Japan Tax Rates & Tips for US Expats
- Japan at a Glance
- Non-Resident Income Tax Rate in Japan
- Resident Income Tax Rate in Japan
- Japanese Income Tax Rates for Residents:
- Americans Living in Japan Have US and Foreign Tax Obligations
- Tax Filing Requirements in Japan
- How Is Tax Residency Determined in Japan?
- Other Taxes in Japan
- US-Japan Tax Treaty
- Totalization Agreement With Japan
- Tax Forms for Expats in Japan
- Report of Foreign Assets
- Navigating Tax Compliance for US Expats in Japan
The tax rate in Japan for foreigners depends on whether or not you’re considered a resident. Those who own a home or have had a temporary residence for at least a year are considered residents. There may be other situations in which you are considered a resident, though generally, if you do not spend much time in Japan, you might be considered a non-resident.
To avoid double taxation, the US and Japan have signed a tax treaty that provides relief for certain taxes. However, it’s important to note you may still have to file returns in both countries, even if you don’t owe any US taxes.
Japan at a Glance
- Primary Tax Forms: Form A
- Tax Year: January 1 to December 31
- Tax Deadline: March 15th
- Currency: Japanese Yen (JPY)
- Population: 126 million
- Number of US Expats in Australia: Over 60,000
- Capital City: Tokyo
- Primary Language: Japanese
- Tax Treaty: Yes
- Totalization Agreement: Yes
Non-Resident Income Tax Rate in Japan
Japanese non-residents are taxed on their Japan-sourced income at a flat rate of 20.42% of gross income. No deductions are available for this tax.
Resident Income Tax Rate in Japan
Unlike non-residents, residents are taxed on their worldwide income at progressive rates, as shown below. “Taxable income” is what remains after applicable deductions, such as the spousal, dependent, or basic deductions, are accounted for.
Japanese Income Tax Rates for Residents:
| Taxable Income (JPY) | Tax Rate (%) | Tax Bracket Adjustment |
| 0 – 1,950,000 | 5 | 0 |
| 1,950,000 – 3,300,000 | 10 | 97,500 |
| 3,300,000 – 6,950,000 | 20 | 427,500 |
| 6,950,000 – 9,000,000 | 23 | 636,000 |
| 9,000,000 – 18,000,000 | 33 | 1,536,000 |
| 18,000,000 – 40,000,000 | 40 | 2,796,000 |
| 40,000,000 or more | 45 | 4,796,000 |
To quickly estimate your Japanese income tax liability, identify your bracket and multiply your income by the appropriate percentage. Then, subtract the “Tax Bracket Adjustment” figure from the same row. Progressive tax brackets work by taxing income at different rates as income increases. The “correction” figure accounts for tax accumulated in lower brackets, allowing you to quickly estimate liability without messy math.
Additionally, all self-employment income must be self-reported. The excess of gross revenue over total deductible business expenses is what is subject to tax.
Due to the US-Japan tax treaty (as well as various IRS tax credits and deductions), it’s rare for a US expat in Japan to be subject to double taxation.
Learn where the best tax havens are, common traps, and ways to save money on your US expat taxes.
Americans Living in Japan Have US and Foreign Tax Obligations
As a US citizen, you must file a US Federal Tax Return every year, regardless of where you live or work, if your income is over certain thresholds. Failure to do so can result in penalties or fines, even if you don’t owe any taxes. Additionally, residents of Japan may also be required to file taxes with the Japanese government.
Tax Filing Requirements in Japan
Japanese residents and non-residents whose income meets certain thresholds will be taxed on that income. However, because Japan imposes a withholding tax on employees, foreigners living in Japan with only Japan-sourced employment paid in Japanese Yen (JPY) will not need to file a return.
Most foreigners will only need to file a tax return if:
- They receive employment income from a source outside of Japan.
- Their employer doesn’t withhold their taxes during the year.
- They have more than one employer.
- They are self-employed.
- They leave Japan before the end of the year.
- Their annual income exceeds 20 million JPY.
- Their side income exceeds 200,000 JPY.
