Change in law relating to deduction for spouse and dependent in 2015.

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Here, I want to explain about change in law relating to deduction for dependent and spouse.

Assumed a resident in Japan ( hereinafter called to ” taxpayer ” ) has income in Japan.
Taxpayer pays money to sustain his dependent relatives ( Fuyo shinzoku =  扶養親族 ).

Dependent relatives means as below.
1 Taxpayer’s relative and his/her age is 16 or over 16 years old.
2 Relatives who dependent on taxpayer’s earnings.
3 The amount of Relative’s Annual earning is 1,030,000 yen or below 1,030,000 yen.
4 Relatives who are not family employee.

If a taxpayer has relatives who can satisfy all these conditions, taxpayer can deduct specific amount from his taxable income.
In this way, Japanese government try to support taxpayers who sustain his relatives.

Amount of deduction differs depending on situation of relatives.

Relatives his/her age ( As of end of year ) is 16 or over 16 years. : 380,000 yen

Relatives his/her age ( As of end of year ) is 19 or over 19 years and below 23 year old. : 630,000 yen.

Relatives his/her age ( As of end of year ) is 70 or over 70 years. : 480,000 yen or 580,000 yen

Dependent relative does not include spouse.
But, there is system of deduction for spouse deduction ( Haigusha kojo ) .

Age of Spouse ( As of end of year ) is below 70 years. : the amount of deduction is 380,000 yen

Age of Spouse  ( As of end of year ) is 70 years or over 70 years. : the amount of deduction is 480,000 yen

These deductions are applicable even if taxpayer’s relative or spouse does not live in Japan.
So, a taxpayer could use this deduction by pretending that taxpayer sustained his / her relative who might live in foreign country.

A taxpayer could pretend that he had dependent relatives or spouse out side of Japan.
And number of relatives are 10 and he could deduct
380,000 yen × 10 = 3,800,000 yen.
So, taxpayer in Japan could reduce 3,800,000 yen from taxpayer’s taxable income.
Of course, this is tax evasion.

But, now taxpayer can not use this method.
Now, in the case taxpayer’s relatives or spouse  is non resident of Japan, taxpayer has to provide certificate.

This certificate should prove that
1  The dependent or spouse is actually taxpayer’s relative or spouse. This certificate should be issued from foreign government.
2  Document that can show taxpayer send money to his dependent in foreign country.
For example, scanned copy of bank book.

Non resident of Japan can not apply deduction for dependent and spouse.
If taxpayer in Japan is non resident ( even if a person is non resident of Japan, when he has earnings emerged in Japan, he still has to pay income tax. ), he can not use deduction for dependent and spouse.

Non resident can apply basic deduction of 380,000 yen.
( July 2nd 2015. )
Business in Japan, July 2nd 2015.

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