Tax Agent (Tax Representative, Tax Administrator)

Term which refers to an agent who handles all the procedures concerning tax payment on behalf of an individual or a corporation who has moved overseas and has no domicile in Japan any more.

Situations in which you need a tax agent (Tax Representative, Tax Administrator)

1. Claiming tax refund ( income / residential tax ) before or after your return to your country
   When you are applying for a pension lump-sum withdrawal payment, in order to get the refund on the income tax for reconstruction of said lump-sum payment, it is necessary to appoint a tax administrator/representative/ before leaving Japan to go back to your home country.
   Please check the link below for more information.
   http://www.pg-taxrefund.co.jp/pensionrefund/english/refund_request.html
2. Having some income by leasing or selling real estate property in Japan
   You need to file an income tax return for this income(declare final income tax to the tax office), which is categorized as domestic source income, even if you are planning to emigrate from Japan, transfer abroad or return to your home country.
3. The occurrence of the grounds for paying inheritance tax or gift tax while you live abroad
   Tax obligation occurs if you inherit some fortune from either of your parents after his or her demise, or if you receive some fortune or money from your parents by gift.
4. The occurrence of the grounds for paying local taxes ( residential tax, fixed asset tax ) while you live abroad
   Fixed asset tax and urban planning tax are to be collected from the owner of some real estate as of January 1st, whether an individual or a corporation.
   Residential tax is to be collected from any resident in Japan as of January 1st, who has a certain amount of income.
5. Gaining income by selling shares or such like and receiving interest, dividends and loyalties, etc. from domestic corporation in Japan
   Business income basically falls under residence taxation, however the incomes like those mentioned above which meet certain criteria are subject to source taxation.
   * Some of the above listed incomes can be exempted pursuant to tax treaties. ( if not categorized as domestic source income )
6. When non-residents or foreign corporations (with a head office or branch in Japan) become liable for consumption tax, they must designate a tax representative to handle consumption tax-related matters, such as submitting the consumption tax return. This designation is made by submitting the "Notification of Appointment of Consumption Tax Representative" along with the "Consumption Tax Taxpayer Registration Form" to the tax office with jurisdiction over the place of taxation.
7. Requesting deferment of the payment of departure tax
   Departure tax is imposed on the unrealized gain on marketable securities or such like, therefore for taxpayers who are recognized as having difficulty in paying it for capital insufficiencies, a 5 to 10 year grace period may be granted by the application.

Non-Residents Who Are Required to File a Tax Return

Resident vs. Non-Resident Classification

Non- Resident	An individual who is not a Japanese national and has had a residence or domicile in Japan for 5 years or less in the past 10 years. 1. Income from sources other than foreign income. 2. Foreign-source income that has been paid in Japan.
Resident	An individual who does not meet the criteria of being a non-resident. ↓ All income, both domestic and foreign, is subject to tax, regardless of where it is earned.

Note: For residents, there is further classification. Foreign-source income is generally taxable. The way this income is treated depends on whether the resident is a permanent resident or not. All income tax imposed on residents is subject to comprehensive taxation (filed through a tax return).

Non-Resident Definition

A "non-resident" refers to an individual who has been a resident of Japan for less than a year, or whose main place of living is abroad. The presence of employment in Japan or family members living in Japan is considered when determining residency status. If neither condition applies, the individual is considered a non-resident.

Note: Whether a non-resident needs to file a tax return depends on the tax treaties with their country of residence.

Income Type	Domestic Income	Foreign Income
Residents	Taxable	Generally taxable (tax treaties take precedence)
Non-Residents	Taxable	Not taxable

Note 1: If an individual submits a notification of moving abroad (foreign transfer notification) and no longer has a Japanese residence certificate, but stays in Japan for more than a year, they are still considered a resident. On the other hand, even if the individual does not submit the foreign transfer notification and maintains their Japanese residence certificate, if their actual residence is abroad, they are considered a non-resident. (If the notification is not submitted, they may still be subject to local taxes, national pension, and health insurance premiums, as if they were residing in Japan.)

Note 2: Non-residents are taxed only on domestic-source income. However, taxation can vary depending on the presence of a Permanent Establishment (PE). A Permanent Establishment (PE) includes branches, construction sites, or agents.

Non-Resident with a Permanent Establishment (PE)	With Permanent Establishment (PE)	A　Income related to the PE	Tax return required, subject to comprehensive taxation (income tax).
		B　Other income	Same as above (tax return required, comprehensive taxation).
	Without Permanent Establishment (PE)		Tax withheld at source or separate taxation applies.

Non-Resident Renting Out Property

A: In principle, the landlord (non-resident) will be subject to 20.42% withholding tax, which will be settled during the tax return process.

1. If the tenant is the individual themselves or a relative using the property for residence, withholding tax is not applied.
Note 1: If the tenant is a corporation, withholding tax will apply regardless of the use of the property.
Note 2: The tenant must remit the withheld income tax to the tax office by the 10th of the following month.

2. The landlord (non-resident) must file a tax return within the prescribed period, and deduct the withholding tax on rental income from the tax payable.

Non-Resident Selling Domestic Real Estate

When receiving payment from the sale of real estate, withholding tax is applied, and the tax is settled during the tax return process.

