The short version

What Japan's exit tax actually does

Japan's exit tax was introduced in the 2015 tax reform (Article 60-2 of the Income Tax Act) and has applied to departures from Japan since July 1, 2015. It is not a tax on the act of leaving. It is a rule that treats you as if you had sold your securities on the day you leave, at their market value on that day, and taxes the unrealized gain as if the sale were real.

Two conditions both have to be met for it to apply to you:

• Asset value. Listed and unlisted securities, interests in silent partnerships (tokumei kumiai), unsettled margin trades, and unsettled derivatives, valued together at ¥100 million or more. What you hold is tested at departure, but the valuation date depends on the procedure you follow, and that date can decide whether you reach ¥100 million at all. File a tax agent notification before you go and it is the departure-date value; go without one and file the special departure return instead and it is the value three months before your scheduled departure date, with anything acquired after that day taken at acquisition (Art. 60-2(1), (5)). We set this out in full under Deferral below.
• Residency history. You have had an address or residence in Japan for more than 5 years within the 10 years before you leave.

If both apply, the gain is included in your income for the year you depart (as capital gains, miscellaneous income, or business income depending on the asset) and taxed even though nothing has actually been sold. (Source: National Tax Agency, No.1478 Special provisions on capital gains where you leave Japan.)

Periods on a standard work visa are excluded from the 5-year test

This is the point that decides whether the regime reaches you at all, and it is a statutory exclusion rather than a concession.

The National Tax Agency's own guidance on this rule states it plainly: even if you have had an address or residence in Japan, periods spent under a Table 1 status of residence under the Immigration Control and Refugee Recognition Act (the work categories such as Professor, Artist or Business Manager, and equally Dependent, Student and Designated Activities) are not counted toward the 5-in-10-year residency test.

The practical effect: a foreign executive who has lived in Japan for eight years entirely on a Business Manager or Highly Skilled Professional visa has accumulated zero years toward this test, regardless of how large their holdings are. The clock generally starts only once the person moves to a Table 2 status, most commonly by obtaining permanent residency or a spouse-of-Japanese-national visa.

(Source: National Tax Agency, Outline of the exit tax system for departing individuals, pamphlet, in Japanese.)

The same years typically overlap with a separate tax-law question: whether you are a non-permanent resident, and how your foreign-source income is taxed while that status lasts. See our guide to non-permanent resident taxation and the remittance rule.

15.315%, not 20.315%

Ordinary capital gains on listed Japanese shares are taxed at 20.315% (15.315% national tax plus 5% local inhabitant tax). That combined figure is often carried over to the exit tax. It should not be, and the reason is worth having in writing.

On the deemed disposal of shares and other securities within the separate share-gains regime, the charge is a national tax only: 15% income tax plus surtaxes calculated on that income tax amount. For departures in 2026 or earlier the surtax is the 2.1% reconstruction surtax. For departures in 2027 or later it is a 1.1% reconstruction surtax plus a 1% defence special income tax. Either way the combined rate is 15.315%, applied to the deemed gain in your departure-year return.

Why no inhabitant tax on the deemed gain. Inhabitant tax on a year’s income is charged by the municipality where you have an address on the following 1 January (Local Tax Act Art. 294(1)(i), Art. 318), and someone who has left Japan has none.

None of this cancels inhabitant tax on the rest of your year. That is charged by the municipality where you had an address on 1 January, on the previous year’s income (Art. 294(1)(i), Art. 318, Art. 313(1)), and leaving in March does not cancel that bill. A per-capita charge can also arise where you have no address in the municipality but keep an office, a business or a house there (Art. 294(1)(ii)).

Vested shares count. Unvested RSUs generally do not, and options depend on the conditions

The exit tax reaches securities you own at departure, including shares held in a custody account. How an equity award is treated depends on its legal form and its terms.

RSUs that have not vested. An unvested RSU is normally a promise to deliver shares later rather than a security you already own, so it generally sits outside the asset categories in Article 60-2(1). Check this against the plan documents. The shares delivered on vesting are ordinary securities and count toward the ¥100 million line.

One sequencing point catches people who assume a large unvested RSU balance protects them entirely: the exit tax and Japan's ordinary employment-income tax on vesting are separate questions. An RSU that vests before your departure date is taxed at vesting under the ordinary rules for employment income, whether or not you are about to leave. The exit tax is a separate charge on the unrealized gain in the shares you hold when you go. We cover the vesting and sale mechanics for RSUs, ESPP and stock options separately in our guide to RSU and equity compensation tax in Japan.

