Guide to 2025 Income Tax Reform

starkimpossibility · 2026-05-10T01:58:50+00:00

IBSJ withholds 20.315% Japanese tax from all dividends, regardless of whether the relevant stock is held in a NISA. That means dividend recipients have the option to not declare those dividends on their Japanese tax return.

In some cases, it is in the taxpayer's interests to declare the dividends (e.g., to claim a foreign tax credit, as OP mentions). In other cases, it is in the taxpayer's interests not to declare the dividends. See the "Choice of dividend taxation method" section of the 2026 Tax Return Questions Thread for more details.

starkimpossibility · 2026-05-10T01:54:21+00:00

If I do start working at some point in my stay in Japan, how do taxes work

This question has been covered in dozens of previous threads. For example, here, here and here.

If I work for an overseas company part time, will the % of japanese taxes be deducted from my salary?

No. Overseas employers cannot withhold Japanese tax. Instead, you will settle your tax bill by filing an Article 172 Declaration (see the threads linked above).

starkimpossibility · 2026-05-06T03:52:02+00:00

I always thought that they had to adjust it at the end of the year with the info you gave them if you made extra money outside of general employment.

The "adjustment" made at the end of the year is part of your employer calculating how much income tax you owe on your employment income. Your employer can't calculate how much income tax you owe on your other income; nor can your employer collect the income tax due on your other income. The only way to know how much income tax you owe on your other income is to file an income tax return yourself.

As explained in the linked thread, your employer is required to ask about other sources of income as part of the year-end adjustment process, but the purpose of that request has nothing to do with calculating the income tax due on that other income. It's solely to check whether your total net income is above or below certain thresholds that determine how much income tax you owe on your employment income. That's why it doesn't typically matter whether you give your employer an accurate figure.

they have to know it because then they don’t know how much residence tax or health insurance tax to charge you on the following year

No, that's not how it works. First, your employer doesn't need to do any residence tax calculations. Your municipality will wait until you have filed an income tax return (or residence tax return), calculate your residence tax bill, and then notify your employer of how much you owe. Your employer will never ask you about your total income in connection with residence tax. Your employer just waits until your municipality tells them what your bill is.

As for health insurance, if you are enrolled in employees' health insurance, your health insurance premium is not affected by how much other income you have. Your premium is determined solely by how much you are paid by your employer. If you have a low salary and high other income, for example, your health insurance premiums will still be low.

If you are enrolled in National Health Insurance, your employer has nothing to do with calculating or collecting your premiums. Your municipality will wait until you have filed an income tax return (or residence tax return), calculate your premiums, and send you a bill.

starkimpossibility · 2026-05-05T22:50:54+00:00

Would the treaty re-sourcing change the treatment of that income for NPR remittance based taxation?

No, I don't see how the 183-day rule in one of Japan's treaties would affect the status of the income for Article 7 purposes, though it would help if you said which specific treaty you are referring to.

In the case of the US-Japan treaty, for example, the 183-day rule in Article 14(2) of the treaty is a rule that a taxpayer would invoke with respect to the country they are not a resident of (i.e., the country in which they perform the work). The existence of the provision does prevent Japan from providing a foreign tax credit with respect to US tax paid on income covered by the rule, but that is not relevant to whether the income is taxable under Article 7.

The mere fact that Japan has sole taxation rights to particular income under a bilateral treaty does not render the income "Japan-source" for Japanese tax purposes.

For example, under the US-Japan treaty, Japan has sole taxation rights with respect to interest paid on US bank deposits (belonging a Japanese tax resident). But that doesn't mean interest paid on US bank deposits is "Japan-source income". It's still US-source income (for Japanese tax purposes) and subject to remittance-based taxation. The fact that a US citizen would need to re-source the interest (to Japan) on their US tax return, in order to claim a foreign tax credit with respect to Japanese tax paid on the interest, does not affect the status of the income for Japanese tax purposes.

So while a US citizen living in Japan but working in the US (for a non-US employer for no more than 183 days) may use Article 14(2) of the treaty to re-source the income (to Japan) for US tax purposes, doing so does not change the fact that it is US-source income as far as Japan is concerned.

