Taxes in Tokyo: what are the taxes levied in Tokyo?
As well as being the world's fourth largest economy, Japan has the fifth largest Brazilian community abroad. Brazilians living in Japan are dispersed, but many choose Tokyo, mainly because it is the economic center of Japan.
Japan, following the post COVID-19 pandemic trend, has seen a high immigration of digital nomads into the country, and has instituted a visa for digital nomads which has been in force since March 2024.
However, whether you're a nomad or not, if you want to choose Tokyo as your residence for the time you're in Japan, you'll have to pay attention to the tax issue.
Before getting into the subject of this article, it's worth explaining about tax residency.
What is Tax Residency?
Tax residence is nothing more than the place where an individual carries out their vital economic activities. This place can be their fixed residence or their habitual residence.
Digital nomads do not have a fixed residence, but they do have a habitual residence. Therefore, the assertion that, because they have no fixed abode, they don't have to declare their taxes anywhere is false.
It doesn't matter if the digital nomad travels every 3 months, every month or every week, everyone in the world will have a tax residence somewhere.
If you declare taxes for two countries at the same time, you will have double tax residence, i.e. you will be subject to declaring and paying taxes for two countries at the same time.
Taxes in Tokyo
Japan has two types of tax: national tax and local tax.
The most prominent local and national taxes are:
a) Income Tax - National Tax;
b) Residents' Tax - Local Tax.
Income tax in Japan is levied annually, according to a progressive table of incomes and their respective rates.
I'll go into more detail about National Income Tax in this article.
Residents' Tax, as the name implies, is levied on those who live in a particular city.
Residents' Tax in Tokyo is called "Personal Residence Tax". This tax is a sum of two taxes, related to the main tax:
a) Tokyo Housing Tax;
b) Municipal Housing Tax.
Similar to income tax, it is calculated on the income the resident has earned during the year and the following rates are applied:
Tokyo Housing Tax - 4%
Municipal Housing Tax - 6%
Example:
Income earned during the year: 5 million yen
5 million x 10% (Tokyo housing tax + municipal housing tax)
Total = 500,000 yen.
In other words, there are two taxes on income in Japan: national income tax and resident's tax.
It is therefore essential to carry out tax planning to avoid tax evasion and double taxation.
If you are interested in hiring professional legal services related to tax planning, we are a law firm specializing in the subject. All you have to do is contact us via WhatsApp or by e-mail: thyanipuppio@gmail.com
Alert for Double Tax Residency
Even if you immigrate to Japan, you don't automatically leave your country of origin. In other words, they will remain tax resident in their country of origin.
The mistake that many people make, mainly because they are unfamiliar with tax legislation, is to declare in their country of origin only the income earned in their country of origin, and to declare in Japan only the income earned in Japan.
But what many people don't know is that this is not just a mistake, it is a crime of tax evasion.
The big headache of having a criminal conviction is a criminal record. If you have a criminal record, your passport will be invalidated. They will not be able to leave the country.
In addition, Japan requires you to present a valid passport in order to obtain a visa. In other words, no valid passport, no visa.
What's more, in addition to a possible criminal conviction, the tax authorities will be able to demand the amounts evaded retroactively, plus interest and monetary correction.
Japan has a number of cooperation agreements with various countries around the world to help them detect fraud and tax evasion, as well as criminal cooperation treaties.
It is therefore extremely important to carry out tax planning, as in addition to optimizing tax payments, it avoids various problems, such as tax evasion and double taxation.
Remember: tax evasion is not just a crime in Japan.
If you are interested in hiring professional legal services to carry out tax planning, we are a law firm specializing in the subject. To do so, please contact us via WhatsApp or by e-mail: thyanipuppio@gmail.com
