What is the remittance taxation for non-permanent residents? [Are remittances taxed when sending money from overseas to Japan?]

In Japan, income tax payers are divided into three categories.

• Permanent residents
• Non-permanent residents
• Non-residents

Of these, non-permanent residents are subject to the remittance taxation, which is the topic of this article.

A non-permanent resident is an individual who does not have Japanese nationality and has had an address or residence in Japan for a total of 5 years or less in the past 10 years.

In addition, the so-called remittance taxation is a system in which a certain amount is taxed when a non-permanent resident has income sourced overseas and remits it from overseas to Japan.

Even if the income is generated overseas, it is subject to tax if

• the money is paid in Japan
• the money is remitted from overseas to Japan.

In this article, we will explain the cases in which non-permanent residents are subject to the remittance taxation and how to calculate it.

When remittances are taxable

In order for remittances to be taxed, the basic conditions are:

• You are a non-permanent resident
• You have foreign-source income in the year you remit from overseas to Japan

If you have no foreign-source income, remittances from overseas will not be taxed.

However, the money earned from that foreign-source income does not have to be linked to the money you remit.

As the saying goes, money has no color, so for example, if foreign-source income in the US is deposited into a US deposit account and remitted to Japan from a completely separate deposit account in Hong Kong, it will still be subject to remittance taxation.

Examples of taxable transfers

The notification specifies that the following transactions are subject to remittance tax.

• Bringing currency into Japan or regular remittances by check, bill of exchange, letter of credit, or other means of payment
• Carrying or sending precious metals, public bonds, stocks, or other items into Japan, which are deemed to have been made in place of regular remittances
• Borrowing or receiving a payment in advance in Japan and using one’s own deposits overseas to repay the debt, which are deemed to have been made in place of regular remittances

Points to note are:

• If the withdrawal account for a credit card used in Japan is an overseas deposit account
• If money is withdrawn from an overseas deposit account at an ATM in Japan

These cases are recognized as a remittance from overseas to Japan.

Example of calculation

In the example below, let’s say there is a remittance of 300 from overseas to Japan.

	Income other than foreign source income (≒ Domestic source income)	Foreign source income
Payment in Japan	A 500	B 300
Payment outside Japan	C 200	D 400

A and C are subject to taxation because they are income other than foreign-source income.
(Whether or not they are remitted is irrelevant)

B is foreign-source income, but paid in Japan, so it is taxable.

The remittance amount of 300 is first calculated as if C’s money was remitted.

Therefore, the amount subject to remittance tax is

Remittance amount 300 – C 200 = 100

So 100 of D 400 is subject to taxation.

If the remittance amount were 200, the entire amount would be recognized as a remittance of C 200, so D 400 would not be taxed.

Conclusion

In this article, we have written about the cases in which non-permanent residents are subject to remittance tax and how to calculate it.

• If you are a non-permanent resident
• If you have overseas-source income
• If you remit from overseas to Japan

You need to be careful because the remittance may be subject to taxation.

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都築太郎税理士事務所/Tsuzuki Taro Tax Accountant Office

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