GES:Change in Taxation of Non-Permanent Residents

Japan:Inbound Tax Alert December 2016, No.18

As part of Japan’s BEPS reforms, Japanese domestic law was amended by the 2014 tax reforms to adopt the principles reflected in the 2010 OECD Report on the Attrition of Profits to Permanent Establishments. The new law will affect both corporations and individuals and will come into effect for the 2017 calendar year for individuals. This news alert discusses the changes affecting individuals. (Japan:Inbound Tax Alert December 2016, No.18)

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From 1 January 2017, the scope of taxable income for non-permanent residents (NPRs) will change. Currently, a NPR is not taxable on worldwide income but on Japan-source income, regardless of where it is paid, and any non-Japan sourced income paid in Japan, remitted, or effectively remitted to Japan. Under the new domestic rules with effect from 1 January 2017, a NPR is taxable on all income except foreign source income that is not paid in, remitted or effectively remitted to Japan.

This alert highlights on the new law which will affect both corporations and individuals, effective for the 2017 calendar year.

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