Japan tax residency for foreigners turns on two questions: how long you have lived in the country, and whether you are a Japanese national. The answers place you in one of three categories. A non-resident pays Japanese tax only on income sourced inside Japan. A non-permanent resident (a foreign national who has been in Japan five years or fewer within the past ten) pays tax on Japanese-source income plus any foreign income brought into the country. A permanent resident (anyone past the five-year mark, and every Japanese national) pays Japanese tax on worldwide income. The rules sit in the Income Tax Act and are administered by the National Tax Agency.
When Japan Treats You as a Resident
The Income Tax Act defines a resident as anyone domiciled in Japan or who has lived in Japan continuously for one year or more.1Japanese Law Translation. Income Tax Act – Article 2 Definitions Fail both tests and you are a non-resident, with Japan taxing only your domestic-source income.
You don’t have to wait out the full year to be classified as a resident. The NTA presumes a domicile from the date you arrive if your occupation “normally requires living in Japan continuously for one year or more.”2National Tax Agency. Income Tax Guide for Foreigners In practice, an employment contract of a year or longer makes you a resident from day one. The only carve-out is where the contract itself makes clear that the stay is arranged to be under a year.
Non-Permanent Resident vs. Permanent Resident
Once you are a resident, the law splits you into two subgroups:
- A non-permanent resident is a resident who does not hold Japanese citizenship and has been domiciled or resident in Japan for a total of five years or fewer within the preceding ten-year period.1Japanese Law Translation. Income Tax Act – Article 2 Definitions
- A permanent resident for tax purposes is every other resident: anyone past the five-year threshold, and every Japanese national from day one of residence regardless of how recently they returned.
The five-year count is cumulative days within a rolling ten-year window, not five consecutive years. The transition from non-permanent to permanent is automatic. You don’t apply and you don’t get a notice. The moment your cumulative time crosses the line, your worldwide income becomes taxable in Japan.
Note that “permanent resident” in the tax code is not the same status as permanent residency for immigration purposes. The tax classification depends only on days of residence and nationality, not on your visa.
What Non-Permanent Residents Are Taxed On
Article 7 of the Income Tax Act limits a non-permanent resident’s taxable income to domestic-source income plus other income “paid in Japan or remitted to Japan from abroad.”3Japanese Law Translation. Income Tax Act – Article 7 Scope of Taxable Income Everything you earn inside Japan is taxable. Foreign income becomes taxable only when the money enters Japan.
Salary from a Japanese employer for work performed in Japan is domestic-source income and fully taxable no matter where the employer deposits it.2National Tax Agency. Income Tax Guide for Foreigners Foreign dividends left in an overseas brokerage account generally sit outside the Japanese tax net. Move those funds to a Japanese bank, or use them to pay a Japanese credit card bill, and the remittance rule brings them in.
What Counts as a Remittance
The NTA reads “remittance” broadly. A wire transfer from an overseas bank to a Japanese account is the obvious case. Using an overseas-issued credit card to pay for purchases inside Japan also qualifies. The matching formula first offsets remittances against any domestic-source income paid abroad. Only the excess gets matched against foreign-source income and taxed.2National Tax Agency. Income Tax Guide for Foreigners
That formula has a practical use. If part of your Japan-sourced salary is paid into an overseas account, it creates a buffer. Remittances you later make to Japan are absorbed by that buffer first, and only the portion beyond it gets matched against foreign investment income. Non-permanent residents with meaningful offshore assets should track every cross-border movement of funds, because the sequence can change the tax outcome sharply.
Where the Work Happens Is What Matters
Sourcing follows the location of the work, not the location of the payer. Salary earned for work performed physically in Japan counts as domestic-source income even when a foreign company issues the paycheck.2National Tax Agency. Income Tax Guide for Foreigners A non-permanent resident working remotely from Tokyo for a London employer owes Japanese tax on that salary. Tax treaties may provide relief in some situations, particularly for short stays under 183 days, but the default rule is that work done in Japan generates Japanese income.4National Tax Agency. Tax on Income of Non-Residents
What Permanent Residents Are Taxed On
Cross the five-year threshold and Article 7 subjects you to Japanese tax on “all income” with no geographic limit.3Japanese Law Translation. Income Tax Act – Article 7 Scope of Taxable Income Rental income from property abroad, capital gains on foreign stock markets, interest on overseas savings, foreign pension distributions — all of it must be reported. Whether the money ever touches a Japanese bank account no longer matters. Japanese nationals sit in this category from day one of residence.