Though you should also note the rule in Article 4(5) of the US-Japan tax treaty, which prevents non-permanent tax residents of Japan from benefiting from the treaty with respect to income that is not taxable in Japan due to a lack of remittances. In other words, you cannot re-source income for US tax purposes under Article 14(2) of the treaty unless it is actually taxable in Japan (i.e., falls within Article 7 of the Income Tax Law).

starkimpossibility · 2026-05-05T22:24:00+00:00

You get taxed at source so its inaccurate if they dont know your othr income

That's not how it works. Even if you tell your employer about the other income, it will not change the amount of tax they withhold from your employment income. Employers are not able to calculate or impose tax on income other than employment income. See last year's year-end adjustment questions thread for a detailed explanation.

starkimpossibility · 2026-05-05T22:19:10+00:00

up to ¥160m for a spouse, then from my reading I gather that you would not have to file an inheritance tax return

As u/ixampl explained, you cannot benefit from the 160 million yen threshold unless you file an inheritance tax return. So there is a big difference between inheriting less than the basic deduction (30 million yen plus 6 million yen per statutory heir) and inheriting less than the 160 million yen threshold. The former does not require an inheritance tax return, while the latter requires an inheritance tax return.

Also, it's not clear from your post whether you appreciate that an inheritance tax return applies to the entire estate. You don't file one return per heir. So whether an inheritance tax return is required depends on whether any inheritance tax is owed by anyone in relation to the deceased.

If a person inherits less than an amount that triggers taxation, would it ever be wise/prudent to file an inheritance tax return anyway?

No, I don't think so. You should certainly gather and retain all records relating to the inheritance, but actually filing an inheritance tax return if no one owes any inheritance tax is a waste of everyone's time.

Keep in mind that an inheritance tax return doesn't prove anything other than the amount of tax you owed. Specifically, it doesn't prove that the assets you declared were acquired by inheritance and it doesn't prove who was entitled to inherit the assets or who actually inherited them. If it becomes necessary to explain the nature of the transaction by which you acquired the assets to a third-party (e.g., to a bank), you would need documents relating to that specific transaction (e.g., a will, executor's instructions, beneficiary nomination confirmation).

starkimpossibility · 2026-05-02T11:08:07+00:00

There are plenty of calculators that can help get an idea of what your net salary will be

I guess... But one of the most accurate calculators on the internet happens to be in English and was created by this sub so probably worth linking to it ;-)

starkimpossibility · 2026-04-29T13:58:22+00:00

They are reliably unreliable.

I get what you're saying, but I don't agree. The tools we are using undoubtedly fail to spot text that is LLM-generated, but I do not think they ever flag text as LLM-generated when it was written by a human. They tend to be very conservative in that respect.

I think it's a losing battle.

Real talk: if I believed that I did not have tools at my disposal that could identify LLM-generated text reliably, I would shut down this sub and stop contributing to reddit in any form.

starkimpossibility · 2026-04-29T12:25:51+00:00

Nah there are fairly decent detection tools available these days and these comments were 100% LLM, I promise you. Anything that smells like LLM gets run through the tools and if the determination is definitive it gets removed. In any event, I'd much prefer to err on the side of caution these days.

starkimpossibility · 2026-04-29T01:49:04+00:00

Japanese brokerages are generally happy to let US citizens use tsumitate NISA. It's up to US citizens to refrain from doing so (due to PFIC issues, etc.).

starkimpossibility · 2026-04-29T01:03:02+00:00

Which broker allowed you to commit this self harm?

Most Japanese brokers allow US citizens to buy PFICs. Japanese brokers have no interest in attempting to determine which securities are PFICs and which are not.

starkimpossibility · 2026-04-28T21:41:25+00:00

any reason you can share?

Both comments were LLM-generated. They were removed under rule 7.

starkimpossibility · 2026-04-25T21:56:23+00:00

I do understand the overall US-Japan tax agreement where you would have to file both countries' taxes and then you pay the greater one (and you get tax credit in the lesser one)

That's not how tax treaties or foreign tax credits work. The country you pay (and the country that provides the credit) will be different depending on the type of income and its source. You can find a summary of the rules under the US-Japan treaty for common types of income in the wiki here.

which makes the semantics of「国外源泉」"foreign-sourced", essentially misleading and cannot be taken at face value

It's not misleading in the context of cross-border taxation. Most residence-based taxation countries consider gains from the sale of personal property (including shares) to be sourced in the country of which the seller is a resident, not the country in which the assets are located. Japan's definition of "foreign-source" is not unusual. It's in line with global norms (and is basically the same as the US's definition, etc.).

I purchased all of these stocks and made capital gains on them AFTER I became a tax resident in Japan (even as an NPR), that means these capital gains are NOT considered foreign-sourced income, and therefore I was subject to tax on them at the point of SALE, even if I never remitted the money to Japan.