1. The seller (non-resident) will have 10.21% withholding tax applied to the real estate sale amount. However, if the sale amount is under 100 million yen and the property is purchased for personal or family residential use, withholding tax will not apply. If the buyer is a corporation, withholding tax will not apply. The seller (non-resident) must file the tax return in the following year, deducting the cost of acquisition and related expenses from the sale amount before subtracting the withholding tax.

Q＆A

Q1

In the case of an American citizen who has obtained permanent residency in Japan (non-resident of Japan) and transferred real estate in the United States.

A

Filing a tax return is not required in Japan.

Q2

In the case of a person who worked for a Japanese company and worked abroad for more than one year.

A

If you rent out or transfer real estate, filing a tax return is required.

Q3

In the case of a person who worked domestically (with withholding income) and was transferred overseas in the middle of the year.

A

You need to appoint a tax representative and file a tax return, but only if your income exceeds the basic deduction.
※You can only claim casualty losses deductions, donation deductions, and basic deductions. (Non-residents cannot use e-tax).
※If the withheld tax amount exceeds the tax payable, you do not need to file a tax return, but you may file to receive a tax refund.

Q4

In the case of an overseas resident company employee working in Japan.

A

If there is no address in Japan (non-resident), it does not qualify as withholding income.

Q5

If you become a non-resident, what happens to the resident tax?

A

If you were living in Japan as of January 1 of that year, you are obligated to pay the resident tax for the previous year.

Q6

Am I exempt from paying resident tax if I submit a notification of moving abroad?

A

Since the resident record will be removed, resident tax is not necessary.

Q7

Can non-residents also deduct income tax?

A

Income earned from working in Japan is subject to domestic income taxation but may also be taxed in the country where they reside.
If Japan has a tax treaty with that country and credit for foreign taxes is applicable, deduction is possible.

Q8

In the case of staying abroad for less than a year.

A

If the period of stay in a foreign country is less than one year, there is an obligation to pay the resident tax and income tax in Japan.
However, since many countries treat an individual as a resident if they stay for more than half a year, they may end up being considered a resident in both countries.
If the short-term visitor exemption applies (183-day rule), you will not be subject to income tax in that country.
(However, in some countries, this rule may not apply.)

Q9

If a company employee frequently moves abroad, are they considered a resident or non-resident?

A

If their family resides in Japan, they are considered a resident.

Q10

Is there a problem if a company rents the house of an employee assigned abroad as company housing?

A

If the company is the lessee, 20.42% withholding tax on the rent paid is required.

 

Standing Proxy

An agent in Japan who exercises various rights, etc., on behalf of an investor residing outside Japan (a non-resident).
Scope of business performed by the Standing Proxy

1. We will receive documents from securities companies or stock issuers (including stock incentives), forward and/or deliver them to the domestic address specified by the customer.
2. Proxy voting in joint-stock companies. However, there will be no representative attendance. (only in case of written resolutions)
3. Submission of tax treaty documents for securities companies, stock issuers, etc.
4. General account maintenance. (There is no specified account for non-residents.)
5. Regarding NISA/New NISA
   From fiscal year 2019, for overseas assignments up to 5 years, it became possible to hold NISA or new NISA assets in a NISA account under certain conditions.
   
   Q＆A

   Q1

   Are there any procedures needed before departing?

   A

   Submit the "Continuation Application Form" to the securities company where the NISA account was opened by the day before the departure date. Additionally, upon returning to Japan, the "Return Notification Form" must be submitted.

   Q2

   After submitting the "Continuation Application Form", is it possible to make new investments or accumulate investments while living abroad?

   A

   New investments using the new NISA are not possible. Additionally, accumulated investments are also not possible.

   Q3

   Is it possible that any securities company (financial institution) will provide the same response after leaving the country?

   A

   Generally, each securities company (financial institution) has different responses and may not be very cooperative.
   However, Nomura Securities, Mizuho Securities, and Rakuten Securities can be considered cooperative.
   In particular, Rakuten Securities allows you to continue using multipurpose accounts, specific accounts, and NISA accounts.
   However, selling everything except Japanese stocks and government bonds for individuals, and appointing a standing proxy, is required.
   
   The following documents are necessary:
   ・Departure-related notification form
   ・Standing proxy agreement
   ・Standing proxy appointment form
   ・Identification documents
   

6. Other services offered:
   Ⓐ Tax services (Our company's group tax accountants)
   Ⓑ Legal services (Our company's partner lawyers)
   Ⓒ Pension/Social insurance (Our company's partner social insurance labor consultants)
   ※ We do not provide custody services related to the storage or sale of domestic securities, including settlement, principal and interest, and dividend receipt.

Glossary

Permanent Establishment (PE)

A permanent establishment (PE) is a fixed place where the business of a company is wholly or partly carried out. For purposes of taxation, a permanent establishment may be classified as (1) a DIRECT PE (such as a subsidiary or branch, an office, a factory or any other fixed place of business of a foreign corporation in Japan); (2) a CONSTRUCTION PE (such as a place in Japan where a foreign corporation conducts construction or installation work); or as (3) an AGENT PE (such as a person authorized to conclude contracts and does so for and on behalf of a foreign corporation or usually plays the main role leading to the conclusion of contracts without any substantial changes made by the foreign enterprise. Generally, therefore if a foreign corporation is not considered to have a PE in Japan, any income earned will not be subject to tax in Japan, except for a transfer of domestically-owned real estate in Japan. back