Does Japan tax your foreign income? The 5-year rule and remittances, explained

The short version. For your first 5 years living in Japan (counted within the past 10), you’re usually a “non-permanent resident” for tax — and Japan taxes your foreign-source income only to the extent you bring it into Japan. Money you leave in a US account isn’t taxed. The trap the forums get wrong: salary for work you physically do in Japan is Japan-source income and is always taxable, no matter who pays it or where. After year 5 you flip to worldwide taxation with no remittance filter. This is orientation from my own research, not tax advice — confirm against the NTA and a professional.

I’m a Japanese national, so this particular rule doesn’t apply to me directly — my own tax situation on returning is different. But it’s one of the questions I get asked most by readers who are US persons moving to Japan, so I dug into the primary sources for this one. Here’s the map.

How Japan sorts residents for tax

Japan uses three tiers. The middle one is where most newly arrived foreigners sit for their first few years.

Tier	Who	What Japan taxes
Non-resident	Living outside Japan	Japan-source income only
Non-permanent resident (NPR)	Non-citizen, resident ≤5 of past 10 years	Japan-source income + foreign income paid in or remitted to Japan
Permanent resident (for tax)	Resident >5 of past 10 years	Worldwide income, no remittance filter

“Non-permanent resident” is a tax term. It has nothing to do with the immigration “Permanent Resident” visa — don’t confuse the two. The statutory definition (JETRO / NTA, Income Tax Law Enforcement Order Art. 17) is: no Japanese citizenship, and a domicile or residence in Japan for 5 years or less within the immediately preceding 10-year period. The clock counts your aggregate time in Japan across a rolling 10-year window, not one continuous stay.

What an NPR actually pays tax on

Income	Taxable in Japan for an NPR?
Japan-source income (wherever paid)	✅ Always
Foreign-source income paid in Japan	✅ Yes
Foreign-source income remitted to Japan	✅ Yes (capped at actual foreign income earned)
Foreign-source income kept entirely abroad	❌ Not taxable

So US dividends sitting in a US brokerage account, a rental check deposited to a US bank, interest that never leaves the States — none of that is taxed by Japan while you’re an NPR, as long as you don’t bring it over.

The mistake that costs people the most: remote salary

Here’s the one the forums butcher. People assume “I work for a US company, paid to my US bank, so it’s foreign income — remittance-shielded.” Wrong.

The source of employment income follows where the work is physically performed, not where the employer sits or where the paycheck lands. Salary you earn while sitting in Japan is Japan-source income, fully taxable, even if a US employer pays it into a US account. The NTA is explicit (guidance No. 12019): “The salary paid based on the work in Japan is applicable to domestic-sourced income even if it is paid outside Japan.”

Translation: a US remote worker living in Japan owes full Japanese income tax on that salary. The NPR remittance shield does not apply to it. Get this wrong and you’re not looking at a rounding error — Japan’s combined top marginal rate runs to roughly 55.9% (national 5–45%, a 2.1% reconstruction surtax on the national tax, plus ~10% local inhabitant tax). Even mid-bracket, an unreported six-figure salary is a bill and penalty that dwarfs anything you’d spend getting advice up front.

What counts as a “remittance”?

Broader than most people think, and this is where you need to be careful.

• Bank wire/transfer into a Japanese account — confirmed remittance. Triggers tax.
• Foreign income “spent in Japan” — at least one guide includes spending in Japan alongside bank transfers in its remittance definition.
• Credit card spending in Japan charged to a foreign account — widely treated in expat communities as a likely remittance, but the NTA has not published explicit guidance on this. I’m flagging it rather than asserting it — verify with a professional before you assume your US card is a loophole.

Two rules worth burning into memory:

1. Once remitted, it stays taxable even if you send it back out. An NTA tribunal ruling (cited by PwC and Japanese tax firms) confirms a remittance is taxable even if the funds are later returned abroad.
2. The taxable amount is the lesser of (a) what you remitted that year and (b) your actual foreign-source income that year. Remitting more than you earned offshore doesn’t create phantom tax above your real foreign income.

There’s also a priority rule: any Japan-source income you were paid abroad is deemed remitted first. Only what’s left over gets attributed to foreign-source income.

