Frequently Asked Questions

I am a foreign resident in Japan. Do I need to include my overseas assets in the Statement of Assets and Liabilities?

Yes, in many cases. If you are a resident of Japan, including a non-permanent resident, and you meet the income and asset thresholds, your overseas assets are generally included when determining whether you must file a Statement of Assets and Liabilities. Since the filing requirements depend on your residency status, income, and the value of your worldwide assets, it is important to review your situation carefully. For more details, please read the following blog.

Can a non-permanent resident claim a foreign tax credit in Japan?

Yes, but it depends on your circumstances. A non-permanent resident in Japan may be able to claim a foreign tax credit if foreign-source income becomes taxable in Japan under the remittance-based taxation rules and the foreign tax has actually been paid. The calculation can be complicated because it also depends on the amount of remittances, the type of foreign-source income, and the timing of the foreign tax payment.

What tax and accounting procedures should I complete after incorporating a company in Japan?

After incorporating a company in Japan, there are several important tax and accounting procedures that should be completed as early as possible.

The most important include submitting the Blue Form (Aoiro Shinkoku) application, determining your director’s compensation, and deciding whether to register for Japan’s Qualified Invoice System.

Missing these procedures may result in higher corporate taxes or the loss of valuable tax benefits. Proper accounting from the beginning is also important for tax filing and future corporate tax planning in Japan.

Do U.S. non-permanent residents need to file a Japanese tax return?

It depends on your circumstances. If you are a U.S. non-permanent resident living in Japan, you may need to file a Japanese tax return if you have Japanese-source income or foreign-source income that becomes taxable under Japan’s remittance-based taxation rules. Preparing the return often requires calculating remittances, identifying each category of U.S.-source income, determining the cost basis of your investments under Japanese tax rules, and claiming foreign tax credits where applicable.

How do you write a business email in Japan?

Japanese business emails usually begin with a polite greeting such as “Thank you for your continued support” and end with a respectful closing like “I look forward to your cooperation.” Using the correct honorifics and business expressions helps build trust and demonstrates professionalism when communicating with Japanese companies.

Do I need to report overseas assets in Japan?

You may need to file a Statement of Overseas Assets if you are a tax resident of Japan and the total value of your overseas assets exceeds 50 million yen as of December 31. Reportable assets may include foreign bank accounts, real estate, securities, and retirement accounts such as IRAs and 401(k)s. Even if no Japanese tax is due, failing to file the statement properly may result in penalties.

Can I operate my U.S. LLC while living in Japan?

Yes. However, if you manage your U.S. LLC while living in Japan, you need to consider both U.S. and Japanese tax rules. Depending on your circumstances, your LLC could create a Permanent Establishment (PE) in Japan, distributions may be taxed differently from the United States, and non-permanent residents may also need to consider Japan’s remittance taxation rules.

These are important issues in international tax and accounting in Japan, and the treatment depends on your business structure, activities in Japan, and tax residency status. Obtaining professional advice before moving to Japan or starting operations is highly recommended.

Should I consult a Japanese tax accountant before moving to Japan from the United States?

Yes. In many cases, international tax planning before becoming a Japanese tax resident is much easier than correcting tax issues afterward.

Reviewing your investments, retirement accounts, remittance plans, and tax residency status before relocating can often reduce future tax risks. A taxation consultant in Japan can also help you understand how your U.S. income and assets may be treated under the Japanese tax system.

Do I need to keep records of my U.S. investments before moving to Japan?

Yes. Japan generally uses the moving-average method to calculate capital gains, while the United States often uses the FIFO method. Keeping detailed records of your purchases, sales, and retirement account contributions before moving to Japan can make future Japanese tax reporting much easier.

How are Roth IRAs and Traditional IRAs taxed in Japan?

Japan applies its own tax rules to retirement accounts. Distributions from both Traditional IRAs and Roth IRAs may be taxable in Japan, although the cost basis may generally be deductible. The tax treatment can differ significantly from U.S. tax rules.

Does transferring my savings from the United States to Japan create taxable income?

Not by itself. Under Japan’s remittance-based taxation rules, the source of the remitted funds does not matter. Instead, the taxable amount generally depends on the relationship between your foreign-source income and the total amount remitted to Japan during the same calendar year.

I am moving to Japan from the United States. Will all of my U.S. income automatically become taxable in Japan?

Not necessarily. During your non-permanent resident period, certain foreign-source income may be subject to Japan’s remittance-based taxation rules rather than being fully taxable in Japan. The tax treatment depends on your tax residency status, the type of income, and whether you remit funds to Japan.

