みなと国際会計事務所 Accounting Intelligence blog by a CPA in Tokyo

みなと国際会計事務所 Accounting Intelligence blog by a CPA in Tokyo, tax tips, accounting, running business

Blurred line between Resident and non-resident

time 2017/02/06

The definition of non-resident is defined by the definition of resident under Japanese tax law.

A non-resident is a person who is not a resident. It looks very clear, but it is sometime difficult to tell whether one is a resident or non-resident and it often becomes one of the hot subjects for heated discussion in case of tax audit.

A resident is a person who has a domicile in Japan or a place to stay for equal or more than 1 year.

domicile

“Domicile” is a tricky word, because it is sometime not very obvious. For example, if you have two residences one in Japan and one in your home country. You have a full time job here and you have your family left in your home country. You own a house in your home country but you live in a rented apartment in Japan. You have your main bank account in your home country.

According to the tax law, domicile is determined not by a single decisive factor like her nationality or number of days in a year in Japan but by weighing multiple factors such as locations of job, family and assets that you have etc. It is not determined by type of visa you have. Even if you have a permanent visa, you are not always a resident, like Japanese nationals are not always residents if they live abroad.

place to stay

“Place to stay” or kyosho in Japanese is a place one stays temporarily, not as serious or committed place as domicile. Examples of “place to stay” are hotels, company dormitory for short stay etc, without family members left in your home country or without full time job here. Even if so, if you stay longer than more than one year, you will be regarded as a resident.

Real world application

1) If you come to Japan for a full time job with no definite date fixed to return, you are regarded as a resident from Day 1. That is especially true, if you bring your family with you. Job and family locations are the two strongest factors.

The reason you will be regarded as a resident from the beginning is because you have “domicile” from Day 1.

2) If you come with working holiday visa, you are usually regarded as non-resident because working holiday visa is temporary. You are not expected to stay and work more than 1 year from the beginning. But once your stay lasted 365 days, you will be regarded as a resident from Day 366. Please be noticed that you are not to be regarded as resident until the 365th day. Your salary will be subject to 20.42% tax rate up to that date.