Residency for tax purposes
There are three residency categories for Japanese tax purposes:
|1. Resident other than non-permanent resident (previously 'permanent resident')||(a) A Japanese resident of Japan
(b) a non-Japanese resident of Japan who has had a domicile in Japan for five or more years in the last ten year period
|2. Non-permanent resident||A non-Japanese national who has resided/maintained a domicile/residence status in Japan for less than five years in the last ten year period|
|3. Non-resident||An individual who is not classified as resident|
NB It appears that from 2020, the Japanese tax authorities have changed the wording from 'permanent resident' to 'resident other than non-permanent resident'. In any case, 'resident other than non-permanent resident', or 'permanent resident' for tax purposes should not be confused with the residency status of permanent residency).
See here (PDF) for more detailed information directly from the National Tax Agency (in English) regarding determination of tax residency, including more in-depth definitions than provided in the table above.
Scope of taxation
The scope of taxation for the different residency classes is summarised below, in written form and in table form:
Resident other than non-permanent resident: all worldwide income is taxable.
Non-permanent resident: the only untaxed income is foreign source income which is not remitted to Japan. However, the definition of foreign source income is such that capital gains arising abroad are likely to be excluded from the classification of foreign source income, meaning they are taxable in Japan.
Non-resident: domestic source income is taxable in principle; income other than domestic source income is not taxable.
|Classification||Income other than foreign source income||Foreign source income|
|Paid in Japan||Paid abroad|
|Remitted to Japan||Not remitted to Japan|
|Resident other than non-permanent resident||Taxable|
|Non-permanent resident||Taxable||Not taxable|
|Domestic source income||Income other than domestic source income|
|Taxable in principle||Not taxable|
Section 1-3 of the 2020 Guide to Income Tax (PDF) provides further detail.
This article (PDF) explains how some sources of income, such as capital gains abroad, fall outside the definition of foreign source income, and thus are taxable for non-permanent residents irrespective of whether the income is remitted to Japan.
Foreign nationals filing tax returns in Japan may be asked to submit a copy of the form ‘Confirmation of the type of resident status, etc.’ (居住形態等に関する確認書).
You can see on the 2020 version of this form (PDF) that the term ‘permanent resident’ was still used as a status of residency for tax purposes.
Double Tax Conventions
Double tax conventions exist to minimise the effects of being doubly taxed on the same income.
It is possible that articles and clauses of a double tax convention could supersede Japan's domestic determination of the type of taxpayer and scope of taxation.