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Hello everyone!

For foreigners living in Japan, the tax structure and preferential tax treatment system is probably a point of concern.

Japan has a tax incentive system for foreign students, short-term residents and foreigners with certain skills, which can reduce your tax burden if you meet the applicable conditions.

However, in order to make good use of the system, it is essential to understand the detailed conditions and procedures.

This article introduces the specific details of the tax benefit system for foreigners and how to apply it in an easy-to-understand series.

1. What is the tax incentive system for foreigners?
The tax incentive system for foreigners is a system designed to reduce the tax burden on foreigners living in Japan, including foreign students, technical interns and short-term residents.

Comparison of the tax systems for foreigners and Japanese
There are differences between the tax systems of foreigners and Japanese depending on their employment status and period of residence.

Item

Resident

Non-resident

Period of residence

More than 1 year

Less than 1 year

Scope of tax burden

Taxed on income in Japan and abroad.

Only income within Japan is taxed, income outside Japan is exempt.

Example of application for Japanese nationals

Most Japanese are treated as residents and are therefore generally taxed on domestic and foreign income.

Fewer people apply, but only domestic income is taxed.

Preferential treatment for foreigners

Income tax exemption may be available for foreign students in certain industries and for short-term stays.

None

Purpose of the system

None.

To compensate for labour shortages in Japan and promote cultural exchange.

In Japan, even foreigners are classified as ‘residents’ and ‘non-residents’, with different tax burdens. For example, if you stay in Japan for more than one year and are considered a ‘resident’, your employment income is taxed regardless of whether you are in Japan or abroad.

In contrast, if you stay in Japan for less than one year and are classified as a ‘non-resident’, you are only taxed on income earned in Japan and are exempt from tax on income earned outside Japan. This system also applies to Japanese nationals, although in practice most Japanese are treated as domestic residents and are therefore generally taxed on their entire domestic and foreign income.

There are also preferential treatment for foreigners, with income tax exemptions available for foreigners working in certain specific industries and for foreign students staying for a short period of time. This was established as part of Japan's internationalisation policy, such as to compensate for labour shortages and promote cultural exchange.

However, Japanese nationals in the same situation often do not enjoy such exemptions, and it is advisable to understand this as a difference between the two sides. Understanding these differences in the taxation system will help foreigners and Japanese to balance their income and tax burden more systematically.

How the foreign tax incentive system works
Tax incentive schemes applicable to foreigners include schemes that reduce the tax burden if certain requirements are met.

Typical examples include income tax exemptions for foreigners who stay in Japan only for a certain period of time and tax breaks for foreigners working in certain industries.

For example, as foreign students and technical trainees have limited income, tax exemptions are often applied to a portion of their income so that they can concentrate on their studies or training. In addition, foreigners who work in Japan for a short period of time as professionals may only be taxed on their domestic income and exempted from taxation on their foreign income.

Such preferential treatment is aimed at promoting the internationalisation of Japan and specific industries. For example, by giving preferential treatment to foreigners with expertise in the fields of IT technology or medicine, the aim is to improve Japanese industry and medical standards.

However, there are conditions for receiving preferential treatment, so it is important to check whether you are eligible. If you do not meet the conditions, the normal tax burden will apply, so make sure you have an overview of the system and make the best choice for your situation.


The choice is important for all foreigners.

Check the conditions carefully and protect your assets to avoid any losses.

Stay tuned for next week!


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