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

Japanese Exit Tax on stocks

time 2017/02/04

I was asked about EXIT Tax of Japan recently and made some recap. EXIT Tax can potentially be applicable to rich people who has foot steps in both Japan and other countries and owns Japanese stocks.

Capital gain on Japanese Stock are free of tax for non-resident

Capital gain from stock transactions are tax free for non-resident (listed stocks). If one is a Japan resident, it is taxed at the flat tax rate of 20.42%. Capital gain is only become taxable for residents when it is realized (sold). It means that you are not taxed until you sell your stock, if you are a resident. You are never taxed on capital gain from Japanese stock if you are a non resident.

Here it raises a question. What if I have Japanese stock, I move abroad and then sell the stocks?

Marginal case – EXIT Tax

If you have more than 50 million yen in stock and change your tax status from a Japan resident to a non-resident, your stocks are to be deemed as sold and the difference between your cost and its market price are taxed with capital gain tax.

But this rule has an exception. You will be NOT taxed if you are non-permanent resident (a tax terminology, meaning you have been in Japan more than 5 years in the last 10 years). It seems that this exception is meant give a room for non residents, in line with the other income tax exception that allows foreign source income for non-permanent residents to be exempt.

A person who has residences both in Japan and your country, and therefore, there is a chance to be regarded as either a Japan resident or non-resident, needs to be careful in determining when to become a non-resident from a resident for a tax purpose.

居住者と非居住者の区別の仕方

I will write about the distinction between a resident and non-resident soon.

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