Tax residence
Japan ordinarily taxes a resident on worldwide income. Domestic residence arises from a Japanese domicile, meaning the actual base of your life, or a continuous residence of at least one year. Domicile is assessed from objective facts such as accommodation, family, occupation and assets. A person arriving for a long-term Japanese job can be resident from arrival; there is no universal tax-free first year or 183-day residence safe harbour.
A non-resident is generally taxed on specified Japanese-source income. The source of employment income follows where duties are performed, with particular rules for directors and other categories. Working in Japan for a foreign company and receiving salary in an overseas account does not by itself turn those earnings into foreign-source income. A treaty employment exemption requires its own residence, presence, employer and permanent-establishment analysis.
If two countries claim residence, read the actual treaty and establish the facts required by its tie-breaker. A Japanese residence card proves an immigration permission; it does not decide treaty residence, residence under foreign law, or whether your company has a Japanese taxable presence.
Non-permanent resident taxation
The income-tax category applies to a resident who does not have Japanese nationality and whose aggregate Japanese domicile or residence during the preceding ten years is no more than five years. It is a rolling history, not simply five calendar tax returns after the latest move. Earlier Japanese stays can consume the period. An immigration permanent resident can still meet this tax definition; a work-visa holder can cease to meet it.
The category narrows the treatment of qualifying foreign-source income, not all overseas receipts. Income other than foreign-source income remains taxable; qualifying foreign-source income paid in Japan is taxable; qualifying foreign-source income paid abroad is taxable to the extent treated as remitted. Once the historical test is exceeded, leaving money abroad no longer preserves this limited treatment.
Keep a dated residence timeline, nationality record, income-by-source schedule and payment-location record. Those are distinct datasets. A bank statement alone cannot identify the source of a dividend, the work location of salary, or the residency history attached to a share acquisition.
| Tax category | Basic income-tax scope |
|---|---|
| Resident outside the non-permanent-resident category | Worldwide income, subject to the applicable exemptions, deductions and treaty rules. |
| Non-permanent resident for income-tax purposes | Income other than foreign-source income; foreign-source income paid in Japan; and qualifying foreign-source income paid abroad to the extent remitted under the statutory rules. |
| Non-resident | Specified Japanese-source income. The source, payment and treaty rules must be checked for each category. |
Remittances: calculation and example
The NTA allocation mechanism first considers income other than foreign-source income paid abroad during the year. Remittances exceeding that amount can bring foreign-source income paid abroad into the Japanese base, limited by the relevant foreign-income amount. The calculation operates across the year. Describing a transfer as old savings does not by itself ring-fence it from the statutory remittance calculation.
The simplified example below assumes an eligible non-permanent resident and ignores other income, losses and special rules. The salary is taxable independently of remittance. Only the illustrated foreign-interest inclusion is calculated here; this is not the final tax due.
Remittance can extend beyond a bank wire. The official circular addresses importing cash or property as a substitute for a transfer and paying a Japanese borrowing or advance from foreign deposits. Foreign-card spending and similar payment arrangements therefore need review. Reconcile the full year before making a large investment sale, not only the account from which the transfer will be made.
| Annual example | Amount, JPY |
|---|---|
| Japanese-source salary paid abroad | 2,000,000 |
| Foreign interest paid abroad | 800,000 |
| Total remitted into Japan | 2,300,000 |
| Remittance exceeding the salary paid abroad | 300,000 |
| Foreign interest included in this simplified example | 300,000 (within the 800,000 foreign-interest amount) |
Asset cost basis on arrival
For ordinary shares purchased for cash, the starting point is acquisition cost and relevant acquisition expenses. Moving to Japan does not, on the sources reviewed, replace that cost with the portfolio value on arrival. Preserve original contract notes, commissions, corporate actions and exchange-rate evidence; a broker reporting in dollars is not a Japanese yen tax computation.
There is an important statutory exception. Income Tax Act article 60-4 can substitute qualifying foreign exit-tax deemed proceeds for the acquisition amount of covered securities and contracts. The NTA’s 18 March 2022 written ruling applies that mechanism to a returning Japanese resident who later abandons US permanent residence and is subject to the relevant US exit tax. It is not limited to a valuation performed on the day of immigration.
The ruling depends on the foreign charge being an equivalent covered deemed-disposal income tax and on the particular assets and facts. Its conclusion cannot be copied to every country’s departure charge, every deferred election or every asset. Obtain the foreign computation, legal basis, deemed proceeds, tax status and the applicable yen conversion before relying on the exception.
Illustration: a share cost JPY4 million, was worth JPY7 million at arrival and is later sold for JPY8 million. With no qualifying adjustment, the starting gain is JPY4 million before costs, rather than JPY1 million. If a qualifying article 60-4 event instead establishes JPY7.2 million of deemed proceeds, the candidate adjusted gain is JPY800,000. Eligibility and currency conversion must be established before using that second result.
| Asset or situation | Starting value and treatment |
|---|---|
| Ordinary purchased shares | Historical purchase cost and qualifying adjustments/expenses; moving alone does not establish an uplift. |
| Covered securities subject to a qualifying foreign exit tax | Potential substituted foreign deemed-proceeds basis under the statutory conditions, converted to yen. |
| Other assets or non-equivalent foreign charges | Unresolved in this review; no automatic arrival market-value claim. |
Income tax brackets and local taxes
Ordinary national income tax uses progressive bands on taxable income after applicable deductions. The NTA rounds the ordinary taxable amount down to the nearest JPY1,000 before applying its quick calculation. The percentage in the table applies to that taxable amount and the listed offset is then deducted. It is not a marginal tax on the entire gross salary.
