Visa Status & Tax in Japan

The three tax statuses

Japan classifies foreign residents into three tax categories. Your status determines what income is taxed in Japan.

Note: "Permanent resident for tax" is different from immigration permanent resident (PR) status. They are determined separately. You can hit 5 years of tax residence long before getting an immigration PR, and vice versa.

The 5-year rule explained

For most working foreigners, the biggest concern is when you cross from "non-permanent" to "permanent" tax resident status. Once you've been in Japan for 5 of the last 10 years (counted by physical presence), Japan starts taxing your worldwide income. This affects:

• Foreign salary (e.g., remote work for an overseas employer)
• Investment income from foreign stocks, dividends, capital gains
• Rental income from property in your home country
• Foreign pension benefits
• Cryptocurrency gains worldwide

Many foreigners optimize their tax position by realizing capital gains, restructuring investments, or even leaving Japan before crossing this threshold. Consult a tax professional well before your 4th year.

Filing your tax return as a foreigner

Most employed foreigners do NOT need to file a tax return. Your Japanese employer handles monthly withholding and year-end adjustment (nenmatsu chosei, 年末調整). You only need to file (kakutei shinkoku, 確定申告) if:

• You're self-employed (sole proprietor)
• You have side income over 200,000 JPY/year
• Your annual salary exceeds 20M JPY
• You want to claim deductions like medical expenses, donations, or first-year mortgage
• You changed jobs mid-year and your new employer didn't do year-end adjustment
• You have foreign income (varies by tax status, see above)

Filing period: February 16 to March 15 for the previous calendar year. Late filing has penalties (5-15% of unpaid tax).

Common deductions for foreigners

• Foreign tax credit: If you paid tax in your home country on the same income, you can offset Japanese tax. Tax treaties (e.g., Japan-US) prevent double taxation.
• Spouse and dependent deduction: Even if your spouse and children live overseas, you may claim deductions if you support them. Requires remittance records.
• Medical expense deduction: Family medical expenses over 100,000 JPY/year are deductible. Includes spouse, children, and dependent parents (even abroad).
• Furusato Nozei: Donate to municipalities in exchange for ~30% value gifts; effectively pay only 2,000 JPY for the gifts. Available to foreign residents who pay Japanese resident tax.
• iDeCo (private pension): Contributions are 100% tax-deductible. Foreign residents can join. Funds are locked until age 60, so plan accordingly if you may leave Japan.

Leaving Japan: tax procedures

When you permanently leave Japan, you must:

1. Final tax filing: File a final tax return for the year of departure before you leave (or appoint a tax representative, nouzei kanrinin, 納税管理人, to file for you later).
2. Resident tax: Resident tax for the current year is based on the previous year's income, so you may owe a substantial amount even after leaving. Pay in advance or via your tax representative.
3. Pension lump-sum withdrawal: If you've paid into Welfare Pension or National Pension for less than 10 years and have no entitlement to a pension, you can claim a lump-sum withdrawal (dattai ichijikin, 脱退一時金) within 2 years of leaving Japan. Up to 5 years of contributions are refunded.
4. Withhold tax on lump-sum: 20.42% withholding tax is automatically deducted from the lump-sum. You can recover this by filing a tax return through your tax representative.