Expatriate tax ebook - Japan

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
The extent of an expatriate's income subject to Japanese tax depends on their residency status. A permanent resident is subject to income tax on their worldwide income. A non permanent resident is subject to income tax on Japan source income, and on foreign source income either paid or remitted to Japan. A non resident is taxed only on Japan source income.

Residence
A resident is an individual whose domicile is in Japan or who has formed the intention of residing in Japan. In cases where intent is difficult to determine, an individual who has resided in Japan continuously for a year or more is a resident. A non resident is an individual other than a resident.

A resident is further classified into either a permanent resident or a non permanent resident. A non permanent resident is an individual who has not formed the intention of living permanently in Japan, nor has domicile, nor been a resident of Japan for more than five years in the previous ten year period.

Income from employment
Income from employment is subject to income tax. Employers deduct tax from salary and wages paid, and remit this withholding to the tax office, generally on a monthly basis. Taxpayers who receive a salary income of less than ¥20m in the tax year are not required to file a tax return, unless they are not paid by a Japan employer (i.e. offshore), have claimed a medical expense deduction, or their other income totals more than ¥200,000.

Source of employment
Japanese income tax arises on employment income derived from duties performed in Japan. The tax is assessed on employment income including all wages, salaries, bonuses, overtime pay, gratuities, and benefits etc.

Benefits (in kind)
The Income Tax Law specifies the tax treatment of the following benefits in kind: residential accommodation, loans to employees or directors, language lessons and insurance. Allowances such as taxes, school fees, utility expenses, medical expenses and car expenses granted by an employer are treated as salary income.

Expatriate concessions
There are no specific tax concessions for expatriates; however the correct structuring of housing and other benefits as part of the compensation package can result in significant tax savings.

Relief for foreign taxes
Where income has been subject to taxation in Japan and a foreign jurisdiction, relief from double taxation may be available where double taxation agreements apply. Foreign tax credits may also be available.

Deductions against income
A number of deductions or allowances may be made from a taxpayer’s income, such as:

• deduction for accidental loss
• deduction for social insurance premiums
• allowance for a spouse
• allowance for dependants
• allowance for widow or widower
• basic allowance.

Information about Japan:

introduction

facts and figures

basis of taxation

what taxes?

tax planning opportunities