Remittance-Based Taxation in Japan: How the Amount Is Calculated
【Koshida Accounting Firm Column Date:】
If you are a non-permanent resident of Japan for tax purposes and have overseas income, simply knowing how much money you remitted to Japan is not enough to determine how much foreign-source income is taxable in Japan.
A non-permanent resident is taxed on income other than foreign-source income, as well as foreign-source income that is paid in Japan or paid outside Japan and remitted to Japan.
The important point is that not all money remitted from overseas to Japan is automatically treated as a remittance of foreign-source income.
If you have income other than foreign-source income that was paid outside Japan during the same year, the remittance is first treated as coming from that income.
Only the remaining amount is treated as a remittance of foreign-source income.
1. First, Divide Your Income Into Four Categories
When calculating remittance-based taxation for a non-permanent resident, I first divide the income into four categories:
- Income other than foreign-source income — paid in Japan
- Income other than foreign-source income — paid outside Japan
- Foreign-source income — paid in Japan
- Foreign-source income — paid outside Japan
Income other than foreign-source income is taxable in Japan regardless of whether it is paid in Japan or outside Japan.
Foreign-source income paid in Japan is also taxable in Japan.
The remittance calculation mainly becomes relevant to foreign-source income paid outside Japan.
2. Do Not Simply Treat the Amount Remitted to Japan as Foreign-Source Income
Suppose a non-permanent resident transfers 120 from an overseas bank account to a Japanese bank account.
You do not simply calculate:
“I remitted 120 to Japan, so 120 of my foreign-source income is taxable in Japan.”
If you have income other than foreign-source income that was paid outside Japan during the same year, the remittance is first treated as coming from that income.
Only the amount exceeding that income is treated as a remittance of foreign-source income.
3. A Practical Calculation Example
Suppose you have the following income:
- Income other than foreign-source income, paid in Japan: 400
- Income other than foreign-source income, paid outside Japan: 200
- Foreign-source income, paid in Japan: 100
- Foreign-source income, paid outside Japan: 50
You also remit 120 from overseas to Japan during the year.
The 120 remitted to Japan is first treated as a remittance of the 200 of income other than foreign-source income that was paid outside Japan.
Because the remittance of 120 does not exceed 200, none of the 50 of foreign-source income paid outside Japan is treated as having been remitted to Japan.
Therefore, in this example, the additional amount of foreign-source income taxable because of the remittance is zero.
4. How Much Income Is Taxable in Japan?
In the example above, the following amounts are taxable in Japan:
- Income other than foreign-source income, paid in Japan: 400
- Income other than foreign-source income, paid outside Japan: 200
- Foreign-source income, paid in Japan: 100
The 50 of foreign-source income paid outside Japan is not additionally taxable because the remittance of 120 is within the 200 of income other than foreign-source income paid outside Japan.
Therefore, the total income taxable in Japan in this example is:
400 + 200 + 100 = 700
5. What If the Remittance Exceeds the Income Other Than Foreign-Source Income Paid Overseas?
Now suppose the amount remitted to Japan is 220 instead of 120.
The income other than foreign-source income paid outside Japan is 200.
Therefore:
220 − 200 = 20
The remaining 20 is treated as a remittance of foreign-source income paid outside Japan.
The income taxable in Japan is therefore:
- Income other than foreign-source income: 600
- Foreign-source income paid in Japan: 100
- Foreign-source income paid outside Japan and treated as remitted: 20
The total is:
600 + 100 + 20 = 720
So even though you actually remitted 220 to Japan, only 20 of the foreign-source income paid outside Japan is treated as remitted and becomes taxable because of the remittance.
6. What If You Remit Even More?
Using the same example, suppose you remit 300 to Japan.
The first 200 is treated as a remittance of the income other than foreign-source income paid outside Japan.
That leaves:
300 − 200 = 100
However, the foreign-source income paid outside Japan is only 50.
Therefore, the amount of foreign-source income treated as remitted to Japan is limited to 50.
In this case, all 50 of the foreign-source income paid outside Japan becomes taxable in Japan.
7. The Actual Source of the Money You Transfer Does Not Determine the Tax Treatment
This is an important point in practice.
For example, you might say:
“The money I transferred to Japan came from savings I had accumulated many years ago.”
Or:
“I left this year’s overseas income in my foreign bank account and did not transfer that particular money to Japan.”
Those facts alone do not determine whether remittance-based taxation applies.
For a non-permanent resident, the calculation is not based simply on tracing which particular money in a foreign bank account was transferred to Japan.
Instead, I check the relationship between income paid outside Japan during that year and the amount remitted to Japan during the same year.
Therefore, where the transferred funds actually came from does not by itself determine the Japanese tax treatment.
8. Income and Remittances in the Same Year Need to Be Checked
When calculating remittance-based taxation, I check the income and remittances for the same calendar year.
For example, when checking foreign-source income for 2026, I also check remittances to Japan made during 2026.
Even if you remit money that has been held in an overseas account for many years, the remittance calculation is still necessary if you have relevant income paid outside Japan during that year.
9. A Remittance Does Not Mean Only a Bank Transfer
A remittance to Japan is not limited to an ordinary transfer from an overseas bank account to a Japanese bank account.
Using a foreign credit or debit card in Japan and withdrawing cash in Japan from a foreign bank account can also count as remittances to Japan.
For a detailed explanation, see What Counts as a Remittance to Japan for Non-Permanent Residents?
10. What I Check When Calculating Remittance-Based Taxation
When preparing a Japanese tax return, I do not check only transfers from overseas accounts to Japanese bank accounts.
I check:
- foreign-source income for the year,
- income other than foreign-source income for the year,
- whether each item of income was paid in Japan or outside Japan,
- remittances to Japan during the year,
- use of foreign credit and debit cards in Japan, and
- cash withdrawals in Japan from foreign bank accounts.
After organizing this information, I calculate how much foreign-source income is taxable in Japan.
11. The Amount Remitted to Japan Is Not the Same as Taxable Foreign-Source Income
One of the most important points about remittance-based taxation for non-permanent residents is:
Amount remitted to Japan ≠ Foreign-source income taxable in Japan
If you have income other than foreign-source income that was paid outside Japan, the remittance is first treated as coming from that income.
Only the amount exceeding that income is then considered in determining how much foreign-source income paid outside Japan is treated as remitted.
Therefore, when preparing a Japanese tax return for a non-permanent resident, I check the type of income, the source of the income, where it was paid, and the amount remitted to Japan together.
Koshida Accounting and Tax Office provides English-language support for Japanese tax returns, overseas income and remittance-based taxation for non-permanent residents.
For Americans living in or moving to Japan, see Moving to Japan? How Your U.S. Income Is Taxed in Japan for an overview of the five-year rule, U.S. income and remittance-based taxation.
If you need help with a Japanese tax return or overseas income, please contact me here.