Foreign Tax Credit
Permanent residents earning income abroad can credit foreign income tax paid on that income against their Japanese income tax, up to a cap. The cap equals your Japanese income tax multiplied by the ratio of your foreign income to your total income. Any excess can be applied against the reconstruction surtax, subject to its own separate limit. Japan has tax treaties with dozens of countries that may modify how foreign-source income is defined or capped for credit purposes, and where a treaty differs from domestic law the treaty controls.5National Tax Agency. Foreign Tax Credit for Residents U.S. citizens face additional complexity because the United States taxes its citizens on worldwide income regardless of residence; the U.S.-Japan tax treaty and the U.S. foreign earned income exclusion typically prevent full double taxation, but the paperwork is substantial.
Rates and the Reconstruction Surtax
The rates themselves are the same for both resident categories. Only the scope of income differs. Japan applies seven progressive brackets:
- Up to ¥1,950,000: 5%
- ¥1,950,001 to ¥3,300,000: 10%
- ¥3,300,001 to ¥6,950,000: 20%
- ¥6,950,001 to ¥9,000,000: 23%
- ¥9,000,001 to ¥18,000,000: 33%
- ¥18,000,001 to ¥40,000,000: 40%
- Above ¥40,000,000: 45%
A 2.1% reconstruction surtax, introduced after the 2011 Tohoku earthquake and running through 2037, is applied to your calculated income tax, not to your income.6National Tax Agency. Income Tax Guide – Special Income Tax for Reconstruction If your income tax comes to ¥1,000,000, the surtax adds ¥21,000.
Local Inhabitants Tax
National income tax is only part of the bill. Anyone domiciled in Japan on January 1 owes inhabitants tax to their prefectural and municipal governments on the prior year’s income. The standard combined rate is 10%, split as 4% prefectural and 6% municipal, though some local governments set slightly different rates.7Japan External Trade Organization. Overview of Individual Tax System
The January 1 rule catches people on the way out. Leave Japan permanently on December 30 and you skip inhabitants tax for that year’s income. Leave on January 2 and you owe the full year. Inhabitants tax also bills with a lag: you pay in the year after the income was earned, which makes the first year in Japan feel light on local tax and can produce a bill that arrives after you’ve already gone. Employers usually withhold inhabitants tax from monthly salary; self-employed residents and mid-year leavers settle it directly.
The Exit Tax
Japan imposes an exit tax on unrealized capital gains when certain residents leave. Both conditions must be met on the date of departure: you hold financial assets (securities, investment trusts, and unsettled derivative positions) with a combined market value of ¥100 million or more, and you have resided in Japan for more than five cumulative years within the prior ten. Cash and real estate do not count toward the ¥100 million threshold.
The tax treats qualifying assets as if sold on the day you leave, and you owe income tax on the theoretical gains. Some visa holders may have specific periods of stay excluded from the residency count, which matters for executives on short-term assignments. If you are near either threshold and planning to leave, the timing of departure can be financially significant.
Filing and Deadlines
The Japanese tax year runs from January 1 to December 31. Final tax returns are filed between February 16 and March 15 of the following year, with the deadline pushed to the next business day when March 15 falls on a weekend or holiday.8National Tax Agency. Final Tax Return
Most employees receive a withholding tax statement (gensen chōshū-hyō) from their employer in January showing total salary and taxes already withheld. If your employer handles the year-end adjustment and you have no other income, you may not need to file at all. Filing is required for anyone with income from multiple employers, self-employment income, foreign income, or significant capital gains. Non-permanent residents must also report remittances made during the year and keep records of cross-border fund movements.
Returns can be submitted through the NTA’s e-Tax online portal, by mail to your local tax office, or in person. e-Tax requires a My Number card and the two passwords tied to its electronic certificates.9National Tax Agency. User’s Guide for Smartphone Tax Return Filing Payment can be made by bank transfer, credit card, or at convenience stores.
If You File Late
Missing March 15 triggers an additional tax on top of what you owe. The standard late-filing rate is 15% of the tax owed, rising to 20% on any portion above ¥500,000 and 30% on any portion above ¥3,000,000. Filing voluntarily before you get an audit notice cuts that to 5%. Delinquent tax also accrues daily from the day after the deadline, at 2.4% annually for the first two months and 8.7% after that.10National Tax Agency. Overview of Additional Tax and Delinquent Tax If you realize you missed the date, filing right away is dramatically cheaper than waiting to be contacted.