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Does Using a U.S. Credit Card in Japan Count as a Remittance?

kotsi
a man near the mountain

Hello, my name is Taisei Koshida, a certified public accountant and tax accountant in Japan.

I often receive questions from Americans living in Japan about remittance-based taxation for non-permanent residents.

One issue that is easily overlooked is the use of a U.S. credit card in Japan.

A common question is:

“I haven’t transferred any money from my U.S. bank account to Japan, so my remittances are zero, right?”

Not necessarily.

If you use a U.S. credit card in Japan and later pay the credit card bill from your U.S. bank account, the transaction can count as a remittance for Japanese tax purposes even though you did not make an ordinary bank transfer to Japan.

What matters is not simply whether you made a bank transfer.

The important point is whether funds located outside Japan were used to make payments in Japan.

1. Why Remittances Matter for Non-Permanent Residents

For a non-permanent resident of Japan, not all foreign-source income is automatically taxable in Japan.

Foreign-source income paid in Japan or remitted to Japan can become subject to Japanese income tax.

Therefore, two figures are important:

In a simple case, the basic idea is easy to understand.

For example:

In this case, generally, USD 30,000 would be brought into the Japanese tax calculation under the remittance rules.

Now consider the opposite situation:

The entire USD 100,000 does not become taxable income simply because you remitted USD 100,000.

In this simple example, the relevant foreign-source income is only USD 30,000.

So, in simplified terms, you compare:

Relevant foreign-source income for the calendar year

with

Remittances to Japan during the same calendar year.

The lower amount is generally the amount brought into the Japanese tax calculation under the remittance rules.

There are additional allocation rules when, for example, income other than foreign-source income is paid outside Japan. But the basic starting point is to compare foreign-source income and remittances within the same calendar year.

For a broader explanation of how these rules work when preparing an actual Japanese return, see How to Prepare a Japanese Tax Return for U.S. Non-Permanent Residents: Remittances, IRA, and Foreign Tax Credits.

2. Why Using a U.S. Credit Card in Japan Can Count as a Remittance

A remittance for Japanese tax purposes is not limited to a wire transfer from a foreign bank account to a Japanese bank account.

Consider this example:

You did not directly transfer JPY 100,000 from your U.S. bank account to your Japanese bank account.

But the economic result is that funds located outside Japan were used to settle a payment in Japan.

Japan’s remittance rules are not limited to ordinary bank transfers. Transactions in which an obligation in Japan is ultimately settled using funds held outside Japan also need to be considered.

No bank transfer does not necessarily mean no remittance.

This is the key point of this article.

3. Paying the Credit Card Bill From Old Savings Does Not Change the Basic Rule

This is often misunderstood.

Suppose you have USD 100,000 of relevant foreign-source income during the year.

During the same year, you use your U.S. credit card in Japan and later pay USD 30,000 of credit card bills from your U.S. bank account.

However, your U.S. bank account already contained substantial savings that you accumulated ten years ago.

You might think:

“I didn’t use this year’s USD 100,000 of income. I paid the credit card bill from savings I already had ten years ago.”

That does not change the basic result.

Remittance-based taxation does not work by tracing each individual dollar and asking exactly when that particular dollar was earned.

The basic comparison is made by calendar year.

For example:

Generally, USD 30,000 would be brought into the Japanese tax calculation under the remittance rules.

It does not matter whether the USD 30,000 came from:

Old savings can still be a remittance.

Therefore, leaving this year’s foreign income in the United States and using only old savings to pay your expenses in Japan does not, by itself, avoid remittance-based taxation.

4. Do Not Count Only Bank Transfers

When preparing a Japanese tax return for a non-permanent resident, looking only at transfers into Japanese bank accounts is not enough.

At a minimum, the following should be reviewed:

In other words, simply asking:

“How much money entered your Japanese bank account?”

does not necessarily tell you the total amount of your remittances.

You also need to look at how your expenses in Japan were actually funded.

5. Restaurants, Amazon Japan, Hotels, Rent, Apple Pay and ATMs

The same basic principle applies to many ordinary transactions.

Restaurants in Japan

If you use a U.S. credit card at a restaurant in Japan and later pay the credit card bill using funds outside Japan, the payment needs to be considered for remittance purposes.

Amazon Japan

The result does not change simply because the transaction takes place online.

If you buy something for use in Japan through Amazon Japan, pay with a U.S. credit card, and later settle the credit card bill using funds outside Japan, the same remittance issue arises.

Hotels in Japan

The same applies to hotel expenses.

Paying a Japanese hotel with a U.S. credit card and later paying the credit card bill from a U.S. account can create a remittance even though there was no bank transfer to your Japanese account.

Rent in Japan

The same basic principle applies if rent or another Japanese obligation is paid using a foreign credit card and the resulting debt is settled using funds outside Japan.