Remitted this year	Foreign-source income this year	Taxable foreign income
¥1,000,000	¥5,000,000	¥1,000,000
¥1,000,000	¥0	¥0
¥1,000,000	¥600,000	¥600,000 (capped)

US dividends and capital gains under NPR status

This is where US persons need to slow down, because a 2017 rule change quietly narrowed the shield for securities.

• US dividends — foreign-source income. Left in a US account, not remitted → not taxed by Japan while NPR.
• Capital gains on securities you bought before becoming a Japan tax resident (i.e., while still living in the US) and sell as an NPR → foreign-source, taxable only if remitted.
• Capital gains on securities you buy outside Japan while already an NPR and sell while still NPR → taxable in Japan even without any remittance (post-April 1, 2017 rule). This one I’d verify against the law text or a professional — I’m relaying the community reading of it.

Practical upshot:

Your situation	Gain taxed by Japan while NPR?
US brokerage stock bought before the move, sold now	Only if remitted
US brokerage stock bought after the move, sold now	Potentially yes, remittance or not

And remember: as a US person you also owe US tax on the same dividends and gains. The US–Japan tax treaty and the Foreign Tax Credit (Form 1116) are the coordination tools, but treaty interactions with NPR status get complicated fast. If you’re deciding how to hold US investments across the move, I walk through the account-mechanics side in keeping your US brokerage when moving to Japan and what happens to a 401(k) or IRA after moving to Japan.

What changes after year 5

Cross the 5-of-the-last-10-years threshold and you automatically become a permanent resident for tax purposes. Japan then taxes your worldwide income with no remittance filter — every dollar of foreign dividends, gains, and interest is on the table whether or not it ever touches Japan. There’s no election and no form to file for it; it just happens on the date you cross the line. If your plan relied on the remittance shield, year 5 is a hard deadline to have a new plan.

Reporting thresholds to keep on your radar

Even below the tax line, paperwork triggers exist:

Trigger	Threshold
Overseas Remittance Report (auto-filed by the bank)	Transfers over ¥1,000,000
Bank of Japan reporting	¥30,000,000
Foreign Asset Report (国外財産調書)	Year-end foreign assets over ¥50,000,000 — NPRs are exempt; this obligation applies to tax permanent residents only

The Foreign Asset Report exemption for NPRs is worth flagging explicitly: if you’re in your first 5 years, this filing does not apply to you, regardless of how much you hold offshore. The obligation kicks in only once you cross into tax permanent resident status. (Source: freedomtax.jp)

Decision guide

• US remote worker living in Japan → your salary is Japan-source and fully taxable. Budget for it from day one; don’t count on the remittance shield.
• US person with passive US income (dividends, rent, interest), first 5 years → keep it in US accounts and don’t remit what you don’t need. Track exactly what you bring over.
• Bought US securities after moving → assume gains may be taxable in Japan without remittance; confirm before selling.
• Approaching year 5 → model the switch to worldwide taxation before you cross it. Consider timing gains while still shielded.
• Using a US credit card in Japan to “avoid” remitting → treat as unsettled. It may count. Don’t build a strategy on it without professional confirmation.

Because the US and Japan sides interlock, this is genuinely worth paying a specialist to get right in your first filing year. One place to start that focuses on US–Japan expats is Taxes for Expats — that link gives $25 off your first filing. (Full disclosure: that’s a referral link; I may earn a small credit if you file through it. It’s one option, not the only one — compare and pick what fits.) For the US-side timing of the year you leave, I also wrote up the first tax year after leaving the US.

FAQ

If I never send money to Japan, do I pay zero Japanese tax as an NPR?

No — only your foreign-source income escapes. Any Japan-source income (most importantly, salary for work you physically perform in Japan) is taxable regardless of remittance. The remittance shield only covers genuinely foreign-source income, and only during your NPR years.

Does spending on a US credit card in Japan count as a remittance?

Possibly. Some guides treat “spent in Japan” as a remittance, and expat communities widely assume foreign-card spending can trigger it — but the NTA hasn’t published clear guidance, so I won’t tell you it’s safe. Verify with a Japan tax professional before relying on it either way.

What’s the difference between the tax “non-permanent resident” and a Permanent Resident visa?

They’re unrelated. The tax status is about how long you’ve been a resident (≤5 of the past 10 years) and determines what income Japan taxes. The immigration Permanent Resident is a visa category about your right to stay. You can be a tax “permanent resident” long before you’d ever qualify for the visa.