Taxation in Japan
Will I need a permit or visa to work in Japan?
Yes visas and permits will be necessary for expats in Japan. You should apply for both a work permit and a visa prior to travelling to Japan. If you are travelling with a spouse then they will also have to apply independently.
Is there any paperwork for this that I must complete?
All foreigners in Japan who expect to be staying for over 90 days will have to register with the authorities and acquire an alien registration card, once you receive your card you should keep it on you at all times.
Should I open an offshore bank account or a Japanese bank account?
As a non-permanent working resident you may find that income you make that is remitted or paid in Japan is subject to tax, for this reason an offshore account could come in handy.
When does the Japanese tax year start?
Japanese tax year starts on 1 January.
How is tax determined in Japan?
In Japan, tax boils down to your residency status. Japan’s residents are taxed on all of their income worldwide. Non-permanent residents in Japan will have to pay tax on any income they earn that is paid in Japan. Complete non-residents will only have to pay tax on income sourced in Japan.
How is my tax residency determined?
There are three different categories of residency in Japan. The first is the permanent resident. A permanent resident will be someone who is either a native, domiciled, of Japan or a foreign worker who is worked and lived in Japan for five years or more.
Then there is the non-permanent resident. This bracket is for foreigners who have lived and worked in Japan for one year or more. Recently, laws have been introduced that immediately classify all people who travel to Japan for work as non-permanent residents as soon as they take up employment, as long as the job is expected to last for at least a year.
Finally, the last bracket is that of the non-resident.
Are there any state or regional taxes?
There are a number of local taxes that may apply to you in Japan. Prefectural Inhabitants Tax is payable by all residents and non-residents who have a place of business or a home in Japan.
Local enterprise tax will apply to anybody who is involved with any type of profession, rental or business in Japan.
Am I able to file a tax return with my partner?
No, tax returns must be filled out separately.
What can I deduct from my tax?
There are deductions that can be made for employment income, depending on what your salary is, also if you are a resident then you can file a return and claim individual expenses, as opposed to the statutory amount.
Will I have to file a tax return? If so, when?
In Japan tax liabilities are usually paid via pay-roll at the end of the year, so tax returns are not usually necessary. However you will have to complete one if-
Your gross income is greater than 20 million yen or if your income was paid abroad.
If this applies to you the tax return will have to be filed by the 15 March of the following year. Note that there are no extensions available for this deadline, failure to meet the date could lead to penalty payments.
How do I pay the owed tax?
Income tax is paid in two instalments, one by 31 July and one by 30 November, except during your first year of work in Japan.
Are there forms of non-cash compensation that aren’t taxable
If your employer supplies you with extra benefits, such as accommodation expenses, then these may also be subject to tax.
Will I be taxed in Japan on income generated back home?
All permanent residents are taxed on all their income worldwide. Non-permanent and non-residents are only taxed on income sourced in Japan.
Are there any other taxes I should know about?
Japanese gift tax may be payable if assets are given at below their market value.
Will I have to pay Social Security in Japan?
As a foreign worker in Japan you will have to make social security payments to cover costs of things like health insurance and welfare. However if your country of origin has a bilateral social security agreement with Japan then you may be exempt from such payments.
Learn more about expat life in Japan by reading our Tokyo City Guide.
