Many foreign nationals who have recently moved to Japan fall into a special tax category called "non-permanent resident". Non-permanent residents are not taxed on all of their worldwide income. Overseas income is taxed only to the extent it is paid in Japan or brought into Japan.
We can help if you
- moved to Japan a few years ago and have rental income, dividends or interest abroad
- transfer money from an overseas account to your Japanese account
- want to know whether you are a non-permanent resident and when you will become taxable on worldwide income
- sold shares abroad and are not sure whether you need to report them in Japan
Who is a non-permanent resident?
A resident of Japan (someone who has a domicile in Japan or has lived here for a year or more) is a non-permanent resident if both of the following apply (Income Tax Act, Article 2):
- the person does not have Japanese nationality, and
- the person has had a domicile or residence in Japan for a total of five years or less in the past ten years.
Your visa type does not matter. Even with a permanent resident visa, you are a non-permanent resident for tax purposes if your total time in Japan is five years or less. Once you pass five years, you move to the "permanent resident" category for tax and are taxed on worldwide income from that point.
What income is taxed?
| Type of income | Treatment for non-permanent residents |
|---|---|
| Japanese-source income | Fully taxed |
| Foreign-source income paid in Japan | Taxed |
| Foreign-source income remitted to Japan | Taxed up to the amount remitted |
| Foreign-source income kept abroad | Generally not taxed |
Points to watch
Remittances are treated as coming from the current year's income first
When you transfer money to Japan, it is hard to show whether it came from old savings or from this year's income. Japanese law therefore presumes that money remitted in a year comes first from that year's foreign-source income. This applies regardless of what the money is used for, such as living costs or capital for your company. Only the part of the remittance that exceeds the year's foreign-source income is treated as a transfer of untaxed savings.
Gains on shares can be taxed even if not remitted
Gains on shares and similar securities acquired while you were a non-permanent resident (within the past ten years) can be taxed even if you sell them through an overseas account and keep the proceeds abroad. Whether you bought the shares before or after moving to Japan makes a difference, so the purchase dates matter.
No overseas asset report is required
Non-permanent residents do not need to file the overseas asset report, even if their foreign assets exceed 50 million yen. The obligation starts from the year you become a permanent resident for tax purposes. See Overseas Asset Report.
How we help
- Check your residence periodWe confirm how long your non-permanent resident status will last, based on your arrival date and travel history.
- Match income and remittancesWe compare your foreign income with the amounts and dates of transfers to Japan, year by year.
- File your tax returnWe calculate the taxable amount and prepare and file your return, including any foreign tax credit.
- Plan aheadWe advise on remittances and how to hold assets before you become taxable on worldwide income.
FAQ
Is my Japanese salary fully taxed as a non-permanent resident?
Yes. Salary for work performed in Japan is Japanese-source income and is fully taxed. The special treatment only applies to foreign-source income.
Does using an overseas credit card in Japan count as a remittance?
Paying in Japan with a card settled from an overseas account can be treated in the same way as a remittance to Japan. If the amounts are large, please consult us.
How are the five years counted?
We look back ten years from the relevant date and add up the periods you had a domicile or residence in Japan. If you left Japan and came back, earlier periods of residence are included. We check this using your entry and departure dates.
This page provides general information only. The actual treatment depends on your individual circumstances. Please consult a professional before making decisions.