What industries are common among foreign entrepreneurs starting a business in Japan?

Wholesale businesses are among the most common types of businesses operated by foreign entrepreneurs in Japan.

If you are starting a business in Japan, the appropriate accounting and tax procedures will depend on your industry, business structure, and scale of operations.

What is Japan’s Simplified Consumption Tax System for small businesses?

Japan’s Simplified Consumption Tax System can make consumption tax calculations easier for eligible businesses. However, whether it is beneficial depends on your business and circumstances, so there are several points you should consider before choosing this system.

If your friend becomes your client or the reverse happens, you might claim it as an expense in Japan.

Possibly. If your friend is also your client, or if the meeting has a genuine business purpose, part or all of the cost may be considered a business expense for Japanese tax purposes. The important point is whether you can reasonably explain the business purpose of the expense.

I started a business in Japan and will spend the Bon season there for the first time this year. How do most Japanese spend it?

Japanese people spend the Bon holiday in different ways. Many visit their hometowns or family graves, while others travel or simply take time off from work.

I started a business in Japan and heard about the culture of gifting such as お中元 and お歳暮. Should I do them?

This custom of gifting something to business-related people remains even now in Japan.

Can I deduct business startup expenses in Japan?

Yes. Certain expenditures incurred before starting your business in Japan can be treated as startup expenses for Japanese tax purposes.

One important feature is that qualifying startup expenses can generally be deducted in a later year rather than necessarily being deducted immediately. This can provide flexibility when considering tax reduction in Japan for a new business.

Is overseas outsourcing subject to Japanese consumption tax?

Not necessarily. Whether overseas outsourcing is subject to Japanese consumption tax depends on how the transaction is classified under Japanese consumption tax rules.

If you run a business in Japan and outsource work to an overseas service provider, it is important to determine whether the transaction is treated as a domestic or overseas transaction for Japanese consumption tax purposes.

Do Working Holiday Visa holders pay tax in Japan?

Yes. The tax rules depend on whether you are considered a tax resident or non-resident of Japan. Most Working Holiday Visa holders are initially treated as non-residents, but your tax status may change if you stay in Japan for more than one year. Understanding these rules is particularly important if you earn overseas income or remit money to Japan.

I started a business in Japan. What should I know about business card etiquette?

Business card etiquette in Japan reflects Japanese business culture particularly well. There are several customs concerning how to give, receive, and handle business cards when meeting Japanese businesspeople.

How should I make a business phone call to a Japanese company?

Japanese business phone calls tend to follow certain patterns and expressions. Learning a few basic phrases and rules of etiquette can make it much easier to communicate with Japanese companies.

Can You Claim Business Expenses Without a Receipt in Japan?

In practice, you may still be able to claim the expense by preparing a written memo that includes the same information normally shown on a receipt, such as the date, amount, name of the store or person paid, purpose of the expense, and payment method.

You should also keep any other supporting documents, such as credit card statements, bank records, invoices, or order confirmation emails. However, a memo does not automatically guarantee that the expense will be accepted for tax purposes, so it is always best to obtain and keep original receipts whenever possible.

I am going to visit a Japanese company. What business etiquette should I know beforehand?

When visiting a company in Japan, you are likely to encounter several customs that reflect Japanese business culture, including bowing, exchanging business cards, punctuality, and seating etiquette.

I wonder if I should start a business in Osaka. What is Osaka's uniqueness?

Osaka people have had a rivalry against Tokyo.

I am trying to start a business in Japan. How different between Tokyo and Osaka?

Tokyo is the capital city of Japan. It leads to many differences.

How should foreign currency transactions be recorded in accounting books in Japan?

Companies in Japan need to record foreign currency transactions properly and recognize foreign exchange gains or losses for accounting and tax purposes.

This is particularly important for foreign entrepreneurs and companies that receive revenue or pay expenses in currencies other than Japanese yen. Proper treatment of foreign currency transactions is an important part of accounting in Japan for businesses with international transactions.

I heard about a fixed-amount tax cut in Japan in 2024. What is it like?

A fixed-amount tax cut in 2024 is a one-time treatment.

I run a business in Japan as a sole proprietor. Can I deduct part of my home rent and car expenses?

Yes, in some cases.

If your home or car is used for both business and personal purposes, you generally cannot treat the entire amount as a business expense. However, the portion reasonably attributable to business use may be deductible.

The important point is to use a reasonable basis for allocating the business and personal portions.

I started a business in Japan but don't know how to build deep relationships with Japanese businesspeople. Would you happen to have any suggestions?

In Japan, there are several unique ways to build deep relationships in the business world.

