US corporation but work in Japan(Subsidiary)?

Question

If I take job with US corporation but work at subsidiary in Japan what are tax implication...Do I pay Tax in US, Japan or both.
Do I take Japanese yen or in US dollars in wages?

Can someone answer this in complete detail

Answer 1

Get a copy of IRS Pub 54 from the IRS website. It will tell you most of what you need to know as a US citizen or resident working overseas.

How you are paid is up to agreement between you and your employer. Normally you would be paid in the currency of the country where you are working.

You will pay Japanese income taxes on the income. That is unavoidable. If there is a tax treaty in place between the US and Japan that could affect that but normally the only people protected by tax treaties are certain students, college and university professors and fellows, and sometimes medical professionals.

Pub 54 will explain the US tax position. You may be able to claim the Foreign Earned Income Exclusion or take a credit against your US tax liability for the Japanese income taxes paid. You can figure your taxes both ways and go with whichever way is most beneficial to you. A detailed discussion is beyond the scope of this forum.

The rules are a bit complex and the timing of your returns is important. Filing a late return can be extremely costly to you, more so that if you filed late in the US. For this reason it's a good idea to consult with a tax pro who has experience in foreign-source income.

Answer 2

When you are in Japan with the subsidiary of a US corporation, you are most likely to be paid in Japanese yen. Since you will be working in Japan, you will need to pay taxes in Japan. As a US citizen, you are required to file income tax return every year no matter where you are in the US or aboard. The good thing is that you have a higher deduction limit as an expatriates. If there is a tax treaty between US and Japan, you might be able to get tax credit for the taxes you paid in Japan. Each country and individual case is unique, so you might want to check with your tax adviser.