Individuals becoming non-Japanese resident

November 4, 2010  |  Court, Individual

Japanese judicial decisions

The Japanese Tax Tribunal web site summarizes the results of an appeal dated 10 September 2009 concerning tax residence for an individual who went to work outside Japan while his family, whom he visited relatively regularly, remained living in Japan.

Based on the facts of the case the individual was found to be non-resident in Japan during the period of his employment overseas.  These facts and comments on the decision can be found here (link in Japanese), and are summarized below.  Please see this article for more information on individual tax residence.


For the period from 13 September 2004 to 8 June 2006 the appellant (below the ‘Taxpayer’) would visit Japan approximately once per month, mainly including the weekend, for periods of between only one and five days. The Tribunal considered facts around the Taxpayer’s day to day life while in Japan, his employment overseas, his wife’s residence and employment and his assets in reaching its conclusion as outlined below.

During this period the Taxpayer would reside in a house in Japan (the ‘Japanese Location’) which was a corporate residence rented from the company which employed the Taxpayer’s wife.

A base while present in Japan vs. a ‘Base for Day to Day Life’

Considering that moveable items used in day to day life had not been shipped overseas and that items that could be assumed to be required while living in the same place as his wife and children then it could be inferred that the Japanese Location was a base for the Taxpayer’s day to day life while present in Japan (in Japanese a ‘日本滞在中の生活拠点’) it could not quickly be determined whether or not the Japanese Location was the Taxpayers ‘Base for Day to Day Life’ (in Japanese ‘生活の本拠’) as required by the test of residence under Japanese tax law.

Work outside Japan

In relation to the Taxpayer’s consulting work, the contents of each consulting contract usually needed, for the work concerned, the provision of the services to be carried out in an office located outside Japan.  Accordingly, it was appropriate to recognize that during the period of the Taxpayer’s contract the greater part of his work was carried on outside Japan.  The Taxpayer may exceptionally have acted as a have used the above Japan Location as an office for consulting but looking at looking at the principal work involved it could not quickly be concluded that Japan was the base for the Taxpayer’s employment.

Wife’s residence with the Taxpayer

Furthermore the Taxpayer’s wife, also his dependent, took leave from her employer and for a period lived together overseas with the Taxpayer also with their children.  From these facts it could be recognized that the residence of the Taxpayer’s wife and children overseas was only temporary and that the Taxpayer did have a dependent family in Japan [i.e. post the return of the wife and children to Japan].

Maintenance of Japan Location choice of wife as an employee

However, it could be recognized that the decision to continue the rental of the Japan Location while the wife took leave from employment and subsequently to continue to live in the house concerned was, in the final analysis, a decision made by the wife as an employee of her company.  This decision could be recognized as not being made with the objective of preserving a Base for Day to Day Life of the Taxpayer during the above period of the appeal.

An important fact relevant to the case, that the underlying reason for maintaining the Japan Location was to maintain a Base for Day to Day Life of the Taxpayer, could not easily be inferred from the above position.

Taxpayer’s assets still in Japan

Excluding cash and accounts at a Japanese bank, the Taxpayer did not maintain any other assets in Japan. Considering that it was not usually necessary to establish a Base for Day to Day Life in Japan simply in order to manage a bank account it could not easily be inferred, looking at the Taxpayer’s assets based in Japan, that the Japan Location was a Base for Day to Day Life.

Comprehensive review and conclusion

Comprehensively taking into account each of the above facts it was difficult to conclude that the Japan Location was the Base for Day to Day Life required to establish Japanese individual tax residence for the period concerned or that the Taxpayer was continuously resident there in the period concerned.  Accordingly it had to be said that the Taxpayer was not tax resident in Japan.


Issues of tax residence such as the above are highly fact specific, so readers should be careful not to infer too much into any particular reported case.

For example, the reporting on the case does not indicate whether any particular fact was either decisive or led to an objective test of residence.  Rather, the facts concerned were looked at comprehensively by the Tribunal when reaching its decision, with no clear indication that one fact was of decisive significance (although the emphasis on the reasons for maintaining the house in Japan being related to the wife’s employment does seem to have been given some weight).

Given the criticality of tax residence in Japan to determining individual tax status, advice should always be taken from a qualified Japanese tax accountant on an issue such as this. Important matters such as the application of tax treaties in overseas countries also have to be considered.

Notwithstanding this position, however, some points in the case are of interest for persons going to work outside Japan and hence who may break their Japanese tax residence.  For example:

Be clear where your work is carried out

If your work is to be carried out mainly overseas then make sure that this can be clearly evidenced.  The terms of the contract may help but actual factual evidence of the position should be maintained as well.

Think about your assets remaining in Japan

The appeal recognized that some assets, if kept in Japan, may imply that the taxpayer maintained a Base for Day to Day Life in Japan given the need to manage or maintain the assets concerned.  We can see that a bank account is not included in this class of assets, but could this include a rental apartments? Or investments in stocks and shares and similar?

Take your toothbrush

If you are leaving your wife and family in Japan while working for extended periods overseas, don’t forget to take your toothbrush!  The appeal noted that goods required for day to day living continued to be maintained in the Japan Location and these may imply that the person maintained a Base for Day to Day Life in Japan.  The individual going to work overseas may be advised to leave no personal possessions behind.

Don’t visit the wife and family

A final lesson may be don’t come back to visit your wife and family, or if you do stay in a hotel.  Regrettably, a somewhat sad outcome for the average company employee required to work for his employer overseas.

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