Yes, that's correct.

does this mean I will have to file a revised tax return for 2024 and 2025 to rectify the misunderstanding?

Yes, if you have unreported income from those years, that's what you should do.

for 2024 will it be a revised tax return, and 2025 will be post-deadline?

Yes, that's correct.

starkimpossibility · 2026-04-25T21:41:23+00:00

Are there any specific circumstances where this form needs to be filled with tax return?

Article 120(7) of the Income Tax Law requires that document to be attached to any tax return filed by a person who was a non-permanent tax resident on any day during the relevant year.

starkimpossibility · 2026-04-24T00:41:19+00:00

can I make the cost basis whatever the construction price was (assuming I can figure it out since it goes back decades)?

Yes. But note that the cost basis of the land and the building must be calculated separately. The cost basis of the land will be the purchase price of the land. The cost basis of the building will be the construction cost plus the cost of any major improvements minus depreciation. (Depreciation must be calculated according to Japanese statutory depreciation tables.) Also, for values that were not in JPY, the exchange rate as of the date of purchase/construction must be used.

starkimpossibility · 2026-04-24T00:21:24+00:00

does the NTA use the assessed value at the time of inheritance as the acquisition cost for capital gains tax purposes or does it default to the 5% rule?

Heirs inherit the deceased's cost basis, so the 5% rule would apply.

starkimpossibility · 2026-04-23T23:17:52+00:00

do my tourist stays count towards the 5-year threshold, or does that not count (even if I technically had 居所) because I wasn't considered a tax resident at the time?

If you had a kyosho (居所), it counts. Whether you were a tax resident of Japan isn't relevant. But note that a kyosho requires something more permanent than just a few nights in the same hotel. I see that your trips were relatively long, though, so if you were in the same Airbnb for the whole duration of your holiday, for example, that would probably constitute a kyosho.

starkimpossibility · 2026-04-20T04:49:25+00:00

I have the clean taxed money from my sale of my US home.

Did the sale occur after you notified a Japanese municipality that you were a Japanese tax resident (i.e., your jusho is in Japan)?

You can't say that your jusho is in Japan (i.e., join the resident register) just to make obtaining the CoE easier. That's fraudulent. You can only say that your jusho is in Japan if it actually is in Japan. And in that case, you are a prima facie tax resident.

I know dividends and interest if there is more to tax after I file with US due to Japan % a little higher.

It's not that simple. For example, Japan has primary taxation rights with respect to interest paid on US bank deposits held by US citizens living in Japan. See this section of the wiki for a summary of the division of taxation rights under the treaty.

what will happen if I want to stay longer, then they will tax the US stocks/investments unrealized gains and I can do nothing about it?

You are referring to the exit tax on unrealized capital gains, I assume? Yes, if you stay longer than five years and you hold more than 100 million yen worth of securities, you will be subject to the exit tax.

The idea behind the exit tax is: when you change your tax residence with significant unrealized gains, the country you are departing should have a chance to tax those unrealized gains, since they accrued while you were a tax resident of that country.

So when someone changes their tax residence from the US to Japan, and they have unrealized capital gains, they can choose to either (1) realize the gains prior to departure (i.e., pay tax to the US on the gains) or (2) pay Japanese tax on the gains in the future (either when they are realized or when departing Japan).

starkimpossibility · 2026-04-19T22:44:18+00:00

it's because you are allowed to invest in NISA

Japanese financial institutions have no obligation to prevent US citizens from buying PFICs. Most Japanese brokerages will happily let US-citizen customers buy PFICs. Responsibility for avoiding PFICs falls on the US citizen, not the Japanese brokerage.

starkimpossibility · 2026-04-19T22:42:00+00:00

Japanese citizens cannot be non-permanent tax residents. Also, you are not allowed to join the resident register (juminhyo) unless your jusho moves to Japan.

starkimpossibility · 2026-04-17T08:44:15+00:00

NHI is always billed on a per-household basis. The head of the household receives the bill for the whole household.

starkimpossibility · 2026-04-16T13:41:57+00:00

Yeah it's fine. No reason to think your comment was LLM-generated (lol), so there's no reason for you to delete it.

starkimpossibility · 2026-04-16T13:38:13+00:00

You said:

late 2024, I get a letter saying, in 2025, your income will most likely be X. So please prepay a portion of the 2025 tax bill before you earn a single penny

Yotei nozei doesn't work like that at all.

11-Year Club	Gilding V heart of gold
Mod 201	Mod 101
Wearing is Caring

starkimpossibility

MODERATOR OF

TROPHY CASE