What Counts as a Remittance to Japan for Non-Permanent Residents?
【Koshida Accounting Firm Column Date:】
Hi, my name is Taisei Koshida, and I am a certified public accountant and licensed tax accountant in Japan.
If you are classified as a non-permanent resident for Japanese income tax purposes, remittances to Japan are important when determining how your foreign-source income is taxed in Japan.
A remittance does not mean only transferring money from a foreign bank account to a Japanese bank account.
It also includes bringing foreign currency into Japan, sending funds by check or money order, bringing valuable metals or securities into Japan, and borrowing or making payments in Japan based on deposits held overseas.
This article focuses specifically on what counts as a remittance to Japan.
1. Ordinary Remittances to Japan
The most obvious example is directly transferring funds held overseas to Japan.
An ordinary bank transfer from a foreign bank account to a Japanese bank account counts as a remittance to Japan.
Remittances are not limited to bank transfers. They also include:
- Bringing foreign currency into Japan
- Sending foreign funds to Japan by check
- Sending foreign funds to Japan by money order
In other words, “remittance” does not mean only a bank transfer.
2. Bringing Valuable Metals or Securities Into Japan
Bringing valuable metals or securities from overseas into Japan also counts as a remittance to Japan.
Therefore, it is not enough to look only at cash and bank deposits.
Moving economic value from overseas into Japan can count as a remittance even when no money is deposited into a Japanese bank account.
3. Borrowing or Making Payments in Japan Based on Foreign Deposits
Borrowing or making payments in Japan based on deposits held overseas also counts as a remittance to Japan.
Concrete examples include using credit or debit cards linked to foreign bank accounts in Japan and withdrawing cash in Japan using a cash card linked to a foreign bank account.
This applies even when no funds are transferred directly into a Japanese bank account.
4. Using a Foreign Credit or Debit Card in Japan
For example, if you use a U.S. credit card linked to funds held overseas to pay for a hotel, restaurant, shopping, or other expenses in Japan, the amount used in Japan is treated as a remittance to Japan.
The same basic rule applies to a foreign debit card.
Therefore, when calculating remittances for a non-permanent resident, it is necessary to check not only transfers into Japanese bank accounts but also the amount spent in Japan using foreign cards.
For a detailed explanation of U.S. credit card use and remittance-based taxation, see U.S. Credit Cards in Japan: Do They Count as a Remittance?
5. Withdrawing Cash From a Foreign Bank Account in Japan
Withdrawing cash from a foreign bank account at an ATM in Japan using a cash card or debit card also counts as a remittance to Japan.
For example, if you withdraw JPY 100,000 from a U.S. bank account at an ATM in Japan, that JPY 100,000 needs to be included when checking your remittances to Japan, even though there was no transfer to a Japanese bank account.
6. A Remittance Is Not the Same as Taxable Income
There is an important distinction here.
The amount remitted to Japan does not automatically become taxable income.
For a non-permanent resident, the amount of foreign-source income taxable in Japan depends on the relationship between foreign-source income paid outside Japan and remittances to Japan during the same calendar year.
Also, transferring money from savings accumulated before moving to Japan does not automatically take the transfer outside the remittance rules.
For a broader explanation of non-permanent resident status and remittance-based taxation, see Japan’s 5-Year Tax Rule for Americans: What Changes?
7. Do Not Check Only Transfers Into Your Japanese Bank Account
When preparing a Japanese tax return for a non-permanent resident, looking only at overseas transfers into Japanese bank accounts can cause remittances to be overlooked.
The following transactions should be checked:
- Bank transfers from overseas to Japan
- Foreign currency brought into Japan
- Transfers by check or money order
- Valuable metals or securities brought into Japan
- Borrowing or payments in Japan based on foreign deposits
- Foreign credit or debit card use in Japan
- Cash withdrawn in Japan from foreign bank accounts
If you regularly use foreign bank accounts or foreign cards while living in Japan, keeping annual records of these transactions makes it much easier to prepare your Japanese tax return.
8. FAQs About Remittances to Japan
Does a Bank Transfer From an Overseas Account to Japan Count as a Remittance?
Yes.
An ordinary bank transfer from an overseas account to Japan counts as a remittance to Japan.
What If I Bring Foreign Currency Into Japan?
It counts as a remittance to Japan.
A remittance does not have to go through a bank.
Does Using a Foreign Credit Card in Japan Count as a Remittance?
Yes.
Using a foreign credit card in Japan based on funds held overseas is treated as a remittance to Japan, even when no money is transferred directly to a Japanese bank account.
What If I Withdraw Cash From My Foreign Bank Account at an ATM in Japan?
It counts as a remittance to Japan.
The funds held in the foreign bank account are being brought into Japan through the cash withdrawal.
What If I Transfer Savings I Had Before Moving to Japan?
Transferring old savings does not itself create new income.
However, if you are a non-permanent resident and have foreign-source income paid outside Japan during the same calendar year, the relationship between that income and your remittances to Japan needs to be considered.
Therefore, simply saying that the money came from old savings does not mean that it can be ignored for remittance-based taxation.
Is the Entire Amount Remitted to Japan Taxable?
No.
The remittance itself is not income. For a non-permanent resident, the amount of foreign-source income taxable in Japan is determined by considering foreign-source income paid outside Japan and remittances to Japan, together with the other applicable remittance rules.
9. Japanese Tax Support for Non-Permanent Residents
When preparing a Japanese tax return for a non-permanent resident, both foreign income and remittances to Japan need to be checked.
If you regularly use foreign bank accounts, credit cards, or debit cards in Japan, looking only at deposits into your Japanese bank account can result in remittances being missed.
If you have U.S. income, see Moving to Japan? How Your U.S. Income Is Taxed in Japan for an overview of non-permanent resident taxation, remittance-based taxation, U.S. rental income, stocks, Social Security, 401(k)s, U.S. LLCs, and other common issues.
Koshida Accounting and Tax Office provides Japanese tax return and international tax support in English for foreign residents in Japan.
Need help with foreign income or remittances to Japan?
Contact Koshida Accounting and Tax Office to discuss your Japanese tax filing.