Do Foreigners Doing Business in Japan Need to Pay Individual Income Tax on Income Earned Outside of Japan to the Japanese Tax Office?
【Koshida Accounting Firm Column Date:】
Hi, my name is Taisei Koshida, and I am a certified public accountant and tax accountant.
I aim to assist non-Japanese business owners who struggle with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.
If you are unclear about the taxable range of Japan’s individual income tax, you might find this blog helpful.
First, you need to determine your taxpayer category.
Resident Status
(1) Do You Have A Domicile In Japan?
A resident refers to a person who has a domicile in Japan. A domicile is considered the base of one’s life, and this status is determined by objective facts. This means it is judged by considering various aspects such as the number of days spent in Japan, housing, family situation, and job.
(2) Have You Stayed In Japan for More Than A Year?
Even if you don’t have a domicile, if you have actually lived in Japan for more than a year, you are considered a resident. When a person temporarily leaves Japan with the intention of returning, that period is considered as if they still reside in Japan.
(3) Cases Where You’re Assumed To Be A Resident
If you’re engaged in an occupation that typically requires you to reside for over a year, you’re assumed to be a resident.In this case, individuals who come to live in Japan for business or work purposes are considered residents, unless it is explicitly stated in the contract or otherwise that their stay will be less than a year.
(4) Non-Permanent Resident Status
Among residents, those who do not have Japanese nationality and whose total period of maintaining a domicile in Japan is not more than five years within the past ten years, are classified as non-permanent residents.And, those not classified as non-permanent residents are considered permanent residents.
Non-Resident Status
(1) Non-Resident Status
Individuals who are not classified as residents are considered non-residents.
(2) Presumption of Non-Residency
The following individuals are typically presumed to be non-residents:
・People engaged in occupations that typically require them to reside in countries outside Japan for over a year. In this case, unless explicitly stated in the contract that their business or employment in Japan will last less than a year, they are considered non-residents.
・Individuals who hold a nationality other than Japanese and are unlikely to live in Japan due to reasons such as their family not residing in Japan.
Even if a case meets the conditions for presumption, a taxpayer can overturn it by providing evidence to the contrary.
Taxable Income Scope for Each Status
(1) Permanent Residents
Permanent residents are taxed on their worldwide income.
(2) Non-Permanent Residents
Non-permanent residents are taxed on their domestic income, as well as any other income that is remitted to Japan or paid within Japan.
The details of the income remitted to Japan are described as follows:
(3) Non-Residents
Non-residents are only taxed on their domestic income.
Our accounting firm has been actively assisting foreign business owners in Japan with accounting and tax matters. Please feel free to contact us through the inquiry form.