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Understanding Japan’s New Exit Tax

Congratulations! According to Japan’s tax agency, you might be too rich and need to be relieved of some of that excess money.

By 3 min read 11

Japan is implementing a new tax targeting those who are “wealthy” that is due to take effect by July this year. According to the wording of the legislation that will soon become law, (barring some kind of last-minute miracle), all who are considered by authorities to be permanent residents (and who own global financial assets exceeding a total of 100,000,000 JPY (around $850,000 USD) will be mandated to pay this new exit tax.

It applies only to those who wish to leave the Land of the Rising Sun to move abroad. So, if you are particularly enamored of your hard-earned cash, perhaps you might consider sticking around for retirement and a nice view of Mt. Fuji…

Essentially, this new legislation is designed to prevent those deemed “wealthy” from moving to a new country where taxes are lower, (or nonexistent in some cases), where they could sell financial assets with little or no financial penalty. The good news for all who are supposedly rolling in the dough is this: Should you be a short-term resident of fewer than 5 out of the last 10 years, you will be spared the Samurai Sword of this new “exit tax.” Stay any longer and you are thus identified as a “permanent tax resident” and will feel the blade’s edge of the departure tax.

To further clarify, this ‘exit’ tax would be applied to a person who no longer has jusho (or his or her main residence in Japan) or kyosho (meaning a temporary home) in Japan. If so applicable, then at the time of one’s exit from Japan, a person would be subject to taxation on any gains on securities and/or derivative transactions. On top of all that, these transactions would be settled at what the tax agency determines as fair market value. And this tax would also apply to gifts and inheritances of property on or after July 1, 2015 as well.

Foreigners aren’t the only ones affected as Japanese nationals will also be subject to the authority of this new law. If you think you might fit into this category there is a likely reprieve: As a foreigner you will be allowed to exclude the years in which you may have held a visa other than the type that is termed as a permanent resident visa. So, if you were in country on a temporary visitor visa or held a spousal or professional visa or a business manager visa, you may be able to avoid the whoosh of the aforementioned Samurai sword.

For example, if you are on a short-term visa as an employee on assignment to Japan, (again fewer than 5 out of the last 10 years), your neck could be safe.

If you do fall into the category for this new tax and are just temporarily moving out of Japan and have no plans to sell any such financial assets while you are away, then you may choose to defer the tax payment for five years with an option of a possible extension for up to five additional years. But don’t think it’ll be all that clear cut (pun intended), as you will also be required to deal with an appointed tax representative in Japan.

You will then be likely mandated to provide a collateral deposit to cover any possible future tax should your initial plans not pan out as envisioned. The good news is that if you return to Japan within a period of five years and you did not sell any financial assets, the exit tax would not apply to you and your collateral deposit would then be refundable. If this is the case then you would need to go to the trouble of filing an amended tax return for the year of your exit.

So, if you have substantial assets held overseas and want to avoid this exit tax, now might be a good time to pack up your bags (before July 1st) OR learn the art of sushi-making or Origami as you might be staying a while…

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  • Winnie the Pooh says:

    The tax doesn’t apply to real estate.. but perhaps you’re concerned about the definition of “exit” versus what the tax applies to?

  • GeneralObvious says:

    Because someone that owns 2 houses in Tokyo…. literally the most expensive city in the entire world… isn’t rich….

    Most people who live in the Japanese countryside don’t even own their own house. Land values in Japan are incredibly high forcing most people to rent.

  • Em Singh says:

    The USA has a nation of rich poor people demanding for a lifestyle deserved only by those who work for their wealth. The entitlement is killing the golden goose (the working class) and eventually its going to blow up in our faces. Its called looking at the bigger picture & looking at the rest of the world in a useful way. The wealthiest nation always sets the bar, its why other nations have copied us and why now we are starting to copy them, even if they are communist. Sad times.

    • Skinny Jay says:

      Actually greed at the top is what’s killing the middle class and the social contract

    • GeneralObvious says:

      I think you’re commenting on the wrong article. I agree with you, but your statement has literally nothing to do with this. Japan is not a nation of redistribution like many in Europe and the US. The employment rate in Japan is one of the lowest in the entire world and there are very few social programs in place to take care of those who won’t take care of themselves (Notice I said “won’t” and not “can’t”). Japan’s government is extremely conservative on the political scale. Even the more liberal party in Japan is still more conservative than the American Republican party.

  • Commenter says:

    I can understand applying this tax to Japanese citizens who wish to leave Japan, but it’s ridiculous to include foreigners who stay over 5 years. Maybe they want the most talented foreigners to leave the country ASAP–which will undoubtedly backfire on the baka Japanese politicians. Anyway, it’s best to stay in Japan less than 5 years.

  • Tess de la Serna says:

    This is a very good article.

  • GeneralObvious says:

    lol @ “wealthy” in quotes.

    Like $850,000 in assets isn’t enough to be considered legitimately wealthy to the author.

    • Em Singh says:

      The estimated value of an asset isn’t as important as how much of it and how quickly someone can trade it in for said amount. You can be poor and have a baseball cad worth 100,000 (because you are sentimental or cant find someone willing to pay you for it). Also please note that the “poor” on government assistance in the USA are considered VERY RICH by 3rd world poverty standards.

      • GeneralObvious says:

        This article pertains specifically to Japan, why would you bring up the economic conditions of a different country? I would also assume this is being used to mainly target business owners, who are considering leaving the country, as very few Japanese people own cumulative assets worth more than $850,000 before retirement age. Most Japanese people don’t even own the house they live in. Heck, the people that rent the houses to them don’t even own the land under their house half the time.



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