In this page I will explain about tax related to non resident of Japan and foreign
corporations ( Gaikoku houjin ) for tax purposes.
「Non resident = hi kyoju sha」……A person who does not have a domicile (
Jusho ) in Japan nor have a residence in Japan continuously for one year or
In the case a person who has lived in Japan falls under either of following
items, she will be presumed as non resident.
1 In the case she has a job in foreign country that ordinary requires her to
live in foreign country for one year or more.
2 In the case she has foreign nationality or permisson for permanent residence
in foreign country and she does not have spouse and relatives who share living
expenses with her.
3 In the case there are not matters that will indicate she will come to Japan
and mainly live in Japan, considering her occupation and asset in Japan.
「Foreign corporation 」 = A corporation that does not have head office in
( So, even if a foreign corporation has branch office in Japan, it still non
In the case non resident or foreign corporation ( Hereinafter referred to ” non
residents ” ) acquire income generated in Japan, existence of branch office or
other permanent establish ( = kokyu teki shisetsu ) in Japan influence the way
And the type of permanent establishment ( PE ) also differs the way of taxation.
There is a branch or factory in Japan
In the case non residents conduct construction for more than one year in
In the case non residnets have proxy who has authority to conclude contract
on behalf of non residents.
In the case non residents do not have any establishment in Japan.
And according to tax treaty, there may be other treatment.
■ Assumed that a foreign company has real estate in Japan and have real
A foreign company is included in non residents.
Even if a foreign company has real estate for renting out, the real estate is not
included in permanet establishment.
( permanet establishment means that branch or office or permanent proxy )
Even if the foreign company hires realtor to administer the real estate, the
realtor is not included in permanent proxy.
So, the foreign company is included in Type 4.
Then, in the case a renter ( Excluding individual ) pays rent for foreign
company, she needs to withhold income tax.
And rate of withholding income tax is 20%.
This foreign company needs to file tax return in Japan.
In the case a part of corporate tax is already withheld, it can file an application
for the final return of a tax refund.
This foreign company is non resident.
So, it does not need to pay corporate inhabitant tax.
If this foreign company wants to avoid withholding, it can appoint permanent
proxy in Japan ( It is included in PE ) and acquire permit from authority, it can
However, if it appoint permanent proxy in Japan, it also needs to pay corporate
If non residents have income generated Japan ( this income is called ” domestic
source income ” ), they need to pay tax for Japanese government.
On the other hand, tax will be levied by home country of non residents.
This is called ” Double taxation = Nijuu kazei = 二重課税 “.
Assumed that non residents sells software in Japan and receive payment in
In that case, the non residents need to pay corporate tax in Japan and their
In order to eliminate double taxation, there are some measures.