Apple Pay

Using Apple Pay does not, by itself, change the nature of the transaction.

If the underlying payment method is a U.S. credit card and the credit card bill is paid using funds outside Japan, putting Apple Pay between you and the credit card does not make the remittance issue disappear.

ATM Withdrawals in Japan

If you withdraw cash from a U.S. bank account through an ATM in Japan, the absence of a wire transfer does not mean that there was no remittance.

You are using funds that were located outside Japan for your expenses in Japan.

6. Credit Card Payments Across Two Calendar Years

The timing becomes important when you use a credit card near the end of the year.

For example:

For remittance purposes, the relevant date is the date on which the credit card bill is actually paid using the funds outside Japan.

In this example, the payment would therefore be included in your 2027 remittances, not your 2026 remittances.

This is different from asking when the obligation to pay for the goods or services arose.

For remittance purposes, the important question is:

When were the funds outside Japan actually used to make the payment?

Therefore, when reviewing U.S. credit card transactions around year-end, you should check not only the date on which the card was used but also the date on which the credit card bill was actually paid.

7. How Should Remittances Be Converted Into Japanese Yen?

Remittances ultimately need to be measured in Japanese yen for Japanese tax purposes.

The practical method depends on how the transaction was made.

If U.S. Dollars Are Converted Into Yen and Remitted to Japan

If your U.S. dollars are actually converted into Japanese yen and you receive yen in Japan, the actual amount of yen received should be used.

There is already an actual yen amount.

For example, if you transfer USD 10,000 and actually receive JPY 1,480,000 in Japan after the currency conversion, JPY 1,480,000 is the natural amount to use as the remittance amount.

If You Use a U.S. Credit Card in Japan

If your credit card statement clearly shows the amount of the transaction in Japanese yen, the actual yen amount shown on the statement should be used.

If the statement shows only a U.S. dollar amount and the transaction therefore needs to be converted back into yen, using the TTM rate is a reasonable basic approach.

When a U.S. credit card is used for a yen-denominated transaction in Japan, the cardholder often bears the currency conversion cost when the yen transaction is converted into U.S. dollars.

Therefore, the practical approach is:

If U.S. Dollars Are Remitted to a Japanese Bank Account Without Being Converted Into Yen

If U.S. dollars are transferred to a U.S. dollar account at a Japanese bank without being converted into yen, there is no actual yen amount received.

If those U.S. dollars were actually converted into Japanese yen in Japan, the conversion would normally be made at a rate based on the bank’s TTB rate.

For that reason, using the TTB rate to measure the remittance in yen has a reasonable economic basis.

If there is an actual yen conversion, use the actual yen amount.

If the funds remain in U.S. dollars, using TTB reflects approximately how much yen would actually be received if the dollars were converted into yen.

The use of TTM or TTB here does not mean that Japan’s remittance-based taxation rules expressly prescribe these particular rates for these transactions.

The purpose is to determine the yen value of the actual remittance using a reasonable method that reflects the transaction.

8. Should You Use the Exchange Rate for Every Transaction or an Average Rate?

The most precise method is to calculate the yen amount separately for each remittance or payment.

If you make dozens of U.S. credit card payments during the year, calculating each transaction individually produces the most accurate result.

There is no general rule under the remittance-based taxation rules expressly allowing an annual average exchange rate to be used for calculating annual remittances.

However, in practice, the number of transactions can be very large.

If exchange rates were relatively stable and there would be no significant difference between calculating each transaction individually and using an average rate, an average rate may sometimes be used as a practical method.

This is a simplified method rather than the most precise method.

Particular care is needed when:

In those situations, mechanically applying an annual average rate can produce a materially different result.

The more significant the difference, the stronger the reason to calculate the transactions individually.

9. What Changes After the 5-Year Point?

Once you are no longer a non-permanent resident for Japanese tax purposes, Japan generally taxes you on your worldwide income.

At that point, whether you used a U.S. credit card or remitted the foreign income to Japan generally no longer determines whether the foreign-source income is taxable in Japan.

The foreign-source income itself is generally within the scope of Japanese taxation.

This is why U.S. credit cards and remittance-based taxation are particularly important while you still qualify as a non-permanent resident.

The “five-year point” is not always simply the fifth anniversary of the day you first entered Japan.

Your periods of residence in Japan during the preceding ten years also matter when determining whether you qualify as a non-permanent resident.

For a more detailed explanation of what changes around this point, see What Happens to Your Japanese Taxes After Living in Japan for 5 Years? A Guide for Americans.

10. What Should Be Checked When Preparing a Japanese Tax Return?

When preparing a Japanese tax return for a non-permanent resident, reviewing foreign income alone is not enough.