I have started a business in Japan and want to know which companies are more likely to be targeted by tax audits.

There are certain tendencies in companies where tax audits are conducted in Japan.

I have started a business in Japan and need to decide on a term of office for a director. Do you have good suggestions?

In most cases, it is ten years in small companies, which is the most extended term.

I run a business in Japan. I sometimes visit my home country. Is the cost of the trip considered a business expense for tax purposes?

Possibly. If your trip includes genuine business activities, part of the travel cost may be deductible as a business expense for Japanese tax purposes.

The important point is to distinguish the business portion of the trip from the private portion and to keep records that support the business purpose.

Why are business suits generally not deductible as business expenses in Japan?

The main reason is that an ordinary business suit can also be worn for private purposes. For this reason, Japanese tax offices generally do not regard the cost of an ordinary suit as a deductible business expense merely because it is worn for work.

I heard tax audits are likely conducted when a sole proprietor incorporates a business in Japan. Is it true?

In Japan, tax audits are likely conducted when a sole proprietor incorporates a business. This is because the subject of tax responsibility changes from an individual to a corporation when incorporation occurs.

I am planning to start a business in Japan and want to obtain business networking there. Do you happen to know suitable opportunities, such as business meetups?

When I started this office, I became a member of JCI.

I am planning to start a business in Japan. However, it is challenging to understand seals related to Japanese companies. Could you explain it easily?

The especially complex part is the difference between an individual seal and a representative seal of a corporation.

What are the key requirements for accounting records in Japan?

Businesses in Japan need to maintain accounting records that meet Japanese tax and bookkeeping requirements. Inadequate records can cause problems during a tax audit and, in some cases, may result in the loss of tax benefits or additional taxes and penalties.

Proper accounting in Japan is therefore important not only for preparing tax returns but also for supporting the figures reported to the tax office. For foreign entrepreneurs and small businesses, professional accounting services can also help ensure that transactions are recorded consistently under Japanese accounting and tax rules.

Are sales to overseas clients subject to Japanese consumption tax?

If the sales qualify as export transactions under Japanese consumption tax rules, they are generally subject to a 0% consumption tax rate.

What do National Tax Agency statistics tell us about tax audits in Japan?

The National Tax Agency publishes information about tax audits of individuals and companies in Japan. These reports are useful for understanding recent audit trends and the types of taxpayers or transactions receiving attention from the tax authorities.

I live and run a business in Japan. I am curious to know if I am within the range of Japanese inheritance taxation or not.

If you live in Japan, you are basically within the Japanese inheritance taxation range for all of your properties, including those abroad. However, there are exceptions.

Should my business register with the Japanese Invoice System for consumption tax? Do you have any suggestions?

Whether your business should register for Japan’s Qualified Invoice System depends on several factors, including whether your customers are businesses, whether you are already a consumption-taxable business, and how registration would affect your consumption tax burden.

Can a Minpaku business claim a consumption tax refund when purchasing property in Japan?

A Minpaku business may be able to claim a Japanese consumption tax refund in certain circumstances when purchasing property, but there are important limitations and requirements.

Whether a tax refund is available depends on factors such as your consumption tax status and how the property is used. If you are considering a large property purchase, it is important to review the Japan tax refund requirements before completing the transaction.

I heard the Japanese inheritance tax is rather severe. What is it like?

If you live in Japan, you may have to pay inheritance tax because its non-taxed range is pretty low.

I have heard that Japan has launched a digital nomad visa recently. What is it like?

This visa was specially made for digital nomads who visit Japan.

How is Japanese income tax calculated on a company director’s salary?

In Japan, income tax on a director’s salary is calculated after taking into account factors such as the employment income deduction and applicable income deductions.

The amount of the director’s compensation can also affect the company’s corporate tax and social insurance costs, so it is an important consideration when planning the finances of a company in Japan.

I run a business in Japan as a sole proprietor. What tools can I use to pay taxes?

In Japan, You, as a sole proprietor, can pay taxes in cash at the bank counter, by credit card, through internet banking, or in other ways.

I heard about the per-capital levy against companies in Japan. What is it like?

In Japan, even if your company does not make a profit, per-capital levies are incurred according to the amount of capital.

I plan to get a Japanese management visa and run a business in Japan. What do you think I should know in preparing to renew the visa?

One of the most important terms for renewing a management visa in Japan is the financial health of your business.

I am planning on establishing a company in Japan. Can you advise me on determining the capital amount?

Several factors should be considered when deciding the amount of capital for a company in Japan. The amount can affect matters such as consumption tax, the per capita levy, financing, and, depending on your circumstances, visa considerations.

