to know for future reference anyway.

Fred, I think you have a very valid point there.  I wonder what the law surrounding royalties and copyrights are?  Perhaps insisting on holding the copyright to the translation would be a good way of being paid the full amount (and then not working for the client in future - though I admit I immediately cut ties with the last agency that withheld tax).

Best,

Natasha

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