Americans who do have to file a tax return must self-assess their tax obligations when filing a return, much like the US.
How Is Tax Residency Determined in Japan?
To be considered a resident of Japan for tax purposes, generally, you must either own a home in Japan or have a temporary residence for at least one year. After living in Japan for five out of the previous ten years, you will become a permanent resident.
If you do not meet these residency standards, you will likely be considered a non-resident for tax purposes. This status can have significant implications, as non-residents are only taxed on their Japanese-sourced income.
Other Taxes in Japan
- Capital Gains Taxes are considered part of standard income rather than a separate category. As such, capital gains are assessed at the same rate as regular income. You may deduct capital losses to reduce capital gains.
- Consumption Tax is imposed when businesses transfer goods, provide services, or import goods into the country. The standard flat rate is 10%, though some services are taxed at 8%, such as food, drinks, and newspapers.
- Gift Tax is assessed progressively based on the gift amount (minus deductions and exclusions). The maximum rate is 55%, applying to gifts over 45 million JPY.
- Inheritance Tax is levied at progressive rates, with a maximum of 55% for inheritances over 600 million JPY.
- Property Tax is assessed at a flat rate of 1.7% of appraisal value and is administered by local governments.
- Corporate Tax varies widely depending on specific circumstances. However, domestic Japanese corporations are taxed on worldwide income, while foreign corporations are taxed only on Japan-sourced income. The US-Japan tax treaty protects corporations from double taxation.
- Inhabitant Tax is levied at the local level on residents at a rate of 5,000 JPY + 10% of annual income. Non-residents are exempt.
- Enterprise Tax ranges from 3%-5%, depending on the type of business, and is levied against self-employed residents.
Social Security
Japan boasts a comprehensive social security system. Some foreigners may be required to pay into this, while others will instead contribute to the US Social Security system. This is determined by the US-Japan totalization agreement, designed to help non-residents avoid contributing to both systems at once.
- If a US company assigns you to work in Japan for less than five years, you will pay into US social security. If the assignment exceeds five years, you will pay into Japanese social security.
- If you work for a non-US employer in Japan, you will always pay into Japanese social security.
- If you are self-employed, you will pay into the social security system of whichever country you live in for more days during the year.
US-Japan Tax Treaty
Yes. The US has agreed to a formal tax treaty with Japan. This treaty helps US citizens in Japan avoid being taxed twice on the same income.
Totalization Agreement With Japan
The US also has a totalization agreement with Japan, protecting you from double taxation by defining which country’s social security system you should contribute to.
When you live in the US, tax day is simple: April 15th! When you move abroad, it’s not so straightforward! Learn about all the expat deadlines and extensions you need to know to file.
Tax Forms for Expats in Japan
As an American living in Japan, you may have to file tax forms with both the Japanese and US governments. Let’s take a look at some of the most common Japanese tax forms for expats:
Form A
Form A is Japan’s individual income tax return, comparable to America’s IRS Form 1040. If you are required to file a Japanese tax return, it will almost certainly be Form A.
You must submit Form A to Japan’s National Tax Agency (NTA) by March 15. Extensions are rarely allowed. If you leave Japan before the end of the tax year, you must file Form A before departing unless you appoint a tax agent to represent you in your absence.
Form B
If you have any income-generating assets, such as real estate, investments, or business operations, you will file Form B.
Form B should be attached to Form A and filed simultaneously.
Report of Foreign Assets
If you qualify as a permanent resident of Japan and own assets in other countries worth more than 50 million JPY, you must file a Report of Foreign Assets. Using this form, you will report the type, quantity, and value of all foreign assets.
If you are required to file a Report of Foreign Assets, you must do so by March 15
The IRS provides a variety of credits and deductions for Americans living in Japan. Using these tax credits, most expats are able to erase their US tax bill entirely. To learn more, see our guide on expat tax benefits.
Navigating Tax Compliance for US Expats in Japan
Thank you for reading our guide on the impact of Japan’s tax policies on US citizens living abroad. We hope that it has enriched your understanding of this topic. If you’re seeking further information, our team of knowledgeable expat tax experts is always available to assist you. Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.