For this reason, it is better to consider the tax and business consequences before deciding the initial capital amount.

What are effective ways for sole proprietors to reduce taxes in Japan?

Sole proprietors in Japan have fewer tax-planning options than corporations, but there are still several practical ways to reduce taxes legally.

These may include using the Blue Form tax return system, claiming appropriate business expenses and deductions, and considering whether incorporation would be beneficial as the business grows. Effective tax reduction in Japan usually comes from combining several legitimate measures rather than relying on one large tax-saving technique.

What are practical ways for small companies to reduce taxes in Japan?

There are several practical ways for small companies to reduce taxes in Japan, although each measure by itself may not produce a huge tax saving.

In practice, corporate tax planning in Japan often involves combining several relatively simple measures and implementing them consistently. The appropriate methods depend on the company’s profits, expenses, director’s compensation, investments, and future plans.

I heard about the year-end tax adjustment in Japan. What is it like?

In Japan, employers generally withhold income tax from their employees’ monthly salaries. These monthly withholding amounts are provisional.

At the end of the year, the employer recalculates each employee’s annual income tax and settles the difference through the year-end tax adjustment (nenmatsu chosei / 年末調整).

This procedure is an important part of payroll administration in Japan. Employees whose income tax is fully settled through the year-end adjustment generally do not need to file a kakutei shinkoku (確定申告) unless they have other income or meet certain other filing requirements.

I heard about remittance taxation in Japan. What is it like?

Japan’s remittance-based taxation rules may apply to individuals who are classified as non-permanent residents for Japanese tax purposes.

In general, certain foreign-source income may become taxable in Japan when funds are remitted to Japan during the same calendar year. The calculation depends on the amount of foreign-source income and the amount remitted, so careful review is often necessary.

I plan to establish a corporation in Japan. Must the corporation enroll in social insurance even though it does not have employees?

As a general rule, corporations in Japan are required to enroll in social insurance. There are exceptions for certain workers whose working hours are below the applicable thresholds.

However, even a company with no regular employees may generally be required to enroll if it pays compensation to its director.

When should a sole proprietor consider incorporating a business in Japan?

Incorporation can provide several tax and business advantages for sole proprietors in Japan.

Whether incorporation is beneficial depends on factors such as your level of profit, director’s compensation, social insurance costs, consumption tax, and future business plans. Comparing these factors in advance is an important part of tax planning for a growing business.

What income is taxable in Japan for residents and non-residents?

The scope of taxable income in Japan depends largely on your Japanese tax residency status.

A non-resident is generally subject to Japanese tax on Japan-source income. A resident classified as a non-permanent resident may be subject to special rules for certain foreign-source income, including Japan’s remittance-based taxation rules. Other residents are generally subject to Japanese tax on worldwide income.

I heard about the Invoice System in Japan. What is it like?

Japan’s Qualified Invoice System affects how businesses claim input consumption tax credits.

Under the system, businesses generally need qualified invoices that meet the applicable requirements in order to claim input tax credits. Whether a business should register as a qualified invoice issuer depends on its customers, consumption tax status, and business circumstances.

I heard about withholding tax in Japan. What is it like?

Japan’s Qualified Invoice System affects how businesses claim input consumption tax credits.

Under the system, businesses generally need qualified invoices that meet the applicable requirements in order to claim input tax credits. Whether a business should register as a qualified invoice issuer depends on its customers, consumption tax status, and business circumstances.

I hear about the Blue-Form Tax Return system, 青色申告制度, in Japan. What is it like?

The Blue Form Tax Return system (Aoiro Shinkoku / 青色申告) provides several tax benefits to eligible businesses and sole proprietors in Japan.

To receive these benefits, you need to apply by the applicable deadline and maintain accounting records that meet the required standards. Proper bookkeeping is therefore an important part of using the Blue Form system.

What are the record-keeping requirements for businesses in Japan?

The Blue Form Tax Return system (Aoiro Shinkoku / 青色申告) provides several tax benefits to eligible businesses and sole proprietors in Japan.

To receive these benefits, you need to apply by the applicable deadline and maintain accounting records that meet the required standards. Proper bookkeeping is therefore an important part of using the Blue Form system.

What are the penalties for late tax payments in Japan?

If you voluntarily correct and pay the tax before a tax audit, the penalty is generally 5%.

If the underreporting is identified during a tax audit, the penalty increases to 10% or 15%, depending on the situation.

In addition, interest will be charged based on the statutory rate applicable at the time.

For more detailed information, please see below.