Japan Tax Residency Test: Non-Resident, Non-Permanent or Permanent?

Am I a Japanese tax resident? The short answer

Japan does not sort people into resident and non-resident. It uses three categories: non-resident, non-permanent resident, and permanent resident. Which one applies decides not the rate you pay but how much of your income Japan can reach at all.

The second surprise is that residence itself is not decided by counting days: there is no Japanese equivalent of the 183-day rule, and the revenue authority says so in terms. Residence turns on two concepts from the Income Tax Act — jusho, the base and centre of your life, and kyosho, a lesser place of abode — and on presumptions built around your occupation. A day count is evidence, not the test.

Jusho and kyosho: how residence is decided

Jusho is a question of fact, decided on objective evidence. It asks where your life is genuinely centred, weighing where your home and household sit, where your occupation is carried on and where your assets are held. An address on a residence card does not settle it: someone on a short assignment, with a family home waiting abroad, may hold a Japanese address without a Japanese jusho.

Because that question is unavoidably open-ended, Japanese law supports it with presumptions drawn from occupation. An occupation in Japan that ordinarily requires you to live here for a year or more points towards a Japanese jusho; an equivalent occupation abroad points away. The default matters more than most people expect: revenue guidance treats anyone who comes to Japan to carry on a business or take up an occupation as meeting the Japanese limb unless the stay was fixed in advance, by contract or otherwise, at under a year. An arrangement silent on length therefore points towards residence from arrival rather than away. Classification is revisited when the facts change but never rewritten backwards, so a nine-month secondment later extended past a year changes your status from the day the extension becomes clear, not from the date you landed.

Kyosho is the second route in, and it operates independently. It covers somewhere you actually live that falls short of being the base of your life: company housing, a rented flat, long-stay accommodation. Maintaining one continuously for a year or more makes you a resident whatever the jusho analysis concludes, with effect from the day after the one-year point rather than retrospectively. The year is counted from the day after you entered; it is not an aggregate assembled from separate stays, though a genuinely temporary absence need not break it.

Where neither presumption applies and no kyosho has run for a year — someone retired, between roles, or working short engagements — the position is genuinely open rather than merely unclear. These cases are most often revisited on enquiry, and contemporaneous evidence of where your household and occupation sit carries far more weight than a later reconstruction.

The three categories and what each one reaches

The categories are not immigration statuses. What the statute calls the third group is "a resident other than a non-permanent resident"; it follows from the tax rules and requires no application, while immigration permanent residence is applied for and granted separately. You can hold the tax status years before you could even apply for the immigration one.

The five-years-in-ten test

The dividing line is an aggregate: whether you have had a jusho or kyosho in Japan for five years or less within the preceding ten. Five years or less keeps you in the non-permanent category; more than five ends it. Three features of that test matter more than the headline.

It is an aggregate, not a continuous run. Earlier separate periods — an assignment a decade ago, a student year, a previous posting — count towards the same five years. People who assume a fresh arrival resets the clock are often wrong.

It is a rolling ten-year window, running from the same date ten years earlier to the day before the date being tested. Time accrues at the front and drops off the back, so the expiry date is not simply five years from your arrival. The aggregate is computed by the calendar rather than in round months — periods are added as years, months and days, with thirty days treated as a month and twelve months as a year, each measured from the day after arrival to the day of departure. The status ends the day after the five-year point is passed, so the change can land mid-year.

It is available only to non-Japanese nationals. A Japanese national resident here is a permanent resident for tax purposes from the outset, however long they were previously abroad. That is the sharpest contrast with India, where the equivalent intermediate status — set out in our India residential status test — is open to returning citizens and is usually the most valuable feature of their position.

The remittance basis for non-permanent residents

For a non-permanent resident, foreign-source income falls within the Japanese charge to the extent it is paid in Japan or remitted here. That sentence carries most of the planning consequences.

The "paid in Japan" limb needs no remittance at all. Foreign-source income paid directly into a Japanese bank account is within charge on arrival — which is why the account receiving overseas income matters as much as the one it eventually reaches.

The remittance limb is broader than it appears. Alongside ordinary transfers it expressly reaches currency carried into Japan, cheques, bills of exchange and letters of credit, and bullion, bonds or share certificates carried in where that stands in place of a transfer. It also reaches a less obvious arrangement — borrowing in Japan, or having costs advanced here, then settling the debt from your own funds abroad. That is the shape of most overseas card spending in Japan, which is why it is treated as a remittance rather than a way around one.

