Tax Procedures When Leaving Japan

When you plan to leave Japan permanently or for an extended period, specific tax procedures must be followed to ensure your Japanese tax obligations are settled correctly.

Key Considerations:

1. Determine Your Departure Date and Residency Status Change:

   Your tax obligations will change once you are no longer considered a resident of Japan. This typically occurs when you depart Japan with the intention of not returning, or after being abroad for a year or more without a "domicile" in Japan.

2. Settling Income Tax for the Year of Departure:

   You are liable for Japanese income tax on income earned up to your departure date. There are generally two ways to handle this:

   • Appoint a Tax Agent (納税管理人 - Nozei Kanrinin):
     • Before you leave, you can appoint a tax agent (usually a resident of Japan, like a friend, family member, or professional tax accountant) to handle your tax affairs on your behalf.
     • You must submit a "Notification of Tax Agent" (納税管理人の届出書 - Nozei Kanrinin no Todokedesho) to your jurisdictional tax office.
     • Your tax agent will then be responsible for filing your final income tax return (Kakutei Shinkoku) for the year of departure by the usual deadline (March 15th of the following year) and paying any taxes due.
   • File a Quasi-Final Return (準確定申告 - Jun-Kakutei Shinkoku) Before Departure:
     • If you do not appoint a tax agent, you must file a "quasi-final return" and pay all income taxes due for the period from January 1st of the departure year up to your departure date, before you leave Japan.
     • This can be challenging as it requires calculating your income and deductions accurately up to that point.
     • For non-residents departing, if they were employed and received salary for work in Japan not subject to normal withholding by a Japanese entity, this salary might be taxed at a flat rate of 20.42% (including reconstruction tax) on the gross amount.
3. Inhabitant Tax (住民税 - Juminzei):

   Inhabitant tax is levied by the municipality where you were registered as a resident on January 1st of a given year. This means:

   • If you leave Japan on, for example, June 30th, 2024, you are still liable for the full amount of inhabitant tax for the 2024 fiscal year (which is based on your 2023 income), as you were a resident on January 1st, 2024.
   • You will receive a notice for this tax around June 2024. Arrangements must be made to pay this, either through your tax agent or by paying it in full before departure if the notice has been issued.
   • You will generally not be liable for inhabitant tax for the year following your departure if you are not a resident on January 1st of that following year.
4. Lump-sum Withdrawal of Pension Contributions:

   Foreign nationals who have contributed to the Japanese pension system for a short period (usually 6 months or more) and are no longer residents of Japan may be eligible to apply for a lump-sum withdrawal of their pension contributions. This application must typically be made within two years of leaving Japan.

5. Other Considerations:
   • Notify your local ward/city office of your move-out (転出届 - Tenshutsu Todoke).
   • Close bank accounts if necessary and settle outstanding bills.
   • Inform your employer and ensure you receive your final Gensen Choshu Hyo.

It is highly recommended to consult with the National Tax Agency (NTA) or a tax professional well in advance of your departure to understand your specific obligations and ensure a smooth process. The NTA website provides guides and forms, including the "Notification of Tax Agent" form.