For wealthy foreigners and investors moving to Japan, the tax system works in two phases: surprisingly favorable for the first five years, then full-scale once you settle in. This guide covers the non-permanent resident "5-year rule," the exit tax on assets of 100 million yen or more, Japan's special inheritance tax treatment for foreigners, and the Business Manager visa requirements that were tightened sharply in October 2025 — all based on official sources.
Your First 5 Years: The "Non-Permanent Resident" Window
Japanese income tax is determined by residence, not nationality. A resident without Japanese nationality whose time living in Japan totals 5 years or less within the past 10 years is classified as a non-permanent resident, with a limited scope of taxation (Income Tax Act; NTA Tax Answer No. 2010).
| Type of income | Taxation for non-permanent residents |
|---|---|
| Income arising in Japan (salary, Japanese rental income, etc.) | Taxed |
| Foreign-source income (overseas dividends, interest, capital gains) received abroad and not remitted to Japan | Not taxed |
| Foreign-source income paid in Japan or remitted to Japan | Taxed (remittance basis) |
In other words, gains on the portfolio you keep back home are in principle not taxed in Japan for your first five years — as long as you do not bring the money into Japan. Two caveats:
1. "Remittance" is interpreted broadly. Not just wire transfers — paying a credit card bill in Japan from an overseas account can count. If you have foreign-source income in a given year and bring funds into Japan, that amount becomes taxable up to the income earned.
2. The 5 years are cumulative. Repeated entries and exits are added together over the past 10 years. The moment you exceed 5 years, you automatically become a "permanent resident" for tax purposes and worldwide taxation applies.
After 5 Years: Worldwide Taxation and Asset Disclosure
Once your cumulative stay exceeds 5 years, overseas dividends, rent and capital gains all become taxable in Japan (tax paid abroad is credited through the foreign tax credit). At the same time, disclosure obligations kick in for the wealthy.
| Regime | Who is covered | What it means |
|---|---|---|
| Overseas Assets Report (kokugai zaisan chosho) | Residents (excluding non-permanent residents) holding over 50 million yen in overseas assets on December 31 | Must be filed with the tax office by June 30 of the following year. Non-filing increases penalty taxes; willful violations carry criminal penalties |
| Assets and Liabilities Report | Income over 20 million yen with assets of 300 million yen or more (or 100 million yen+ in exit-tax-covered assets), etc. | Itemized reporting of asset types and values |
| CRS (Common Reporting Standard) | Holders of overseas financial accounts | Tax authorities in more than 100 jurisdictions automatically exchange account balances and income with Japan's NTA. Assume your overseas assets are visible |
The era of "they can't see my offshore account" is over. Unreported income after year five can attract heavy penalty taxes, so take inventory of your assets when you move, not after.
The Exit Tax: A Warning for Those With 100 Million Yen+
What matters when you eventually leave Japan is the exit tax (departure taxation). If you hold covered assets (securities, etc.) worth 100 million yen or more when you move out of Japan, unrealized capital gains are taxed as if sold.
Who is covered — and who is not
- Covered: those who lived in Japan more than 5 years within the 10 years before departure, holding covered assets of 100 million yen or more
- However, time spent under Appendix Table 1 visas of the Immigration Act (Business Manager, Highly Skilled Professional, Engineer/Specialist in Humanities, Professor, Intra-company Transferee, Student, and other work visas) does not count toward the 5-year test
- Time under Appendix Table 2 status (Permanent Resident, Spouse of Japanese National, etc.) does count — so wealthy long-term residents who obtained permanent residency can be caught when they later leave Japan
Practical point: as long as you stay on a work-category visa, you are not subject to the exit tax even with a billion yen in securities. Obtaining permanent residency brings stability — and exit-tax exposure. This trade-off is a key fork in relocation planning (whether it applies depends on individual circumstances; always confirm with a tax accountant experienced in international taxation).
If you are covered, a deferral of up to 10 years is available by appointing a tax agent and providing security.
Inheritance and Gift Tax: A Major Exception for Foreigners
Japan's inheritance tax tops out at 55%, among the highest in the world — but foreigners benefit from an exception expanded in the 2021 reform.
- If the deceased was a "foreign decedent" (living in Japan under an Appendix Table 1 visa at the time of death), then overseas assets are outside the scope of Japanese inheritance tax, provided the heirs are temporary residents or non-residents
- A "temporary resident" is someone under an Appendix Table 1 visa whose time in Japan totals 10 years or less within the past 15 years
- Conversely, if either party has lived in Japan long-term as a permanent resident (Table 2), or is Japanese, worldwide assets are taxable as usual
So for a family on work visas — say an executive posted to Tokyo — assets back home are not subject to Japanese inheritance tax. See our detailed guide, inheritance tax for foreigners. Gift tax follows broadly the same framework.