More importantly, the funds need not be traceable to the income, and the ordering runs against the taxpayer. A remittance is set first against income of yours that is not foreign-source but was paid outside Japan; only the excess is treated as carrying foreign-source income, capped at the foreign-source income paid to you outside Japan that year. So transferring long-held savings in a year when foreign income also arises can bring that income into charge even though the transfer plainly came from capital accumulated years earlier.

Securities are the trap inside the shelter. Since a tightening in 2017, a gain counts as foreign-source for a non-permanent resident only where the securities were acquired more than ten years before the sale, during a period when you were not a non-permanent resident, or before the change. Anything else bought while holding the status is taxable in full, whether or not a yen reaches Japan.

Account structure is therefore worth settling before it is needed: separating accounts that receive foreign income from those funding Japanese spending is close to impossible to unpick afterwards. Japan is not alone here — Thailand's treatment of remitted foreign income raises similar questions, covered in our Thailand tax residence test — but the Japanese ordering rules are their own system.

When the window closes, and what changes

Crossing the five-year line moves your worldwide income into the Japanese charge: foreign salary, overseas dividends and interest, foreign rental income and gains on assets held abroad, whether or not any of it is brought into Japan. Foreign tax credit relief is available for tax paid abroad, but it is capped. The limit is your Japanese income tax for the year multiplied by the share of your total income that is foreign-source; anything above it is set first against the reconstruction surtax, then against local inhabitant tax, with any remainder carried forward for a limited number of years. The relievable figure is frequently less than the foreign tax suffered — relief reduces double taxation, it does not remove the Japanese liability.

The transition can take effect part-way through a calendar year. Japan's tax year runs 1 January to 31 December, but the classification applies to periods rather than the year as a whole, so income arising after the crossing point is assessed on the wider basis even where the earlier part was not.

Local inhabitant tax runs on its own timetable and is easy to overlook. It is charged by the municipality where you had your address on 1 January, on the previous calendar year's income, so it lags the national charge by about a year. That lag matters most on departure, when a liability can fall due for a year in which you no longer live in Japan.

Leaving Japan: the charges that follow length of residence

Two further charges turn on how long you have been resident, and both are harder to manage once a departure date is fixed.

Japan operates an exit charge treating covered assets — securities, silent partnership interests, and unsettled margin and derivative positions — as disposed of when you cease to have a jusho or kyosho here. Two conditions must both be met: the covered assets reach a high statutory value on departure, and you have had a jusho or kyosho here for more than five of the preceding ten years. The second surprises people in both directions, because time under most work, study and intra-company transfer visa categories is excluded from that count. A foreign national who has spent a decade here on a work visa may sit outside the charge entirely, while a permanent resident or spouse-status holder may not. Deferral is available where a tax agent is appointed before leaving.

Japanese inheritance and gift tax scope is decided by a separate set of residence and nationality rules that do not follow the income tax classification. Long residence can bring worldwide assets within scope, with carve-outs for certain foreign nationals depending on visa category and length of stay. Being outside the income tax net therefore says nothing useful about the inheritance tax position, and vice versa.

Compliance caveat

This guide describes Japanese residence classification and the remittance basis for non-permanent residents in general terms. Jusho is a question of fact no questionnaire can settle conclusively, and this page does not calculate how much foreign-source income a remittance brings into charge, apply treaty tie-breakers, or set out detailed thresholds for the exit charge, inheritance and gift tax scope, or local inhabitant tax. Conditions are subject to change. This is educational material, not tax advice, and Global Investments is not authorised by the Financial Conduct Authority. Confirm your position with a qualified Japanese tax professional before filing or acting on anything here.

How Global Investments can help

The most useful feature of Japanese residence classification is that the five-years-in-ten limit has a date attached to it, and the least useful thing anyone can do is find that date after it has passed. Our advisers establish which of the three categories applies from a client's actual dates, map when non-permanent resident status is likely to end against the rolling ten-year window, and structure accounts and income flows before the remittance rules make the choice for them. Where a departure is in prospect, we weigh the exit charge and inheritance tax exposures alongside the income tax position.