| theme | layout | presenter | date |
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apple-basic |
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Kelvin Chandra |
May 15, 2025 |
Created with assistance from Gemini Canvas
- Comprehensive Taxation (総合課税 - Sōgō Kazei): Various individual incomes are combined, and progressive tax rates applied.
- Examples: Salary, business, real estate income.
- Progressive Tax Rate (累進税率 - Ruishin Zeiritsu): Tax rate increases with income (5% to 45% in 7 brackets for national tax).
- Additional: Special Reconstruction Income Tax (2.1%) & Local Inhabitant Tax (~10%).
- Income Deductions (所得控除 - Shotoku Kōjo): Amounts subtracted from total income to reduce tax burden. (Details follow)
Understanding your tax residency status is crucial as it determines the scope of income subject to Japanese tax.
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Resident (居住者 - Kyojūsha): An individual who has a "jusho" (domicile/address) in Japan or has resided in Japan for one year or more. Residents are further classified:
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Non-Permanent Resident (非永住者 - Hi-eijūsha):
- A resident who is not a Japanese national AND has resided in Japan for a total of 5 years or less within the preceding 10 years.
- Taxable Income: Japan-sourced income + Foreign-sourced income that is paid in Japan or remitted to Japan.
- Foreign-sourced income not paid in or remitted to Japan is generally not taxable in Japan for non-permanent residents.
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Permanent Resident (永住者 - Eijūsha - for tax purposes):
- A resident who is a Japanese national OR has resided in Japan for a total of more than 5 years within the preceding 10 years.
- Taxable Income: Worldwide income, regardless of where it is sourced or whether it is remitted to Japan.
- This "permanent resident" status for tax purposes is different from immigration status (e.g., holding a "Permanent Resident" visa).
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Non-Resident (非居住者 - Hi-kyojūsha): An individual who is not classified as a resident.
- Taxable Income: Generally only Japan-sourced income.
*The 5-in-10-year rule is a key determinant for the scope of taxation for foreign nationals.*
Various deductions are available, such as:
- Basic Deduction (基礎控除 - Kiso Kōjo): For all taxpayers.
- Spouse Deduction (配偶者控除 - Haigūsha Kōjo): Supporting a low-income spouse.
- Deduction for Dependents (扶養控除 - Fuyō Kōjo): Supporting eligible relatives. (Details to follow)
- Social Insurance Premium Deduction (社会保険料控除): For social insurance premiums paid.
- Life Insurance Premium Deduction (生命保険料控除): For life, medical, individual pension insurance (limits apply).
- Medical Expenses Deduction (医療費控除): For significant medical expenses (over ~¥100k or 5% of income).
- Donation Deduction (寄付金控除): For specific donations, including Furusato Nōzei.
For claiming deductions for relatives you financially support, especially those overseas.
Eligibility for Dependent Status:
- Relationship: Spouse, or relative within 6 degrees of blood / 3 degrees of affinity.
- Financial Support: Must "share the same livelihood" (生計を一にする), shown by regular remittances for those abroad.
- Relative's Income: Annual income below a threshold (e.g., ¥480,000 total income).
- Age: Dependent relative must be 16+ years old (as of Dec 31st).
To claim for a dependent relative living outside Japan, must provide:
- Proof of Relationship:
- Examples: Passport copy, birth/marriage certificate, family register.
- Requires Japanese translation if not in Japanese.
- Proof of Financial Support (Remittance Documents):
- Examples: Bank transfer statements, credit card statements showing cash advances to that specific relative.
- Must show taxpayer as sender & dependent as recipient. Individual remittances are clearer.
- Frequency & Amount:
- No strict "minimum remittance."
- Must be "necessary for daily life" & "continuous" or "as needed."
- Small, one-off amounts may not suffice. Regular is better.
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Important Note (from 2023 Tax Year): For non-resident relatives aged 30-69, conditions are stricter. Generally must be:
- Studying abroad (student visa).
- Disabled.
- OR Receiving at least ¥380,000 in remittances from taxpayer that year.
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Documentation Retention & Key Considerations for Foreigners:
- Submit with tax return or to employer for year-end adjustment (年末調整). Keep for 5-7 years.
- Ensure Japanese translations for foreign documents.
- Recipient name on remittance must match dependent's name. Maintain clear records.
| Taxable Income (A) | Tax Rate (B) | Deduction Amount (C) |
|---|---|---|
| ¥1,000 to ¥1,949,000 | 5% | ¥0 |
| ¥1,950,000 to ¥3,299,000 | 10% | ¥97,500 |
| ¥3,300,000 to ¥6,949,000 | 20% | ¥427,500 |
| ¥6,950,000 to ¥8,999,000 | 23% | ¥636,000 |
| ¥9,000,000 to ¥17,999,000 | 33% | ¥1,536,000 |
| ¥18,000,000 to ¥39,999,000 | 40% | ¥2,796,000 |
| ¥40,000,000 and over | 45% | ¥4,796,000 |
Tax Amount = (A × B) - C. *Source: NTA Japan. National tax only. Local inhabitant tax (~10%) & Special Reconstruction Tax (2.1% of national) apply separately.*
- Concept: "Donate" to chosen Japanese municipalities.
