Japan sits 210th out of 217 in our world ranking, with a FiScore of 3.2 out of 10. The combined national and local scale reaches nearly 56%. Nobody moves to Japan for the tax.
Except that for five years, a foreign national in Japan is not taxed like a Japanese one. And almost nobody explains it.
Three statuses, not two
Most countries know two situations: resident or non-resident. Japan has three.
| Status | What is taxed |
|---|---|
| Non-resident | Japanese-source income only |
| Non-permanent resident | Japanese source, plus foreign income paid in or remitted to Japan |
| Permanent resident for tax purposes | worldwide income |
The middle status covers any foreign national who has had a domicile or residence in Japan for five years or less out of the last ten.
Mind the vocabulary: "permanent resident" here is a tax position, unrelated to the immigration status of the same name.
What the middle status allows
Your foreign income is taxed in Japan only to the extent that it is paid in or remitted to Japan.
Rent collected in London and left in a British account does not enter the Japanese base. Dividends reinvested in a foreign account do not either.
The mechanism deserves to be understood precisely, because it does not tax the transfer itself: the taxable amount is the lower of the two, your foreign income for the year and the sum remitted during the year.
In other words, remitting old savings does not by itself create tax, but any transfer made during the year is presumed to come from that year's foreign income for as long as there is any left. You have to track your flows rather than rely on your intentions.
The exit tax, and why it probably does not apply to you
Japan introduced a departure tax in 2015: 15.315% on unrealised gains on financial assets above JPY 100 million, for anyone resident five of the previous ten years.
Here is the point almost no source states clearly: it targets only holders of a so-called Table 2 visa, meaning spouse of a Japanese national, permanent resident, or long-term resident. Time spent on a Table 1 work visa does not count towards the five years.
An engineer, a manager or a teacher on a work visa can therefore spend ten years in Japan and leave with no exit tax at all.
Inheritance, the real long-term trap
Japan has among the heaviest inheritance taxes in the world, up to 55%, and it applies them in principle to worldwide assets.
Here again the visa decides. Assets situated outside Japan belonging to a foreign national on a Table 1 visa, present for less than ten years, are outside the scope of Japanese inheritance and gift tax.
Taking permanent residence changes that status. It is a decision about the comfort of your stay that carries a major consequence for your estate, and it is very often taken without a thought for it.
If you are American
Citizenship-based taxation runs alongside all of this, and the two systems interact awkwardly.
The non-permanent resident rule reduces your Japanese tax, which reduces your foreign tax credit, which leaves more of the United States bill standing. The window is still worth having, but it is worth less to an American than to almost anyone else, and the calculation is specific to your own numbers.
What to remember, in order
- The first five years are a remittance regime, to be used by keeping foreign income abroad.
- The visa category matters more than duration, both for the exit tax and for inheritance.
- The switch to the worldwide regime is automatic and silent. Nobody will warn you.
- Becoming a permanent resident is a tax decision as much as an administrative one.
Companies
Corporate tax runs to an effective combined 29.74%, of which 23.2% is the national tax, with a reduced 15% on the first band of profit for small and medium companies. Consumption tax is 10%.
Japan is not a place to book profit. It is a place to live, and the five-year window is about your own income, not your company's.
The full table of Japanese rates is on our Japan page, and the comparison tool puts it next to anywhere else. Before deciding anything, read how to actually leave.
Sources
PwC Worldwide Tax Summaries, JETRO and Japanese firms publishing on the non-permanent resident status, verified in August 2026. Corporate rates from our own country pages. An error reported to us gets fixed.
This page informs, it does not advise. Non-permanent resident status lapses without warning: have it checked by a Japanese tax adviser before your fifth year, as our terms of use set out.