Taxation of remitted income
Case 20
<Question>
I am from Canada and have been living in Japan for 3 years, so I think that I am a non-permanent resident in Japan. I heard if I remit my money from Canada to Japan the Japanese income tax is imposed. Is this true?
I do not understand how the Japanese income tax could be imposed even on money saved before coming to Japan.
<Answer>
You have been living in Japan for 3 years, so you are a non-permanent resident. Non-permanent residents are subject to Japanese income tax on “domestic source income” and other incomes received in Japan or remitted from outside of Japan*.
The meaning of “other incomes remitted from outside of Japan” is quite unclear but it sounds like all remitted money is subject to the Japanese income tax. Based upon the Order for Enforcement of the Income Tax Act 17, if the other incomes received outside of Japan are remitted in the same year they are subject to the income tax, in other words if some money is remitted during a year in which no income was received outside of Japan, it is not subject to the income tax in Japan. The following are examples of remittance rules.
Example 1
Total Income : 3,650
Domestic source : 3,000 (received in Japan)
Other source : 650 (received overseas)
Remittance : 0
No tax
Example 2
Total Income : 3,650
Domestic source : 3,000 (received in Japan)
Other source : 650 (received overseas)
Remittance : 300-650
JPY300-650 is taxed.
Example 3
Total Income : 3,650 (All income was received overseas)
Domestic source : 3,000
Other source : 650
Remittance : 2,000
3,000 is taxed regardless of the remittance.
The remitted 2,000 is not taxed as 2,000 is remitted out of 3,000 which is supposed to be taxed in Japan
Example 4
Total Income : 3,650 (Everything was earned overseas)
Domestic source : 3,000
Foreign : 650
Remittance : 5,000
3,000 is taxed regardless of the remittance.
650 is taxed as 650 of the foreign source income was remitted out of 2,000 (5,000-2,000)
The remaining 1,350 (5,000-3,000-650) is not taxed because the remitted money is taxed as far as it is foreign source income in that year. If the remaining 1,350 is remitted in the next year, it is not subject to the income tax because the income tax is imposed to income in the same year.
Regarding your case, you saved the money in a Canadian bank account before coming to Japan, so the income tax is not imposed in Japan even if you send it to Japan.
* https://tk-tax-accounting.com/en/english-income-tax-rules-for-a-salaried-person/
By Certified Public Accountant, Koji Takahashi,
Tokyo & Yokohama