- Mechanism: Donation (minus ¥2,000 co-pay) is largely deductible from income & inhabitant tax. Limit based on income/family.
- Benefits:
- Tax Reduction: Effectively pre-pays inhabitant tax.
- Thank-You Gifts (返礼品): Local specialty products (value capped at 30% of donation).
- Process: Choose -> Donate -> Get certificate -> File tax return OR use "One-Stop Exception System."
- Purpose: Revitalize regional areas.
- Definition: Tax on profits (譲渡所得) from selling assets (stocks, investment trusts, real estate).
- Separate Taxation (分離課税): Usually calculated separately from other income.
- For Listed Stocks, etc.: Total 20.315% (Income Tax 15.315% + Inhabitant Tax 5%).
- For Real Estate: Rates vary by holding period.
- Profit and Loss Offset (損益通算 - Son'eki Tsūsan): Offset capital gains with other capital losses within the same year (conditions apply, e.g., gains/losses from listed stocks can be offset).
- Loss Carryforward (繰越控除 - Kurikoshi Kōjo):
- If you have a net loss from listed stocks, etc., after offsetting within the year, you can carry forward this loss for up to 3 subsequent years to offset future capital gains from listed stocks.
- Requires filing a tax return (確定申告 - Kakutei Shinkoku) for the year the loss occurred AND for each subsequent year you claim the deduction.
- This applies even if you use a Specified Account with withholding tax, if you wish to utilize loss carryforward.
Overview of common account types for investments in Japan.
- Features: Capital gains & dividends from investments within annual tax-exempt allowance are non-taxable.
- Main Types (New NISA from 2024):
- Tsumitate Investment Quota (つみたて投資枠):
- Annual Limit: ¥1.2M; Max Holding: ¥18M (Growth part up to ¥12M).
- Eligible: Certain long-term, diversified investment trusts.
- Growth Investment Quota (成長投資枠):
- Annual Limit: ¥2.4M; Max Holding: ¥18M (Growth part up to ¥12M).
- Eligible: Listed stocks, investment trusts, etc. (some exclusions).
- Tsumitate Investment Quota (つみたて投資枠):
- Merits: Tax-free profits; indefinite holding period (New NISA).
- Demerits: No profit/loss offset with taxable accounts; no loss carryforward. Annual investment limit.
- Features: Financial institution calculates annual profits/losses; prepares "Annual Transaction Report." Simplifies tax.
- Two Types:
- With Withholding Tax (源泉徴収あり):
- Institution withholds taxes (20.315%) on profits.
- Generally, no tax return needed (unless offsetting, etc., or carrying forward losses).
- Without Withholding Tax (源泉徴収なし):
- Institution calculates profit/loss; investor files tax return.
- With Withholding Tax (源泉徴収あり):
- Merits: "With Withholding" saves filing hassle; reduces calculation errors.
- Demerits (for "With Withholding"): May still need tax return for profit/loss offset with other accounts or loss carryforward.
- Features:
- Investors must calculate annual trading profits/losses and file their own tax return.
- Financial institutions issue "Transaction Reports," not a consolidated annual one.
- Merits:
- Can manage products not handled by Specified or NISA accounts (e.g., unlisted stocks).
- Demerits:
- Profit/loss and tax calculations are complex and time-consuming.
- Tax return filing is mandatory.
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Major Japanese Online Brokers (Support all 3 account types):
- SBI Securities (SBI証券): Large, wide product range, popular for NISA.
- Rakuten Securities (楽天証券): Popular, Rakuten ecosystem integration, strong NISA.
- Generally recommended for ease of use, JP support, full NISA/Specified Account features.
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International Brokers (May have limitations):
- Interactive Brokers (IBSJ):
- Primarily offers General Accounts (一般口座) for JP residents.
- NISA/Specified Accounts generally not available via IBSJ for JP tax residents.
- Known for global market access & lower US stock commissions.
- Tax reporting is investor's responsibility.
- Interactive Brokers (IBSJ):
*Fees are examples & can change. Check broker's current terms. Focus on common scenarios.*
*Simplified comparison. Other fees may apply. Research thoroughly.*
| Feature | Rakuten Securities | SBI Securities | Interactive Brokers (IBSJ) |
|---|---|---|---|
| JP Stocks | - ¥0 up to ¥1M daily (Zero) - Tiered (Super Value) |
- Tiered (Std) - Daily total (Active) |
- Tiered/fixed (~0.05%-0.1%) |
| US Stocks | - 0.495% (max $22) | - 0.495% (max $22) | - Very low, e.g., $0.0035/share (min $0.35) |
| Inv. Trusts (JP) | - Many "No-Load" | - Many "No-Load" | - Less focus; US ETFs |
| FX (USD/JPY) | - ~¥0.25 / USD | - ~¥0.25 / USD | - Very low (near interbank) |
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Popular S&P 500 Investment Trusts (Japan):
- e.g., eMAXIS Slim US Equity (S&P 500), Rakuten S&P 500 Index Fund.