For 2026, reconstruction surtax is normally 2.1% of the relevant national income-tax liability. Local inhabitant tax generally adds an income component based on the previous year and a per-capita component; local exceptions and deductions differ from national income tax. Social insurance is additional. The first arrival year can therefore look artificially inexpensive before the next resident-tax cycle begins.
For example, JPY7 million of ordinary national taxable income produces JPY974,000 before surtax: JPY7 million × 23% − JPY636,000. A simple 2.1% surtax adds JPY20,454 before any other credit or rounding issues. This is a taxable-base illustration, not a gross-salary estimate, and omits local tax and social insurance.
| Ordinary taxable income, JPY | Rate | Quick-calculation offset, JPY |
|---|---|---|
| 1,000–1,949,000 | 5% | 0 |
| 1,950,000–3,299,000 | 10% | 97,500 |
| 3,300,000–6,949,000 | 20% | 427,500 |
| 6,950,000–8,999,000 | 23% | 636,000 |
| 9,000,000–17,999,000 | 33% | 1,536,000 |
| 18,000,000–39,999,000 | 40% | 2,796,000 |
| 40,000,000 and above | 45% | 4,796,000 |
Deductions and 2026 changes
The enacted national basic-deduction changes commence on 1 December 2026. The table gives the revised 2026 and 2027 schedule. Its thresholds use total income, not gross salary. Local inhabitant-tax deductions are separate.
The NTA expressly distinguishes death or departure quasi-final returns submitted by 30 November 2026: the old deduction applies initially, with a correction claim available from 1 December for the revised deduction. A payroll withholding table used during the year is therefore not a complete annual-liability model. The salary deduction also changed; the 2026/2027 minimum is JPY740,000 under the revised schedule. Local inhabitant-tax deductions must be handled separately.
At very high incomes an additional minimum-tax calculation applies. The current 2026 NTA rule compares ordinary liability with 22.5% of the statutory base-income amount above JPY330 million. Base income has its own inclusions. This is not a flat 22.5% tax or permission to ignore the ordinary computation. Proposed or later-year reforms should not be substituted into a 2026 return.
| Total income, JPY | Revised basic deduction, JPY |
|---|---|
| Up to 4,890,000 | 1,040,000 |
| Over 4,890,000 to 6,550,000 | 670,000 |
| Over 6,550,000 to 23,500,000 | 620,000 |
| Over 23,500,000 to 24,000,000 | 480,000 |
| Over 24,000,000 to 24,500,000 | 320,000 |
| Over 24,500,000 to 25,000,000 | 160,000 |
| Over 25,000,000 | 0 |
Foreign companies and estate planning
Japan has an individual foreign-company income-inclusion regime as well as corporate CFC rules. The existence of a foreign incorporation certificate and retention of profit offshore do not establish personal deferral. Review control, connected ownership, effective foreign tax, the activity and passive-income tests, and the year of inclusion. The individual schedule is governed by the individual provisions; copying a corporate group diagram is insufficient.
Inheritance and gift tax use different connections from the income-tax non-permanent-resident rule. The NTA’s international inheritance table distinguishes the heir’s and deceased’s domicile, nationality and history. Its temporary-resident definition uses relevant Annex I immigration status and a ten-in-fifteen-year domicile test, rather than the income-tax five-in-ten test. Estate planning deserves a separate review before changing immigration status, receiving a substantial gift or bringing older relatives into the plan.
Residents other than income-tax non-permanent residents generally have a foreign-asset reporting obligation when covered foreign property exceeds JPY50 million at 31 December, due by 30 June of the following year. Other asset-and-liability reporting may also apply. Exclusion from one reporting form is not an income-tax exemption.
Exit tax and leaving Japan
Japan’s departure tax can apply when covered assets total at least JPY100 million and the relevant Japanese residence history exceeds five years within the previous ten. The covered basket includes securities and specified unsettled financial transactions, not every asset indiscriminately. The residence clock excludes periods under specified Annex I immigration statuses; the income-tax non-permanent-resident clock does not use that same exclusion.
An eligible deferral requires advance tax-agent arrangements, security, return disclosures and continuing reports. A five-year period can be extended to ten under the rules. It is not automatic, and disposal or other changes during deferral can accelerate payment. Keep departure valuation and cost records even where you expect a foreign-country credit.
Our work starts with your actual income, holdings, residence history and company operations. We can compare a Japanese move with alternatives, document the tax reasoning and coordinate the necessary implementation. A useful first inquiry includes your citizenships, present residence, proposed Japanese activity, annual income categories and whether you already own appreciated investments.
Sources & research notes24 references
Sources supporting this guide. Research draft awaiting editorial review.
- NTA — residence, domicile and corporation head-office test
- NTA — non-resident income tax and domestic source
- NTA — salary received from overseas employers
- NTA — 2025 income-tax guide, resident categories and remittance
- NTA — foreign asset report threshold and 30 June deadline
- NTA — Income Tax Basic Circular article 7
- NTA — 2017 amendment introducing specified securities definition
- NTA — taxation of share disposal gains
- NTA — acquisition cost of transferred shares
- NTA — foreign exit-tax acquisition-basis ruling, 18 March 2022
- NTA — statutory analysis of qualifying foreign exit-tax basis
- NTA — conversion of foreign transactions to yen
- NTA — national individual income-tax rate schedule
- JETRO — individual tax system and local inhabitant tax
- NTA — 2026 basic deduction and 1 December commencement
- NTA — enacted 2026 income-tax deduction changes, May 2026 FAQ
- NTA — employment-income deduction
- NTA — high-income minimum-tax rule and future effective dates
- NTA — individual foreign-company income inclusion filing schedule
- MOF — controlled foreign company regime
- NTA — inheritance-tax international scope and temporary residents
- NTA — departure deemed-disposal rules
- NTA — departure tax detailed FAQ, June 2023
- NTA — income tax before leaving Japan