Japan Tax Guide for New Foreign Residents

Congratulations on your new life in Japan!

Understanding the tax system in Japan—which may differ significantly from your home country—is crucial for all non-Japanese nationals residing here. Specifically, transactions involving Crypto Assets (Virtual Currency) and the use of Overseas-Issued Credit Cards can pose unexpected tax risks.

This guide explains your tax obligations based on the Japanese National Tax Agency's (NTA) classifications: Resident, Non-Permanent Resident, and Non-Resident, highlighting key transactions you must be aware of.

Step 1: Check Your "Residency Status" for Tax Purposes

Under Japanese tax law, your classification as a Resident, Non-Permanent Resident, or Non-Resident determines the scope of income you are obligated to report and pay taxes on.

Classification	Definition (Guideline)	Scope of Tax Obligation
Resident (Kyojūsha)	An individual who has an address in Japan, or has resided in Japan for one year or more.	Taxed on worldwide income (all income, both domestic and foreign).
Non-Permanent Resident (Hi-Eijūsha)	A "Resident" who does not have Japanese citizenship and has resided in Japan for 5 years or less within the last 10 years.	Taxed on Japan-Source Income and Foreign-Source Income ONLY if it is paid within Japan OR remitted to Japan.
Non-Resident (Hi-Kyojūsha)	An individual who does not have an address or residence in Japan (e.g., short-term visitors).	Taxed only on Japan-Source Income.

Important Note: The determination of residency status is fact-based. Having a lease, family residence, or continuous presence in Japan for over one year typically establishes residency regardless of visa type.

Step 2: Tax Guidelines for Crypto Asset Transactions

Profits from crypto assets are generally classified as Miscellaneous Income (Zatsushotoku) and are subject to Comprehensive Taxation (aggregated with salary and other income), with rates ranging from 5% to 45% (plus 10% local inhabitant tax, for a maximum combined rate of 55%).

1. Scope of Taxable Income from Crypto

Residency Status	Overseas Crypto Account Transactions
Resident	ALL profits generated globally are taxable. Profits from overseas exchanges must be declared.
Non-Permanent Resident	Profits generated in an overseas account become taxable when those profits are remitted to Japan OR used to pay for expenses in Japan (including through overseas credit cards).
Non-Resident	Only income sourced in Japan (e.g., profits from a Japanese exchange) is taxable.

2. Key Alert for Non-Permanent Residents: The Risk of "Remittance" and "Domestic Payment"

[Image: International money transfer concept with caution symbol]

For Non-Permanent Residents, the rule that "foreign-source income is not taxed unless remitted to Japan or used for domestic payments" requires careful attention, especially with international finance tools.

Clearly Taxable Cases:

• You generate profit (in USD, crypto, etc.) in an overseas account and send that money to your Japanese bank account (converted to JPY).

• You use an overseas credit card funded by foreign-source profits to pay for goods, services, or living expenses in Japan.

• You transfer crypto from an overseas exchange to a Japanese exchange and sell it in Japan.

⚠️ Critical Point: Under current NTA guidance, if you use foreign-source profits (including crypto gains) to pay for expenses in Japan—even indirectly through overseas credit cards—this is generally treated as "domestic payment" and triggers taxation.

3. Importance of Cost Basis Calculation and Record Keeping

[Image: Spreadsheet or accounting ledger with calculator]

Japanese tax authorities require crypto profits to be calculated using the Total Average Method (Sōheikin-hō) or the Moving Average Method (Idō-heikin-hō).

Essential Record-Keeping Requirements:

• Save All Records: You must meticulously record all transaction data from every exchange (purchases, sales, swaps, transfers, fees) and convert them to JPY using the exchange rate at the time of each transaction (TTS rate for purchases, TTB rate for sales).

• Use NTA Worksheets: Download and use the official NTA spreadsheets: "暗号資産の計算書" (Crypto Asset Calculation Sheets) available at https://www.nta.go.jp.

• Retention Period: Keep all records for 7 years (or 5 years for certain cases).

Taxable Events Include:

• Selling crypto for fiat currency

• Trading one crypto for another

• Using crypto to purchase goods/services

• Receiving crypto as payment or rewards

  
  

Step 3: Alerts on Using Overseas-Issued Credit Cards/Bank Accounts

If you are a Non-Permanent Resident using a foreign bank account or a credit card issued in your home country, you must exercise extreme caution.

Residency Status	Overseas-Issued Credit Card Use
Resident	Free to use; however, all foreign-source income is already subject to worldwide taxation regardless of remittance.
Non-Permanent Resident	If you pay Japanese expenses (e.g., rent, utilities, shopping) using an overseas credit card settled with foreign-source profit in your overseas bank account, that payment is deemed a "remittance of foreign-source income used in Japan" and becomes taxable.

The Crucial Distinction: Principal vs. Profit (Non-Permanent Resident)

[Image: Two separate bank accounts or money stacks labeled "Principal" and "Profit"]

For Non-Permanent Residents, it is vital to manage your overseas assets by clearly distinguishing between Principal (non-taxable base funds) and Profit (taxable foreign-source income).

Taxable Scenario:

• Drawing funds from the profit portion of your overseas bank account (investment gains, crypto profits, rental income, etc.) to cover living expenses in Japan—whether by bank transfer OR credit card payment.