Deferral: three steps, three deadlines, and only the first one is before you leave

Paying tax on a gain you have not realized, on assets you may not want to sell yet, is the core problem this regime creates. Japan allows you to defer payment. The part that is usually described wrongly is the timing: what you must do before departure is notify a tax agent. The deferral itself is elected later, in the return.

• File a tax agent notification. Before you leave, submit a notification of tax agent (nozei-kanrinin no todokede) to your tax office, naming someone in Japan to handle your filing obligations after you go.
• Elect it in the return, and post collateral by the filing deadline. Article 137-2(3) makes the deferral available only where your final return states that you are claiming it and carries the required schedules: the details of the deemed disposals and settlements, and the computation of the deferred tax. Collateral has to be provided by the filing deadline for the departure-year return (Art. 137-2(1)), and under Basic Circular 137-2-10 it has to cover both the deferred income tax and the interest tax on it for the full deferral period. Interest tax runs from the day after the ordinary payment deadline until the deferral ends, so agree the required security amount with the tax office before you commit an asset to it. If the statement or the schedules are missing and the tax office accepts that there was an unavoidable reason, the documents can still be submitted afterwards (Art. 137-2(4)), but that is a concession, not a route to plan around.
• The deferral runs 5 years, extendable to 10, plus four months. Article 137-2(1) defers payment until the day four months after the expiry reference date, which is the earlier of the fifth anniversary of departure and the day a return-to-Japan event occurs. So the money is due 5 years and 4 months after departure, not on the anniversary. The extension notice has to reach the tax office by the day five years after departure or, if a return-to-Japan event happens before then, by the day before that event. It moves the reference date to 10 years, with the same four months following (Art. 137-2(2)). Deferral is not free: interest tax (rishizei) runs from the day after the ordinary payment deadline (at the lower of 7.3% a year or the statutory special base rate, so far lower in practice) and is payable together with the deferred tax when the deferral ends (NTA pamphlet, reference 3).
• File every year during deferral. Each year, submit a continued-application report (keizoku tekiyo todokedesho) by March 15 following each December 31, listing what you still hold. Miss the deadline and the deferral on the whole outstanding amount ends 4 months later, with the deferred tax and interest tax becoming due (Art. 137-2(6), (8)). There is a safety valve: where the tax office accepts that the delay was unavoidable, a late report is treated as filed on time (Art. 137-2(7)). But it is discretionary.
• Selling during the deferral ends it for that asset, on a 4-month clock. Where you dispose of, settle or gift a covered asset while deferred, the portion of the deferred tax attributable to that asset falls due four months from the day the disposal happened (Art. 137-2(5)). A partial sale therefore creates a payment date you have to plan for, not merely a recalculation. Note too that only assets you still held or had not settled by the filing deadline for the departure-year return went into the deferral in the first place (Art. 137-2(1)).

What sets your filing deadline and your valuation date is the tax agent notification, not the deferral election. They are two separate decisions.

File the notification before you leave, and your departure-year return is due on the ordinary deadline, March 15 of the following year, with the securities valued at their departure-date value. That holds whether or not you elect deferral; skip deferral and you simply pay at that same March deadline instead of posting collateral. Leave without filing the notification and the rules change: you must file a special return (jun-kakutei shinkoku) covering January 1 through your departure date, valuing the securities as of the day three months before your planned departure date, and pay by the day you leave.

(Source: National Tax Agency, Exit tax FAQ Q7, and Notice to persons leaving Japan, in Japanese.)

Five ways to unwind the tax (each with a 4-month clock)

The exit tax is not necessarily final. Japan built in several routes to cancel or reduce it after the fact, each with a fixed window. The usual instrument is a request for correction under Article 153-2, which is what you file when the original return overstated the tax. Do not assume every unwinding produces a refund, though: where cancelling the deemed disposal removes a deemed loss that was used in the original return, the adjustment runs the other way and an amended return is the right filing. Which one applies depends on what the deemed disposal did to your numbers, not on which event triggered it.

Return-based cancellation is not limited to people who elected deferral. If you paid the tax immediately at departure, have held the asset continuously since then and return to Japan within 5 years, you can file the same request for correction within 4 months of your return.

Foreign tax relief has two routes (each with its own condition and its own deadline)

Here is the scenario that decides whether the exit tax is a timing problem or a permanent cost. You leave Japan, your new country of residence does not step up your cost basis to the Japan departure-date value, and when you eventually sell, that country taxes the full gain from your original cost, on top of what Japan already taxed at departure. The same economic gain is taxed twice.

Japan’s answer is Article 95-2: the foreign tax you pay on the later disposal is treated as if you had paid it in the year of departure, so it can be credited against the exit tax already assessed. This relief is commonly described as being available only to people who elected the deferral. Read the provision and there are two routes.

