A Tax Refund In Japan For Foreigners 2024 Guide To Use

All tax systems in any country are daunting. However, navigating the Japanese tax system as a foreigner is another level. 

To keep things simple, this article is all about the various tax refunds in Japan for foreigners to receive, whether you are living here or just visiting. This guide outlines the essential details to help you claim your tax refunds efficiently.

Resident status affects your tax refund in Japan as a foreigner

Your income tax and refund varies depending on your type of residence. 

Residence

Having residence in Japan means that you have a registered address in Japan or have lived in Japan for over a year. In tax terms, you’ll have a domicile.

In terms of tax obligations, you‘ll be taxed on all income, regardless of where it is earned.

Non-permanent residents

They are foreigners who meet the residency requirements but have been in Japan for over 5 years but less than 10 years.

You’ll be taxed on your earned income in Japan as well as any foreign income that’s either been paid within Japan or sent (remitted) to Japan.

Non-Residents

Non-residents are those who do not meet the residence criteria. They have not lived in Japan for the long term or have not established a domicile.

Anyone who does not have a residence card, such as a tourist, falls as a non-resident in Japan. The main tax that will be imposed for non-residences is the consumption tax when you stay at your hotel, eat out, shop, etc.

Appoint a tax representative in Japan to receive your tax refund

Appointing a tax representative is essential for any tax obligations in Japan, especially for non-residents or those planning to leave Japan.

A tax representative can handle tax returns, pay taxes, receive refunds, process refunds for overpaid income tax, and manage resident tax payments.

They are also essential when a non-resident does not have a Japanese bank account or address, so appointing a trusted individual or service as their tax representative ensures compliance and avoids delays in tax refunds.

Use MailMate as your tax representative.

MailMate is a virtual mailbox service that can act as your tax representative to receive your bills, tax notifications, and government notices on your behalf.

Receive your mail from anywhere.

MailMate is a virtual mailbox service where your physical Japanese mail, including important refund notices and tax office correspondences, is scanned into your online dashboard for viewing anywhere.

That means you can manage your mail and Japanese taxes from abroad.

And if you want to receive any physical mail item yourself, MailMate offers internal forwarding. Just input the international address to which you want your mail items sent, and MailMate will share its tracking number with you.

Securely store your documents.

MailMate complies with Japan's Electronic Bookkeeping Act by making sure:

• Tax-related documents such as receipts, invoices, and purchase orders are tamper-proof

• Users can sort and retrieve records by transaction date, document type, or keywords to search

• It has digital preservation that includes time-stamped verification.

Pay your taxes and bills on time.

With MailMate's real-time notifications, you'll never miss a deal when paying taxes or bills.

Once your mail arrives at MailMate’s facility, it is immediately scanned and uploaded to your secure online dashboard with information about its due date, tax payments, or other time-sensitive obligations.

Types of tax refunds in Japan that you can receive

a. Consumption tax refund

Consumption tax refund targets non-residents on items they bought at tax-free shopping stores, including tourists or anyone in Japan temporarily. Many stores in Japan offer tax-free shopping, where there is a tax-exempt price, or there are tax-exempt items available to purchase.

After making your purchases, you’ll need to head to the designated tax-free counter or the tax-free shopping services, where the staff will confirm that you are a visiting tourist and calculate the taxes owed back to you. 

There are a few requirements for quality, such as:

• Be on foreign visitors or have a short-term stay visa

• Show your passport with a valid entry stamp required

• Spend more than 5,500 yen (after taxes) on one bill

The staff at the tax counter will wrap these items up, as you can not consume tax-free goods that are consumables such as food, drink, cosmetics, etc.

b. Income tax return refund

Before submitting your final tax return, many companies will send out a final end-of-year tax adjustment to their employees to calculate any deductible items that should be considered.

Here is a summarized table of what you can deduct.

Thus, you are subjected to an income tax refund if you overpaid your income tax. 

If you can not receive the refund, such as if you do not have a Japanese bank, you’ll need to appoint a tax representative to accept the refund and forward it to you.

c. Property taxes

Regarding property taxes in Japan, there are so many depending on whether or not you plan on using it as an Airbnb, using a minpaku license, and other factors.

To keep things simple, you are obligated to pay property taxes if you own:

• The Land

• The Building

• Any depreciable assets

You must declare depreciable assets and pay the municipal office's estimated amount based on those asset values. Thus, any property taxes sent by the municipal office must be paid.

So, for any amount you overpaid, you can receive a refund within 5 years. Still, it varies depending on your city or town. 

d. Resident tax refund

Foreigners can receive a tax refund in Japan on their resident taxes if they overpaid.

The statute of limitations for refunds is five years from January 1 of the year following the year the income was earned. So if 5 years have passed, you can no longer receive the refund. 

To file for an individual inhibit tax refund, search for 過誤納金還付請求書 (Overpayment Refund Application Form) from your local city, town, or village and submit it by mail. 

e. Automobile tax refund

In general, the automobile tax is paid for one year, and the system will return that paid tax to you as a refund, depending on when the car is scrapped.

To scrap your car in Japan, you’ll go through a deregistration process, and there are two types: 

1. Temporary: When the vehicle is not being used temporarily. The refund is applied during the unused period when the car is temporarily deregistered. 

2. Permanent: when the vehicle is scrapped, exported, or otherwise permanently removed from use in Japan. The refund is applied to the remaining unused tax for the rest of the year. 

f. Pension refunds

Normally, people do not get pension tax refunds in Japan. 

However, as a foreigner, you can get a pension refund if you plan on leaving Japan permanently. 

There are a couple of requirements first:

• Be a non-Japanese citizen

• Contributed to the National Pension or Employee Pension for at least 6 months

• Have no registered address in Japan at the time of application

• Never have received any Japanese pension benefits, including disability pension

You’ll apply for a lump-sum pension refund (脱退一時金, dattai ichijikin). A 20% tax rate will be deducted from the lump-sum refund. You can still recover this amount by following the tax refund procedure and appointing a tax representative in Japan to file the refund on your behalf.

Frequently asked questions

Can tourists get a tax refund in Japan?

Only foreign tourists who have been in Japan for less than 6 months are eligible for tax-free shopping. Bring your purchased items and receipt to the Tax Refund Counter.

How can foreigners claim a tax refund in Japan?

If you are a tourist traveling in Japan, you can claim a tax refund at tax-free shopping stores after purchasing your items. Additionally, you can buy tax-free items at the airport. If you are a foreign resident in Japan, you can claim a tax refund if you have overpaid your income taxes, property taxes, individual inhabitant taxes, etc.

In closing

Japan provides several tax refund options tailored to residents and non-residents. From taking advantage of Japan's tax exemption system for tax-free shopping to receiving a pension refund, you can ensure you won’t leave any money on the table. With the right guidance and services, claiming any tax refund in Japan for foreigners can be a smooth and straightforward process.