- Low-cost, popular for NISA/Specified. Purchased in Yen.
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ETFs Listed in Japan (TSE):
- Track Japanese (Nikkei 225, TOPIX) & international indices.
- e.g., NEXT FUNDS S&P 500 ETF (1547), iShares Core S&P 500 ETF (2558).
- Purchased in Yen, subject to JP capital gains tax.
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ETFs Listed in the US (NYSE, NASDAQ):
- Vast range (e.g., VOO, VTI, QQQ).
- Purchased in USD (via IBSJ or some JP brokers).
- Subject to JP capital gains tax & US dividend withholding (see Foreign Tax Credit).
- Purpose: Alleviates double taxation on foreign dividends (e.g., US stocks/ETFs where US withholds 10% tax for JP residents).
- Mechanism: Claim credit for foreign tax paid against your Japanese income & inhabitant tax.
- Process (Simplified):
- US withholds 10% tax on dividends.
- Declare dividend income & US tax withheld on JP tax return.
- Credit calculated (up to JP tax liability on that income).
- Claiming: File tax return (確定申告) with proof of foreign income & tax paid (broker statements).
- Benefit: Reduces overall tax on foreign dividends.
- NISA Ineligibility: Income within a NISA account is already non-taxable in Japan, so foreign tax credit is not applicable/cannot be claimed for NISA investments.
When is a Final Tax Return (確定申告) Needed?
- Annual employment income > ¥20 million.
- Side income (non-employment) > ¥200,000 (if from one employer).
- Income from 2+ employers & side income > ¥200,000 (if not year-end adjusted).
- Self-employed, freelancer, business/real estate income.
- Capital gains not taxed at source (e.g., General Account, Specified Account w/o withholding), or to carry forward losses.
- To claim specific deductions/credits not covered by employer's adjustment:
- e.g., Medical Expenses, 1st year Housing Loan, Donations (Furusato Nōzei w/o One-Stop), Foreign Tax Credit.
Why Most Salaried Employees (会社員) Don't File:
- Employer handles taxes via Year-End Tax Adjustment (年末調整 - Nenmatsu Chōsei).
- This usually finalizes tax for those with one employer, income < ¥20M, no major other income/deductions.
- Target: Certain residents (Japanese nationals & foreign nationals who meet specific criteria like visa type and length of stay) leaving Japan permanently or for an extended period.
- Trigger: If they hold covered assets (e.g., securities, derivatives) with a total value of ¥100 million or more at the time of departure.
- Mechanism: Unrealized capital gains on these covered assets are deemed to have been realized and are subject to income tax (15.315%) as if sold at fair market value upon departure.
- Purpose: To prevent wealthy individuals from avoiding capital gains tax by moving assets abroad before realizing gains.
- Important: Complex rules apply. Professional advice is crucial if this might affect you.
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Inheritance Tax (相続税):
- Levied on assets inherited upon someone's death.
- Taxed on the recipient (heir). Rates are progressive.
- Scope of taxable assets depends on the heir's and decedent's residency status and nationality.
- Basic exemptions exist; tax is due if inherited assets exceed these.
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Gift Tax (贈与税):
- Levied on assets gifted from one living person to another.
- Taxed on the recipient of the gift. Rates are progressive and generally higher than inheritance tax rates for equivalent amounts.
- Annual basic exemption (currently ¥1.1 million per recipient per year). Gifts exceeding this are taxable.
- Can also apply to foreign assets depending on donor/recipient status.
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Key Point: Both are complex, especially for international situations. Early planning and professional advice are highly recommended.
- Income Tax: Combined, progressive. Deductions (Furusato Nōzei, Dependents) reduce tax. Tax residency status (5-in-10 year rule) affects scope.
- Capital Gains Tax: On asset sale profits; typically 20.315% for listed stocks. Losses can be carried forward for 3 years by filing a tax return.
- NISA: Tax-free investment profits up to limits. Foreign tax credit not applicable.
- Specified Account: Broker calculates tax; "Withholding" option simplifies. Tax return needed for loss carryforward.
- General Account: Self-calculation & tax filing.
- Brokerages/Products: SBI/Rakuten full-featured; IBSJ for global, low-cost US stocks (General Acct). Fees vary.
- Foreign Tax Credit: Reduces double tax on foreign dividends (not for NISA).
- Tax Return (確定申告): For high earners, multiple incomes, specific claims, or loss carryforward. Most salaried covered by employer.
- Exit Tax: Applies to wealthy residents departing Japan with significant unrealized gains on certain assets.
- Inheritance/Gift Tax: Levied on inherited assets or gifts, with progressive rates and exemptions. Complex for international cases.
It is important to choose the optimal account type according to your situation and understand the tax system.
Please consult with a tax office or a tax accountant (税理士 - zeirishi) if you have any questions, especially regarding complex situations like supporting non-resident dependents or claiming foreign tax credits.
This information is for general guidance only and tax laws can change.