Japan’s Remittance Taxation for Non-Permanent Residents: How It Works

Hi, my name is Taisei Koshida, and I am a certified public accountant and tax accountant in Japan.

I assist foreign residents and business owners who may have difficulty dealing with Japanese accounting and tax procedures.

If you are a non-permanent resident for Japanese tax purposes and have income from outside Japan, understanding Japan’s remittance taxation rules is important.

A common question is: if you remit money to Japan, how much of your foreign-source income becomes taxable in Japan?

Let’s look at a simple example.

Example

Example

Suppose a non-permanent resident has the following income during the year:

① Japan-source income: 600

② Foreign-source income paid outside Japan: 150

③ Amount remitted from outside Japan to Japan during the year: 120

For simplicity, assume there are no other relevant items.

What Income Is Taxable for a Non-Permanent Resident?

A non-permanent resident is generally subject to Japanese income tax on Japan-source income.

Foreign-source income may also be taxable in Japan to the extent that it is paid in Japan or remitted to Japan, subject to the applicable rules.

This is why remittances from overseas can be important when calculating the Japanese taxable income of a non-permanent resident.

How Does Remittance Taxation Work?

In the example above, the non-permanent resident has foreign-source income of 150 that was paid outside Japan and remitted 120 to Japan during the year.

Subject to the applicable remittance rules, up to 120 of the foreign-source income may therefore become taxable in Japan.

In this simplified example:

Japan-source income: 600
Foreign-source income taxable due to remittance: 120

Total taxable income considered in this example: 720

An Important Point About Remittances

A remittance to Japan is not necessarily taxable income by itself.

For example, transferring your own savings from an overseas bank account to Japan does not mean that the transferred money itself suddenly becomes income.

However, for a non-permanent resident, a remittance during the year may affect how much foreign-source income is subject to Japanese tax.

The actual calculation can become more complicated when you have several types of income, income paid both inside and outside Japan, or multiple overseas accounts and remittances.

For this reason, non-permanent residents should keep clear records of their foreign-source income and transfers to Japan during each tax year.

Koshida Accounting and Tax Office assists foreign residents and business owners in Japan with Japanese tax matters.

If you need help determining how your foreign-source income or overseas remittances are taxed in Japan, please feel free to contact us through the inquiry form.