Investing From Japan: The Tax Rates at a Glance
| Asset | Tax rate | Notes |
|---|---|---|
| Listed shares / funds (gains and dividends) | 20.315% (separate taxation) | Tax-free in a NISA account — available to residents regardless of nationality |
| Real estate capital gains | 39.63% short-term / 20.315% long-term | Long-term after 5 years of ownership. For acquisition and holding taxes, see Japanese real estate taxes for foreigners |
| Crypto assets | Miscellaneous income, progressive (up to 55.945%) | Far heavier than shares. A move to flat-rate taxation is under discussion — check the latest |
| Salary / business income | Progressive 5–45% + 10% resident tax | Roughly 56% combined above 40 million yen of taxable income |
Note that the "tower mansion" strategy of compressing inheritance tax via condominium valuations was largely neutralized in January 2024, when valuations were raised to at least 60% of market value.
For Entrepreneurs and Investors: Visas and Support Programs
The Business Manager visa was tightened sharply in October 2025
The "Business Manager" visa — the standard route for foreigners who start a company and live in Japan — had its requirements raised substantially from October 16, 2025.
| Requirement | Before | After (from Oct 16, 2025) |
|---|---|---|
| Capital / total investment | 5 million yen or more | 30 million yen or more |
| Full-time employees | Not required (capital could substitute) | At least 1 employee required (Japanese national, permanent resident, etc.) |
| Japanese language | No requirement | The owner or a full-time employee must have B2-level Japanese (JLPT N2) or above |
| Source of capital | — | Stricter verification via remittance records and documentation |
Existing visa holders have a transition period until October 16, 2028. The era of "move to Japan by starting a small company" is effectively over; the program now targets committed entrepreneurs deploying real capital.
Highly Skilled Professional points and the Financial/Asset Management Special Zones
- Highly Skilled Professional (points-based): 70+ points (income, education, career) grants a preferential status; 80+ points allows applying for permanent residency after as little as 1 year — the fastest route for high earners
- Financial/Asset Management Special Zones: Tokyo, Osaka, Fukuoka and Hokkaido/Sapporo were designated in June 2024. They offer English-language registration and setup procedures for asset managers, residency incentives for foreign investors backing startups, and bank account support (Sapporo's zone was renamed the "GX/AI Financial and Asset Management Special Zone" in February 2026)
Set up a company and subsidies open up too
Japan's major SME subsidies (Monozukuri, IT Introduction, Labor-Saving Investment, New Business Advancement and others) are open to any Japanese company regardless of the owner's nationality, and foreign-owned companies are regularly among the awardees. You can look up which companies won which subsidies — more than 870,000 records — in our subsidy award database. JETRO's investment support programs and municipal incentives for foreign companies (such as Tokyo's) are also available. For an introduction to the Japanese tax system as a whole, see our Japan tax guide for foreign residents.
Do this today
- Add up your periods of stay in Japan over the past 10 years and see how much time you have left as a non-permanent resident
- If your overseas assets look likely to exceed ¥50 million, check whether you must file the Overseas Assets Report
- If you plan to apply for permanent residence, consult a specialist in advance about how it interacts with the exit tax
More actions: the Take-Home Boost Checklist.
Frequently Asked Questions
Q. Is my overseas investment income taxed in Japan from my first year?
A. If you do not hold Japanese nationality and have lived in Japan 5 years or less within the past 10, you are a non-permanent resident: foreign-source dividends and capital gains are not taxed unless paid in Japan or remitted to Japan. Japanese salary and rental income are taxed from year one.
Q. Does the exit tax apply to foreigners?
A. It can, but years spent under Appendix Table 1 visas (work categories) are excluded from the "more than 5 of the past 10 years" test, so expatriates and executives on work visas are usually not covered. Someone who has lived in Japan more than 5 years as a permanent resident or spouse of a Japanese national and leaves with 100 million yen+ in covered assets can be subject.
Q. Can the Japanese tax office see my overseas accounts?
A. Assume yes. Japan participates in the CRS, under which financial account data is automatically exchanged with the NTA from more than 100 jurisdictions. Residents (other than non-permanent residents) with over 50 million yen in overseas assets must also file an Overseas Assets Report.
Q. Does Japanese inheritance tax reach a foreigner's overseas assets?
A. If the deceased lived in Japan under an Appendix Table 1 (work-category) visa, overseas assets are out of scope as long as the heirs are temporary residents or non-residents. If either party has lived in Japan long-term as a permanent resident, worldwide assets are taxable.
Q. Can a foreign entrepreneur receive Japanese subsidies?
A. Yes — once you establish a Japanese company, the major subsidies are available regardless of the owner's nationality. Note that the Business Manager visa now requires capital of 30 million yen or more and other conditions since October 2025, so plan the visa and the business together.
- NTA No. 2010: Individuals liable to income tax (non-permanent residents) (Japanese)
- NTA: Exit tax (departure-time taxation) (Japanese)
- NTA No. 4138: When an heir lives abroad (Japanese)
- NTA No. 7456: Overseas Assets Report filing obligation (Japanese)
- FSA: Financial and Asset Management Special Zones (Japanese)
- Immigration Services Agency (Business Manager visa, Highly Skilled Professional)
This article is general information, not tax or immigration advice. Rules change — for decisions about your own situation, consult a tax accountant (zeirishi), immigration lawyer (gyoseishoshi) or the authorities. The Japanese version and official sources are authoritative.