Here’s how to get your money back when you’re gone
If we are talking about Japan Pension Refund For Foreigners then how do you feel when you contribute to a project and don’t get your hard-earned money back? Of course, everyone is disappointed when they lose their hard-earned money. This is the feeling when Foreigners leaving Japan are unable to reimburse their contributions to Japan’s pension system because they do not understand Japan pension refund for foreigners
While some of us who work and live in Japan may stay in Japan long-term, for many Foreigners, their experience in Japan only lasts a few years before moving to another country. As long as we have income in Japan, we must contribute to the Japanese pension system, and if you stay here temporarily, you will not be eligible for state pension benefits. Fortunately, there is a system that can require Foreigners planning to return to their home country to make certain mandatory pension contributions.
Most Foreigners worry too much about the fate of their pension funds when they want to leave Japan. To avoid this avoidable emotion and potential loss to pension funds, Foreigners should understand how pension refunds work in Japan and what options they can explore to claim a pension.
Frequently Asked Questions for Japan Pension Refund For Foreigners
Japan pension refund for foreigners system may seem strange and complicated. A good way to allay these concerns is to review some of the most frequently asked questions about Japan’s pension reimbursement system.
Who is entitled to a pension refund?
In Japan, not everyone can claim a pension refund, and certain conditions must be met in order to claim a pension refund. The standard is:
- They cannot be Japanese citizens. Although they plan to leave Japan permanently, Japanese citizens cannot apply for a pension refund. Only foreigners can do it.
- You cannot have an address in Japan. For foreigners to qualify for pension reimbursement, they must leave Japan permanently and have no intention of returning.
- No need to hold a valid Japanese visa. When foreigners apply for pension reimbursement, their visas must have expired. These foreign nationals will need to cancel their visas if the visas are still valid.
- You must make at least six (6) months of pension contributions.
- You must apply for a pension refund within two years of leaving Japan. Pension refunds can only be approved if an application is made within two years of the last pension payment.
How much refund can I get back?
The total refund a foreigner can get depends on the number of months and the amount of the deposit. Generally, pension reimbursement rates are calculated based on the number of monthly payments. This is the case with the National Pension Scheme and the Employees Retirement Insurance Scheme (EPI).
Another key point, pension reimbursement stops being paid at 36 months (3 years). This tells us that even if a foreigner paid his pension for six years if he wants to get his pension back, the maximum repayment period is only 36 months. The remaining payments will not be considered. If, after receiving reimbursement, the foreigners decide to return to work in Japan, the pension system will restart and previous payments will no longer be counted.
Are refunded pensions taxable?
Japanese pension refunds are subject to a 20% withholding tax. This tax is deducted before the refund is remitted abroad to the expatriate. In most cases, withholding tax deducted from a tax refund can be claimed through a tax representative.
A tax representative must file an annual tax return to claim this tax. While 20% of the tax is refundable, the cost of hiring a tax representative can make the remaining money scarce unless the refund is large.
Social Security and Funds Withdrawal Agreement
There are two ways for foreigners to claim a partial tax refund and be prepared for any issues that may arise. Two solutions are social security agreements and packages.
Social Security Agreement And Japan pension refund for foreigners
The Social Security Agreement is a consensus between Japan and other countries to make it easier for foreigners to enjoy tax and pension benefits in Japan and their home country, especially if they do not live in any one country for a long time. These agreements, known as aggregation agreements, prevent foreigners from paying double pension contributions and enjoying certain privileges that other foreigners do not have.
Social security treaties between Japan and certain countries allow foreigners from these countries to continue to pay pensions in their home countries after leaving Japan and to continue to pay Japan pension refunds for foreigners if they later return to Japan. Additionally, these agreements allow foreigners to apply for retirement benefits such as disability, survival, or other benefits related to paying pension contributions.
Countries that have signed social security treaties with Japan are Germany, South Korea, Canada, United States, France, Australia, Belgium, United Kingdom, Netherlands, Czech Republic, Spain, Ireland, Brazil, Switzerland, Hungary, and India. In addition, other countries are currently incorporating social security agreements.
Foreigners receive pension reimbursement in the form of capital. In order to accept a one-time payment request, foreign nationals must meet the criteria set forth earlier in this article. Then simply apply for the “One-time Withdrawal Form” and submit it to the Japan Pension Service after completing the details.
Steps to get a one-time annuity refund
Follow the steps below to get your superannuation refund in one lump sum.
- Hire the services of a Japanese tax representative who can follow the tax refund process after you leave Japan.
- Make sure you meet the requirements and leave Japan correctly.
- Download the “Withdrawal Form”, fill it out and return it.
- You will receive your superannuation refund within six (6) months with a payment notice.
- Follow the steps below to claim the 20% tax refund.
- Send a “Lump-sum Payment Advice” to your tax representative in Japan.
- Ask your tax representative to file a tax return to verify the account that will be paid.
State pension schemes are often not beneficial for foreign professionals who plan to live and work in different countries throughout their careers. It is difficult, if not impossible, to get pension benefits in one country if you move from one country to another every few years. This is one of the many reasons why mobile professionals often earn higher incomes to compensate for these shortcomings.
Depending on your circumstances, you may be able to recover some of your superannuation contributions in Japan.
State pension alone is not the answer
Whether you plan to stay in Japan long enough to make the most of your Japan pension refund for foreigners planning to move from one place to another, the reality is that there may not be a single national pension system that can cover all of your retirement needs and allow You live a happy and fulfilling life after getting off work. Today’s public pensions can only ensure that people don’t age completely destitute, but one shouldn’t expect to live too long on a country’s Japan pension refund for foreigners system
Ensuring your financial future is everyone’s responsibility. You need to plan for your happy financial independence, not just relying on the state pension, but possibly as part of an overall plan. This means having private pension plans and investments to cover any significant shortfalls that may arise.
We have an easy online retirement calculator to give you a rough idea of how much you need to save for your retirement or financial independence goals.
If you are concerned about your superannuation, please contact us for a free initial consultation. Argentum is Japan’s first licensed financial planning firm serving expatriates. We advise on tax-efficient and sustainable retirement strategies designed for today’s mobile workforce. We are happy to help you start a fulfilling financial future.