Moving to Japan as a US IT professional? Learn about Non-Permanent Resident status, US-Japan Tax Treaty benefits, and tax-saving strategies for Google employees and contractors.
【Question】I am a US citizen planning to move to Japan and I’d like to know the scope of Japanese taxation and any tax saving ideas?
I am a US citizen planning to move to Japan after marrying a Japanese man I met at an Italian restaurant in North Beach, San Francisco. I will relocate as soon as I obtain my spouse visa.
Currently, I work as an IT engineer at Google HQ in Mountain View. My manager has proposed two options for my move: transferring to Google Japan G.K. (Shibuya, Tokyo) or resigning and working as an independent contractor for them in Japan.
Additionally, as a side business, I have a PhD in psychology and provide mental health management for minor league baseball players. I plan to continue this remotely after moving to Japan. I also hold shares in Nike and Novo Nordisk through a US brokerage, which generate about 500,000 JPY in annual dividends after US withholding tax.
I file tax returns in the US every year, but I want to minimize my tax payment in Japan. Could you explain the scope of Japanese taxation and potential tax-saving strategies?
【Answer】When you reside in Japan for more than one year, you are classified as a “Non-Permanent Resident” for tax purposes. In short, any income earned while you are physically working in Japan is taxable in Japan.
| Type of Income | Taxable in Japan | Why |
|---|---|---|
| Salary/Fees from Google | Yes | You are performing the work while physically located in Japan |
| Side Business for US clients | Yes | Even if clients payments are in the US, your work performed in Japan |
| US Stock dividends | No (Yes on remittance basis) | No tax in Japan if kept in the US, but taxable if remitted to Japan |
【Detailed Analysis】
1. Understanding Your Tax Residency: The “Non-Permanent Resident” StatusIndividuals with a “Jusho” (domicile) in Japan are “Residents”. Foreign nationals who have lived in Japan for five years or less within the last ten years are classified as Non-Permanent Residents.
In Japan, your tax liability depends heavily on your residency status. For most US expats in their first five years, the Non-Permanent Resident (NPR) status offers significant tax planning opportunities.
They are taxed on:
・Japan-source income (Income earned from work performed while physically in Japan).（所法 161①十二イ）
• Income from Google Japan G.K.: Whether you receive a salary (employee) or service fees (contractor), this is Japan-source income because the services are performed while you are in Japan.
o As an employee: Google Japan will withhold income tax from your salary. If this is your only income, you may not need to file a tax return.
o As a contractor: They will withhold 10.21% for payments up to 1 million JPY (20.42% for the excess) before depositing it into your account.
• Side Business as Remote Counseling Fees: Even though the clients are in the US, the income is Japan-source because you are performing the work in Japan. You are obligated to report this income in Japan, even if the revenue is deposited into a US bank account.
・Foreign-source income only to the extent it is remitted to Japan.
・US Dividend Income: Dividends from US brokerages are foreign-source income. You are not required to report these in Japan unless you remit funds to Japan. Note that using a US credit card for shopping in Japan may be considered a “constructive remittance,” making that portion taxable.
2. Avoiding Double Taxation (US-Japan Tax Treaty)
Avoid using US-linked credit cards for daily Japanese expenses is to prevent “constructive remittance.”
Since your work is location-independent, any income earned while you are physically outside of Japan (e.g., working during a temporary trip back to the US) and deposited into a non-Japanese account is not taxable in Japan. However, it becomes taxable if remitted to Japan later.
3. Eliminating Double Taxation: US-Japan Tax Treaty & Foreign Tax Credit)
As a US citizen, you are subject to US taxation on your worldwide income regardless of where you live. This includes income already taxed in Japan by March 15. To avoid double taxation, the US-Japan Tax Treaty allows for a Foreign Tax Credit (FTC) on your US return.
・Note on timing: If you pay Japanese taxes in March 15th 2026 for the 2025 tax year, you can typically only claim the FTC on your US return filed in April 15th 2027 for the 2026 tax year because above Japanese taxes confirmed in the 2026 tax year. This creates a one-year “cash flow gap” in tax relief.
4. Employee vs. Independent Contractor: Which is More Tax-Efficient in Japan?
| Feature | Employee (Google Japan G.K.) | Independent Contractor |
|---|---|---|
| Primary Deduction | Employment Income Deduction (Up to ¥1.95M) | Actual Business Expenses Only |
| Withholding | Automatic (Standard Salary Tax) | 10.21% (Up to ¥1M) / 20.42% (Excess) |
| Tax Filing | Often unnecessary if only one source | Mandatory Annual Tax Return |
| Side Business | Taxed as aggregate income | Taxed as business income |
・Employed vs. Contractor: Employees can utilize the “Employment Income Deduction” (up to 1.95 million JPY depending on salary). Independent contractors can only deduct actual business expenses (e.g., a portion of rent or utilities). Since you already have a side business to claim those expenses, being an employee of Google Japan is likely more tax-efficient.
・ Dividends: Keep your US dividends in your US account. While the US withholds 10% under the treaty, Japan would tax them at an effective rate of 20.315%. By not remitting them, you avoid the additional 10.315% Japanese tax hit.
【Summary】
For US citizens relocating to Japan (with less than 5 years of residency in the last decade), the tax status is defined as “Non-Permanent Resident.” Under this status, the location where you physically perform the work determines your primary tax obligation, regardless of where your employer or clients are located.
【Reference】
・Scope of Japan-source income: https://www.nta.go.jp/taxes/shiraberu/taxanswer/gensen/2878.htm
・Japan-US Tax Treaty: https://www.mofa.go.jp/region/n-america/us/convention/tax0311.pdf