At a minimum, the following may need to be reviewed together:

This becomes particularly important when someone has lived in Japan throughout the year but has transferred very little money into a Japanese bank account.

The natural question is:

“How were your living expenses in Japan actually paid?”

If the answer is “with my U.S. credit card,” those credit card payments become important information when calculating remittances.

Looking only at bank transfers can significantly understate the actual amount of remittances.

Frequently Asked Questions

If I Transfer Money to Japan to Pay Japanese Taxes, Does It Still Count as a Remittance?

Yes.

The fact that the money was transferred to pay Japanese taxes does not change the fact that a remittance was made.

For example, if you transfer JPY 1,000,000 from the United States to Japan in June 2026 to pay Japanese income tax, the JPY 1,000,000 is included in your remittances for 2026.

There is no general exception simply because the purpose of the remittance was to pay Japanese tax.

What matters is not what you later used the money for, but the fact that the remittance to Japan occurred during that calendar year.

Is There a Way to Avoid Remittance-Based Taxation?

This should not be approached by simply changing the form of a transaction so that it does not look like a remittance.

If the substance of the transaction itself changes, however, the transaction may no longer be a remittance by the individual.

For example, suppose you already own a U.S. LLC and later establish a Godo Kaisha (GK) in Japan.

The U.S. LLC may lend business funds directly to the Japanese GK.

The transaction is then:

U.S. LLC → Japanese GK

If it is genuinely a loan between the two companies, the transfer is not simply a personal remittance by the non-permanent resident. Remittance-based taxation is a rule that applies to the individual.

However, simply changing the name on the bank transfer is not enough.

The transaction must actually be a loan from the U.S. LLC to the Japanese GK.

For example, there should be:

The transaction should be structured and carried out in the same way as an ordinary, genuine financing transaction.

This is not:

“Changing the form of a remittance to avoid remittance-based taxation.”

It is:

“Actually carrying out a different transaction — a loan between two companies rather than a remittance to the individual.”

That distinction is important for Japanese tax purposes.

What If I Leave My U.S. LLC Distribution in the United States and Use Only Old Savings for My Living Expenses in Japan?

That does not, by itself, solve the problem.

If you have relevant foreign-source income during the year and make remittances to Japan during the same calendar year, the remittance rules need to be considered.

It generally does not matter that the particular money remitted came from old savings.

The basic comparison is between relevant foreign-source income and remittances during the same calendar year.

For more detail on how Japan treats distributions from a U.S. LLC, see How Are U.S. LLC Distributions Taxed in Japan? A Practical Guide for Americans.

What If I Use My U.S. Credit Card in December but Pay the Bill in January?

The relevant date for remittance purposes is the date on which the credit card bill is actually paid using funds outside Japan.

If you use the card in December but pay the bill from your U.S. bank account in January of the following year, the payment is included in the following year’s remittances.

What If My U.S. Credit Card Payments Are Greater Than My Foreign-Source Income?

The amount of the credit card payments does not itself become income.

For example:

The fact that you remitted USD 100,000 does not mean that you suddenly have USD 100,000 of taxable income.

In this simple example, the relevant foreign-source income of USD 30,000 would be the upper limit.

What If I Use a Family Credit Card in Japan?

The name printed on the card is not the only factor.

You need to look at who used the card, who is legally responsible for the credit card debt, and whose funds outside Japan were actually used to pay it.

The actual flow of funds matters.

What If I Pay Entirely With Credit Card Points?

This is not necessarily the same as an ordinary credit card payment.

If the transaction is paid entirely with points and no credit card debt is subsequently settled using your funds outside Japan, the facts are different from an ordinary U.S. credit card transaction.

The important question is whether funds outside Japan were actually used.

What If I Am Only Visiting Japan and Use My U.S. Credit Card?

First, your Japanese tax residency status needs to be determined.

If you are simply visiting Japan and are a nonresident for Japanese tax purposes, the remittance-based taxation rules for non-permanent residents discussed in this article do not apply to you in the same way.

Japanese Tax Support for Americans Living in Japan

Koshida Accounting and Tax Office provides Japanese tax and accounting services in English for foreign residents in Japan.

For a non-permanent resident, reviewing foreign income alone is not enough.

Bank transfers, U.S. credit cards, foreign bank accounts, U.S. LLC distributions, capital gains, foreign tax credits and other cross-border transactions may need to be reviewed together.

This is particularly important for Americans because Japan and the United States can treat the same transaction differently for tax purposes.

The Japanese side of the tax situation needs to be analyzed under Japanese tax rules.

For a broader overview of U.S. income and Japanese taxation, see Moving to Japan? How Your U.S. Income Is Taxed in Japan.

When necessary, I can also coordinate with your U.S. CPA or tax preparer.

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