Route one: Article 95-2(1). You elected the deferral, and you dispose of, settle or transfer the asset by the expiry reference date while having held it continuously since departure.

Route two: Article 95-2(2). You did not take the deferral. Paragraph (2) applies paragraph (1) mutatis mutandis where you filed a tax agent notification under Article 117(2) of the Act on General Rules for National Taxes by the time of departure, and you dispose of, settle or transfer the asset by the filing deadline for your departure-year return. Both routes also require that the foreign country’s own law computed its tax without regard to the Article 60-2 deemed disposal.

The practical takeaway: for anyone moving to a country likely to tax the same shares again on eventual sale (common wherever the destination does not recognize a Japan-triggered step-up in cost basis), electing deferral is not only a cash-flow decision. It keeps the Article 95-2(1) credit available for a sale made by the expiry reference date, while without deferral the sale has to happen by 15 March of the year after you leave (Art. 95-2(2)). Country-specific plans layer their own mechanics on top of this: a French attribution gratuite d'actions (AGA), for instance, is a statutory regime under the French Commercial Code with its own vesting and holding periods, and has to be analyzed against the actual plan documents on the French side. Article 95-2 is a Japanese credit and does not change how the other country taxes the sale.

(Source: National Tax Agency, Outline of the exit tax system for departing individuals, measures conditioned on the deferral election, in Japanese.)

We map the exposure before you book the flight

Preparing a tax return for another person as a business in Japan is, as a rule, restricted to licensed tax accountants (zeirishi) and others the law permits (Certified Public Tax Accountant Act, Arts. 2 and 52). You may prepare and file your own return. At our office, the work (from the initial scoping through the filing itself) is led in English by our representative tax accountant (zeirishi), Junya Yamaguchi, a Japanese certified public accountant who previously handled international engagements at EY, Deloitte and PwC China, in Japan and in China.

Our work centres on industries where expatriate executives are common (multinational manufacturers, international hotel groups, resources and infrastructure, and global BPO), supporting professionals at major foreign-owned companies through direct individual engagements, with no vendor registration required on the employer's side.

• Confirm whether you are even in scope. Your visa-status history against the test of more than five years of residence in the past ten, and your actual holdings against the ¥100 million line, including NISA-account and overseas-held securities, which count toward the threshold even where the gain itself would otherwise be tax-free.
• Model the deferral decision. Cash cost now versus collateral and annual filings later, run against your actual departure and return plans.
• Handle the departure-year filing. The return or special departure return, the deferral election, the tax agent notification, and the collateral arrangements.
• Track the deferral period. The annual continued-application filings, and the correction claim if you return, sell for less, or run into double taxation abroad.

Pricing

Exit tax work does not fit a standard annual-return tier. It is scoped and priced individually, across three phases:

What we need from you

• Passport with your visa history, or an entry/exit disclosure from the Immigration Services Agency if stamps are incomplete.
• A full asset schedule. Listed and unlisted securities, margin or derivative positions, NISA-account holdings, and anything held overseas, with current values.
• Your planned departure date, even if only approximate at the diagnosis stage.
• A tax agent in Japan: someone you appoint before you leave, with the appointment notified to the tax office. That keeps the ordinary filing deadline and is one of the conditions for deferral.

If part of your exposure comes from unsold RSUs, stock options or ESPP shares, our separate guide on how equity compensation is taxed in Japan covers the vesting and sale mechanics in detail.

Common questions

I have lived in Japan for 8 years on a work visa. Does the 5-year test catch me?

Generally no. Years spent under a Table 1 status such as Business Manager, Engineer/Specialist in Humanities/International Services, or Highly Skilled Professional do not count toward the 5-year test. The clock generally starts once you move to a Table 2 status such as permanent residency or a spouse-of-Japanese-national visa.

My assets are worth less than ¥100 million. Am I safe?

You are outside this specific regime, but the ¥100 million line counts securities whose gains would themselves be tax-free (NISA and junior-NISA holdings, and discount bonds whose redemption gain was taxed at source on issue), as well as securities held overseas and securities standing at a loss. Confirm the total before assuming you are under the line.

I have not sold anything. Why would I owe tax?

The exit tax treats you as if you sold everything at its departure-date value, whether or not you actually sell. That is exactly why the deferral election matters if you do not want to pay tax on an unrealized gain with cash you do not yet have.

What if the share price falls after I leave?