Non-Taxable Scenario:

• Drawing funds from the principal portion of your overseas account (original savings, inheritance, gifts, funds you brought before gaining residency) to cover Japanese expenses.

⚠️ Burden of Proof: You must be able to prove through documentation that any funds remitted or spent in Japan originated from non-taxable principal funds. Without proper records, tax authorities will presume all funds are taxable profits.

Best Practice: Maintain separate accounts for principal and profit, or maintain detailed ledgers with clear transaction categorization.

Step 4: Additional Reporting Obligations

[Image: Tax forms and documents with pen]

Beyond income tax returns, foreign residents may have additional filing requirements:

1. Tax Return Deadline

• March 15 of the following year for income earned in the previous calendar year

• Late filing incurs penalties (see below)

2. Foreign Tax Credit (Gaikoku-zei-gaku-kōjo)

If you paid taxes on the same income in another country, you may be able to claim a credit to avoid double taxation. This requires supporting documentation from the foreign tax authority.

3. Asset Reporting Requirements

Report Type	Who Must File	Threshold
財産債務調書 (Statement of Assets and Liabilities)	Residents with high income + substantial assets	Income over ¥20M AND assets over ¥300M (¥100M if overseas assets)
国外財産調書 (Foreign Assets Report)	Residents and Non-Permanent Residents	Overseas assets exceeding ¥50M (as of Dec 31)

Filing Deadline: March 15 (same as tax return)

⚠️ Penalty for Non-Filing: Up to 5% penalty on additional tax if unreported assets are discovered, plus potential criminal penalties for intentional concealment.

🔑 Final Advice & Expert Support

[Image: Professional tax advisors or consultants in meeting]

Japanese tax law is complex, and international finance—especially concerning crypto—adds significant layers of complexity.

Key Takeaways:

1. Record Keeping: Retain all records for every crypto trade, overseas transfer, and foreign bank/credit card statement. Documentation is your only defense in a tax audit.

2. Understand Your Status: Know whether you are a Resident, Non-Permanent Resident, or Non-Resident, as this fundamentally changes your obligations.

3. Segregate Assets: Non-Permanent Residents should clearly separate principal from profit in overseas accounts.

4. File on Time: Submit your tax return by March 15 to avoid penalties.

⚠️ Warning: The Risk of Penalties

[Image: Caution/warning symbol with Japanese tax authority seal]

If you fail to engage appropriate tax advisory support, you face significant risks:

Potential Penalties:

Penalty Type	Japanese Name	Rate
Failure-to-File Penalty	無申告加算税	15-30% of unpaid tax
Underreporting Penalty	過少申告加算税	10-15% of additional tax
Late Payment Penalty	延滞税	~2.4-8.7% annually
Heavy Penalty (Fraud)	重加算税	35-40% of unpaid tax

Additional Risk: Criminal prosecution for intentional tax evasion can result in imprisonment up to 10 years and/or fines up to ¥10,000,000.

Why Professional Support Matters:

• Complex calculation requirements (especially for crypto)

• Frequent changes in tax interpretations and regulations

• Language barriers in dealing with Japanese tax authorities

• Proper documentation and audit defense strategies

• Risk of overpaying OR underpaying without expert guidance

🏢 About Tokyo Advisory

[Image: Tokyo Advisory logo or Roppongi Hills Mori Tower office environment]

Tokyo Advisory Co., Ltd. is a professional services firm led by Mamiko Yamamoto, who holds both Japanese qualifications (公認会計士/税理士 - Certified Public Accountant & Licensed Tax Accountant) and U.S. CPA certification.

Our Services

• Accounting: Financial auditing, internal control audits, J-SOX evaluations

• Tax: Cross-border tax compliance, crypto asset taxation, international tax planning

• Consulting: CFO services, IPO support, governance advisory

• Training: Executive education, risk management, IT literacy for finance professionals

International Expertise

With extensive practical experience serving clients from the United States, United Kingdom, Sweden, New Zealand, Germany, France, Hong Kong, Taiwan, China, and more, we understand the unique challenges foreign residents face with Japanese tax compliance.

Key Qualifications:

• Member, Japan Institute of Certified Public Accountants (JICPA) Tokyo Chapter IT Committee

• Certified Instructor, Tokyo Licensed Tax Accountants Association

• Member, Japan Investor Relations Association

• Former executive at foreign-owned companies with practical experience in Shanghai

Why Choose Tokyo Advisory?

✓ Bilingual Support: Professional service in English and Japanese✓ Cross-Border Expertise: Deep understanding of both Japanese and international tax systems✓ Crypto Specialization: Up-to-date knowledge of virtual currency taxation✓ Audit Defense: Experience representing clients before Japanese tax authorities✓ Flexible Payments: We accept bank transfers, credit cards, PayPal, and Wise

Contact Information

Tokyo Advisory Co., Ltd.

Roppongi Hills Mori Tower 16F

6-10-1 Roppongi, Minato-ku, Tokyo

📞 Phone: +81-3-6772-3661

📱 Mobile: +81-90-2464-1066

✉️ Email: contact@tokyoadvisory.com

Schedule a consultation today to ensure your tax compliance and optimize your international tax position.

Disclaimer: This guide is for informational purposes only and does not constitute tax or legal advice. Tax laws are subject to change, and individual circumstances vary.

Please consult with a qualified tax professional for advice specific to your situation.

Last Updated: November 2025