Domestic Source Income in Japan

Posted on 09/08/2012 by Koji Takahashi

Case 4

I understood that domestic source incomes received by non-residents are subject to impose taxes. Could you tell me more about the domestic source income?

Source data : Withholding tax 2008 of National Tax Agency

The following types of domestic source income received by non-residents or foreign corporations are subject to withholding.      

1 Distribution of profit arising from partnership contract business conducted in Japan

(Note) “Partnership contract business” is business conducted under a partnership contract provided for in Item 1-2 of Article 161 of the Income Tax Act.

2 Consideration for the transfer of land, rights in land, buildings, auxiliary equipment, or structures in Japan (excluding consideration of 100 million yen or less that is paid by an individual receiving land, etc., for the purpose of his/her own dwelling or that of his/her relatives)

3 Consideration for the provision of personal services which is paid to a non-resident or a foreign corporation engaging primarily in the business of providing any of the personal services listed below in Japan:

(1) Services of entertainers such as movie and drama actors, musicians, and professional athletes;

(2) Services of attorneys at law, certified public accountants and architects, and other such independent personal services;

(3) Services of persons having expertise or special skills in science and technology or business administration

4 Consideration for the leasing of real estate, rights in real estate, quarry rights, mining leases, or the leasing of vessels or aircraft

5 Interest on Japanese national bonds, local bonds, or bonds issued by domestic corporations that are public or corporate bonds, interest on bonds issued by a foreign corporation attributed to business operations carried out by the foreign corporation within Japan*, and interest on funds deposited at offices in Japan

* Applicable to interest on bonds issued by foreign corporations after May 1, 2008

6 Dividends of surplus, dividend of profit, distribution of surplus or other dividends received from domestic corporations

7 Interest on loans to a person who conducts business in Japan relating to that business

8 Any of the royalties or forms of consideration listed below received from a person who conducts business in Japan relating to that business:

(1) Royalties or consideration for the transfer of technical rights such as industrial property rights, production methods employing special technologies, or know-how;

(2) Royalties or consideration for the transfer of copyrights, related rights, or publishing rights

(3) Rental of machinery, equipment, vehicles, means of transport, tools, appliances, or fixtures

(4) Rental of objects used on vessels or aircraft among the assets listed in (2) or (3) above and furnished for the business of residents or domestic corporations

9 Remuneration/fees for the provision of personal services, such as salaries, wages and bonuses arising from work in Japan, or public pensions, retirement allowances, etc., arising from work during the period of residence

10 Money or items awarded for advertising business in Japan

11 Pensions based on life insurance contracts, casualty insurance contracts, and other such agreements executed in Japan

12 Compensation money for benefits from installment deposits which are paid under agreements executed with business offices in Japan, etc.

13 Distribution of profits received under any silent partnership contract (Tokumei-Kumiai)

14 Distribution of profits from foreign special purpose trusts or distribution of revenue from foreign special investment trusts

15 Income from the transfer of listed stocks kept in specific accounts for which withholding is chosen

16 Monetary awards from deposits offering awards which are deposited in Japan, etc.

17 Profit from redemption of discount bonds


By Certified Public Accountant (CPA) & Tax Accountant, Koji Takahashi
Tokyo & Yokohama