Japan taxes and before/after 5 year mark in Japan

[douglasxwilliams]

Hello all ....
i read a couple of posts here recently and there was mention of something like a 5 year point of living in Japan (as a non-Resident) that affects how you are taxed. Is that right?

Searching online i found this bit of information:

Non-Permanent Resident
A person who has lived in Japan for less than five years, but has no intention of living in Japan permanently. Non-permanent residents pay taxes on all income except on income from abroad that does not get sent to Japan.
Permanent Resident
A person who has lived in Japan for at least five years or has the intention of staying in Japan permanently. Permanent residents pay taxes on all income from Japan and abroad.

At the moment, I am in that first category: I have been living and working in Japan for 3 years (on a 5 year visa) . However, my plan is remain in Japan and i have applied for a PR.

Anyway, since I am currently in the first category...I was wondering how the sale of US stocks or RSUs is taxed in Japan, if at all. Since i am currently in the less than 5 years and not yet a Permanent Resident, if i sell stock or RSUs in the US and that money just stays in my US bank account, does that mean I don't need to pay tax on it in Japan? And, after living here 5+ years, then I will need to pay taxes on the sale of stocks/RSUs in the US, even if the money does not come into Japan? I think that is right..maybe?

Thanks for any thoughts.

[TokyoWart]

Anyway, since I am currently in the first category...I was wondering how the sale of US stocks or RSUs is taxed in Japan, if at all. Since i am currently in the less than 5 years and not yet a Permanent Resident, if i sell stock or RSUs in the US and that money just stays in my US bank account, does that mean I don't need to pay tax on it in Japan? And, after living here 5+ years, then I will need to pay taxes on the sale of stocks/RSUs in the US, even if the money does not come into Japan? I think that is right..maybe?

Yes. After 5 years, whether you get PR or not, you become a permanent resident for tax purposes and they will expect you to pay taxes on those foreign financial accounts regardless of whether or not you move the funds to Japan.

[douglasxwilliams]

Hi..
Thank you for the fast response and info!

Do you know if that also includes my 401K accounts in the US?

[TokyoWart]

Hi..
Thank you for the fast response and info!

Do you know if that also includes my 401K accounts in the US?

I don't personally have any 401K accounts so I have not had to deal with this myself, but my understanding is that people should declare income when they withdraw from US retirement accounts and those withdrawals will be taxable but they do not need to declare growth or dividends in the accounts. I think this is something of a gray area because I've never seen any official guidance on it. @captainspoke has linked some Reddit discussions on this topic and @Tkydon knows a great deal about Japanese taxes.

[Tkydon]

For the first 1 year after moving to Japan, or until you establish a residence, you will be classified as a Non-Resident for Tax Purposes.

After 1 year, or after you have establised a residence (move in to an address), you will be classified as a Resident for Tax Purposes.

This Tax Resident status then breaks down in to two sub-groups:

If you have been in Japan for Less than 5 years in the last 10 years, you will be classified as a Non-Permanent Resident for Tax Purposes.

If/When you have been in Japan for More than 5 years in the last 10 years, you will be classified as a Resident other than a Non-Permanent Resident; i.e. a Permanent Resident for Tax Purposes.
(This is completely independent of, and has nothing to do with your Immigration Status).

Each classification above has different tax liabilities. See Pages 5 to 13 here:
English
https://www.nta.go.jp/taxes/shiraberu/s ... df/050.pdf

Japanese Translation (yes, from English )
https://www.nta.go.jp/taxes/shiraberu/s ... df/060.pdf

[douglasxwilliams]

Thanks for the last two posts and help! It is great info!