How the tax rate in Japan for foreigners works (UK guide)

Planning a permanent move to Japan from the UK? Or maybe you’ll be working, investing or buying a property there.

Whatever your plans, if you’ll be earning money in Japan then you’ll need to know about its income tax system - and how it applies to you.

We’re here to help, with a handy guide for UK expats on the tax rate in Japan for foreigners. We’ll look at how income tax works in Japan, who has to pay it, income bands, rates and much more.

We’ll also show you how to save on fees when making tax or other multi-currency payments abroad - with the Wise account.

Learn more about the Wise account 🌍

Tax basics for foreigners living in Japan

Foreign nationals living in Japan permanently must pay tax on all income earned in the country and worldwide. You’re classed as a permanent resident for tax purposes if you are domiciled in Japan (have your main home there) or have had a residence in Japan for over a year.¹

Temporary residents and non-residents must also pay income tax, but only on certain types of income.

In Japan, income tax is known as Shotokuzei.²

Most people who earn a salary/wages in Japan don’t need to file an annual tax return, as taxes are deducted and paid by the employer (like with the UK’s PAYE system).¹ But high-earners may need to.

The tax year in Japan runs from 1st January to 31st December, and tax returns are due between 16th February and 15th March.² The country’s tax authority is the National Tax Agency (Kokuzeicho) or NTA.

Another useful thing to know is that Japan has two types of income tax - national and local (known as inhabitant taxes).¹

Overview: Income tax for expats living in Japan

Here’s some handy at-a-glance info on income tax for UK expats living in Japan:

Who has to pay income tax in Japan?

Anyone who is a resident of Japan for tax purposes needs to pay income tax, as do non-residents who earn income in the country.

Non-residents may be people who are in the country temporarily on short-term student visas or digital nomad visas, or who live in the UK but have income-earning business interests in Japan.

Income tax for residents vs non-residents

The Japanese tax system classes taxpayers in three main groups - permanent residents, non-permanent/temporary residents, and non-residents.

Here’s a quick overview of each category and its tax liability in Japan:¹

Residents and non-residents may pay different tax rates, depending on the type of income.

How does income tax work for foreigners in Japan?

For foreign residents, income tax is calculated in the same way as for Japanese nationals.

Any deductible expenses and losses are deducted from assessable income, which includes salary, wages, allowances and cash compensation. It may also include investment income, bank account interest and other forms of income.

From this amount, taxable income is determined and the appropriate rate of tax is applied.

Most people living and working in Japan don’t need to submit a tax return, as their employer will deduct taxes before paying salaries. But if you have one or more employment and earn over ¥200,000 JPY a year, you may need to submit one.¹

Self-employed people, freelancers and businesses also need to file tax returns and pay income taxes.

Income tax for businesses in Japan

Businesses in Japan need to pay corporate income tax on their revenue, with tax rates ranging from 15% to 23.2% depending on the size of the company. Other taxes may also be due.³

Income bands and tax rates in Japan

Now, let’s take a look at income bands and tax rates in Japan for the year 2024 to 2025:³

Bear in mind that you’ll only pay the given rate of tax on the portion of income that falls into each tax bracket.

So if you have taxable income (minus deductions) of 2,500,000 JPY, you’ll pay 5% income tax on 1,950,000 JPY. Then you’ll pay 10% on the remaining 550,000 JPY.

Non-residents pay income tax on Japan-source earnings at a flat rate of 20.42%.³

And don’t forget that there are also local income taxes to factor in. These are known as individual inhabitant taxes, and are paid to the municipal authorities in each prefecture.¹

Manage your money internationally with the Wise account

After reading this, you should have a better idea of how income tax in Japan works for foreigners.

We’ve looked at who pays it, rates, income bands and more. All of this information should be helpful if you’re moving to Japan, or spending time working in the country.

If you do have a tax bill or other payment to make between countries, you’ll need a cost-effective way to make the transfer.

Open a Wise account online and you can manage your money in 40+ currencies all in one place.

Send money worldwide for low fees* and mid-market exchange rates, and receive it for free with local account details in 8+ currencies.

Open a Wise account today 🌍

Sources used:

1. Ashiya City - Individual Income Taxv
2. Ashiya City - Taxes for foreign residents
3. QuickBooks - NTA Income Tax Brackets in Japan 2024-2025

Sources last checked on date: 18-Mar-2024