Yes, on two separate routes and two separate clocks. If you sell a covered asset below the departure-date valuation, having held it continuously since departure, the tax is recalculated on the sale figure. This is available under deferral (Art. 60-2(8)) and also without deferral where you filed a tax agent notification by departure and sell by the filing deadline for the departure-year return (Art. 60-2(9)); the request for correction is due 4 months from the sale. If you are under deferral and have held it continuously, its value is instead tested on the day 5 years after departure (10 where the deferral was extended) and the request is due 4 months from that day, not from the payment deadline four months after it. That last route is not available without deferral.

Does this apply to RSUs I have not vested yet?

Generally not the unvested portion itself, because an unvested RSU is not yet a security you own. Confirm this against your actual plan documents. Separately, an RSU that vests before your departure date is taxed at vesting under the ordinary employment-income rules, whatever happens with the exit tax.

Is 20.315% the right rate?

No. That is the ordinary rate for domestic listed-share sales, which includes a 5% local inhabitant tax component. For shares, the charge on the deemed gain is 15.315%: 15% income tax plus a reconstruction surtax of 2.1% of that income tax. For departures from 2027 the surtaxes are a 1.1% reconstruction surtax and a 1% defence special income tax, both on the income tax, so the total is the same. No inhabitant tax attaches to the deemed gain in practice, because inhabitant tax on a year’s income is charged only where you have a Japanese address on the following 1 January (Local Tax Act Art. 294(1)(i), Art. 318). But 15.315% is the rate for shares and the other items in the share-gains regime, not for every covered asset. Deemed settlement of unsettled margin trades and derivative contracts is computed as business or miscellaneous income under Art. 60-2(2) and (3), and has to be worked out separately. A very large gain can also bring in the additional tax under Article 41-19 of the Act on Special Measures Concerning Taxation.

If your holdings also include an eventual gift or inheritance from family abroad, see our guide to Japan inheritance and gift tax for foreign professionals. Status of residence matters in both regimes, but the tests are not the same one: the exit tax excludes Table 1 periods from a 5-in-10-year count, while inheritance and gift tax ask whether you hold a Table 1 status now and count domicile periods over 10-in-15 years. Read them separately.

The filings that come with leaving, whether or not the exit tax reaches you

The exit tax is one item on a longer list. Three filings follow from the date you stop having a domicile and a residence in Japan, and they run on different clocks.

• The return for the year you leave. Leaving part-way through a year without appointing a tax agent, you must file a return for 1 January to the date of departure by the time you leave if the income for that period leaves tax to pay (Income Tax Act, Art. 127(1)); if it would produce a refund, you may file one (Art. 127(2)). If you leave between 1 January and the ordinary deadline of the following year, a return that you were required to file for the completed year is due by the time you leave (Art. 126(1)). Anyone within the exit tax has a return to file in either case.
• Or you appoint a tax agent, and keep the ordinary deadline. File a notification under Article 117(2) of the Act on General Rules for National Taxes before you leave, and the return stays on the ordinary timetable (16 February to 15 March of the following year), with someone in Japan for the tax office to deal with. Filing it by the time you leave is also one of the conditions for the five-year deferral of the exit tax (Art. 137-2(1)).
• Leaving does not cancel the year’s inhabitant tax. It is charged by the municipality where you had an address on 1 January, on the previous year’s income (Local Tax Act, Art. 294(1)(i), Art. 318, Art. 313(1)). A bill can still arrive after you have left. If you leave your employer between January and April, any balance still being deducted from your salary is normally collected in one go from pay or a retirement payment made by 31 May; between June and December that happens only at your request. Otherwise you pay it yourself or through a tax agent (Local Tax Act, Art. 321-5(2)). Leave before 1 January and the income-based part does not arise for the following fiscal year. The per-capita part can still reach someone with no address here who keeps an office, a place of business or a dwelling in the municipality (Local Tax Act, Art. 294(1)(ii)), so keeping a flat in Japan is worth checking separately.

Gift and inheritance filings run on their own version of the same trap: a gift tax return moves forward to the day you leave if you go between 1 January and 15 March of the year after the gift without notifying a tax agent (gift tax: rates, exemption and deadline).

What you actually receive

• A written questionnaire. After your first message we send a short set of questions: residence and visa history for each person, the jurisdictions involved, what is held where, and the dates that matter. Nothing is quoted before we have the facts.
• One call, in English, if the facts need it. Used to confirm the timeline and the assumptions, not to sell.
• Written advice, signed by a licensed tax accountant. You receive the analysis in writing, as a tax opinion letter signed by the licensed tax accountant (zeirishi) who handled your matter. A tax return or other follow-up work is included only where our written proposal says so; otherwise it is quoted separately.

Fees are fixed and quoted in writing before any work begins, and they follow the scope once the facts are known.

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