If you sale your products or provide your service in Japan, do you have to pay Japan tax? This depends on your type of taxpayer on Japan Tax Laws. As I briefly write about taxpayer type before, if you are classified to a resident or a non-permanent resident, you have to pay the tax for income generated in Japan.
1. Under What situation Would You Be Taxed in Japan?
So, if you sales your products into Japan through internet at your e-shop from US or Europe, or if you have a couple of business in some countries including Japan and provide your service in Japan just during your temporary stay in Japan, are you classified to a non-permanent resident, and do you have to pay Japan tax?
Now I would like to write about some criteria to classify your taxpayer type in Japan. This is typical examples, because tax obligation is strictly determined with careful consideration for the tax treaty between your country and Japan.
2. Short Stay
If you stay in Japan shorter than 183 days, you are generally classified as a non-resident, that means you do not have to pay Japan Tax. However, please note this is just one of some criteria. When you wish to save Japan tax, and you stay in US and communicate with your customers from US mostly, could you be classified to a non-resident for Japan, even if you earn most of your money in Japan? This answer could be NO.
3. What are the keys in this case?
In the case noted above, there are some keys.
First, 183 days rule is defined in tax treaty. This means 183 days rule is not directly related to your classification of taxpayer type. Taxpayer type is determined by 1 year rule. If you continuously stay and live in Japan more than 1 year, you are classified as a resident that includes a non-permanent resident and a permanent resident.
Secondly, even if the classification is determined by 1 year rule, is shorter stay better for not paying Japan tax? I am afraid to say NO. 1 year rule is one of the criteria of taxpayer classification. You are determined by your residence and domicile. What is a domicile? Generally domicile is located in the country where you have your nationality. Now, in this case, as your domicile is somewhere in US (considering you are US national), you are never taxed in Japan? NO. If you liked Japan so much that you live in Japan with your family at your second house in Japan (this means you also have your residence as your US domicile) for a couple of years, and if you often go back to US to make Japan stay shorter, then your home would be determined to Japan’s second house, that is your main place of business, employment, or post of duty, and home with your family home. As a result, you would be taxed in Japan. There is a difference between residence of US law and the one of Japan law. US residence is determined regardless of your family, but Japan residence is considered about your family.
4. Please be advised by a professional
There are more criteria to determine your taxpayer status practically. If you stay in Japan, and have business income in Japan, please have you checked by a professional. If you are an employee of a company, I think you are checked by your company’s the human resources department.