Cross-border and expat taxes

Japan taxes you based on residency, not nationality. It sorts individuals into non-resident, non-permanent resident, and permanent resident (for tax) — a status based on how long and how you have lived here, separate from immigration permanent residence.

Broadly, non-permanent residents are taxed on Japan-source income plus foreign income paid in or remitted to Japan, while permanent residents (for tax) are taxed on worldwide income. The first five years often matter a great deal.

Because two countries can each claim you, your residency status in each — and the tie-breaker rules in any tax treaty — is the first thing to establish before worrying about specific numbers.

When two countries tax the same income, relief usually comes through a tax treaty and a foreign tax credit (外国税額控除): the tax paid in one country is credited against the tax owed in the other, so you are not fully taxed twice.

Treaties also assign primary taxing rights for pensions, dividends, real estate, and employment income, and provide tie-breakers when both countries consider you resident. The details differ by country pair.

Relief is rarely automatic. You typically must file and actively claim the credit or treaty position, with documentation of the foreign tax paid. This is the point where a cross-border tax professional earns their fee.

The United States taxes its citizens on worldwide income wherever they live, so US citizens and green-card holders in Japan generally file in both countries and lean on the treaty, the foreign earned income exclusion, and foreign tax credits. Note that Japan’s NISA tax break is not recognised by the US, which can create reporting complexity.

US persons also face information reporting such as the FBAR (foreign bank accounts) and FATCA, with steep penalties for missing them even when no tax is due. Dual nationals should confirm the filing duties of every citizenship they hold, not just where they live.

Separately, Japan has an exit tax (国外転出時課税) that can tax unrealised gains on large financial holdings when certain long-term residents leave. If you hold significant investments and may depart, understand this well before you book the flight.