The short version

“My income was under ¥200,000, so I don't need to file”

This is the single most common — and most expensive — misunderstanding among foreign professionals in Japan.

Japan's filing exemption for employees is narrower than it looks. Article 121(1) of the Income Tax Act opens with a ceiling: it is available only to a resident whose employment income for the year is ¥20 million or less. For most executives with a meaningful grant, that ceiling alone ends the discussion. Item (ii) then adds a second condition: all of that employment income must have been subject to Japanese withholding under Article 183 or 190 — or have been required to be. Only once both hold does a ¥200,000 threshold come into play at all.

Equity granted by an overseas parent company is paid outside Japan. No Japanese withholding applies. That means you fall outside the exemption entirely — not because the amount is large, but because no Japanese withholding obligation ever arose.

So if your first vest was small, the exemption you are relying on does not exist for you.

Taxed as employment income, at your marginal rate

RSUs are not taxed when granted. They are taxed when the restriction lifts and the shares become yours — the vesting date. The amount included in your income is the fair market value on that date, and it is treated as employment income, taxed together with your salary at progressive rates.

At the top bracket this reaches 55.945% (45% national income tax + 0.945% special reconstruction income tax + 10% local inhabitant tax).

Two consequences follow, and both surprise people:

• Nothing is withheld. Japanese withholding obligations under Article 183 apply to a payer who pays employment income in Japan. An overseas parent paying outside Japan is not such a payer. Shares arrive in your brokerage account with no tax taken.
• Year-end adjustment does not cover it. Your employer's nenmatsu-chōsei settles Japanese payroll only. Equity from the parent company sits outside it.

Options and ESPP: the same structure, a different date

The two-event structure is the same, but for options and ESPP the first event is not vesting.

• Stock options are taxed when you exercise. Employment income arises on the exercise date, measured as the share value on that date less the exercise price (NTA No.1543; Article 84(3) of the Income Tax Act Enforcement Order). Nothing is taxed at grant or at vesting.
• ESPP is taxed at purchase, and only on the discount. Employment income arises on the purchase date, measured as the share value on that date less what you actually paid — not the full market value (Article 84(3) of the Enforcement Order).
• A foreign parent's plan cannot be a Japanese tax-qualified option. The favourable treatment in Article 29-2 of the Act on Special Measures Concerning Taxation attaches only to rights issued by a Japanese kabushiki kaisha, so there is no deferral to sale: the exercise-date charge always applies.

Capital gains at 20.315%, on a base most people get wrong

When you sell the shares, the gain is capital gains income, taxed separately at 20.315% (15.315% national + 5% local). The calculation looks simple. It is not.

Your acquisition cost is the value already taxed at the first event

Because the shares were acquired without payment, the acquisition cost is “the amount normally required to acquire the shares at the time of acquisition” (NTA No.1464, item (6); Article 109(1)(vi) of the Income Tax Act Enforcement Order). In practice: the fair market value on the vesting date — the same figure already included in your employment income. If you report the full sale proceeds as your gain, you are taxed twice on the same value.

Foreign exchange moves the result even when the share price does not

This is the point most English-language guidance omits. Your acquisition cost is fixed in yen on the vesting date. Your sale proceeds are converted at the exchange rate on the sale date. If the yen weakens between the two dates, you have a taxable gain even if the share price never moved. Share price and FX both act on the result.

The default is the TTM — the mid rate between the bank's telegraphic transfer buying (TTB) and selling (TTS) rates (Income Tax Basic Circular 57-3-2). Where the foreign currency received as sale proceeds is sold for yen immediately on each receipt, the National Tax Agency accepts the TTB for the proceeds (NTA published Q&A). Outside that case there is no general TTB/TTS election for capital gains: the continuous-application election in the proviso to Circular 57-3-2 is confined to real-estate, business, forestry and miscellaneous income.

Multiple vests mean an averaged cost

If you have vested the same stock more than once, you cannot pick which shares you sold. The acquisition cost per share is computed under the method equivalent to the total average method (Article 118 of the Enforcement Order, NTA No.1466). Three years of vesting means three years of vesting-date prices and exchange rates feeding one calculation.

Taxed on shares you may not be allowed to sell

The tax at vesting is due whether or not you sell. If a blackout period, a lock-up, or an internal trading policy prevents you from selling, the liability still arises. At the top bracket, the vesting-year charge alone reaches 55.945% of the entire vesting-date value, while the later sale is taxed at 20.315% — and only on movement after vesting. For most grants, the vesting year is where the bulk of the money falls due.

Executives with large grants and restricted trading windows are the group most likely to be caught by this. Both the return and the payment for a vesting year are due by March 15 of the following year. Planning the sale timing against that deadline is part of the work, not an afterthought.

Double taxation is relieved only if you claim it

Where the grant relates partly to work performed outside Japan, or where your home country taxes the same award, relief may be available through the foreign tax credit or a tax treaty. Neither applies automatically. They apply because you claimed them correctly on the Japanese return, with the supporting evidence of foreign tax paid.

Country-specific plans add their own layer. 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 — the Japanese analysis has to be run against the actual plan documents, not the label on the award letter.

If you are holding vested shares and may eventually leave Japan, review this alongside our guide to Japan’s exit tax, which can tax unrealised gains on departure. And if you have lived in Japan for five years or less within the past ten, a further layer applies: the portion of your RSU income attributable to work performed outside Japan is foreign-source, and taxed only if it is paid in Japan or remitted here. See our guide to non-permanent resident taxation and the remittance rule.

We prepare and file the return ourselves

Tax return preparation in Japan is restricted to licensed tax accountants (zeirishi). At ESPERANZA, YAMAGUCHI Junya — a certified tax accountant (zeirishi), registration no. 151831 — handles the work directly: the interview, the calculation, the filing, and the correspondence with you in English. We do not hand the substantive work to unlicensed staff.

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.

• Reconstruct the acquisition cost. Vesting statements, grant agreements, vesting-date prices and exchange rates, across every year that feeds the calculation.
• Separate the two events. Employment income at vesting, capital gains at sale, each in the correct year.
• Claim what applies. Foreign tax credit, treaty relief, work-period allocation where the facts support it.
• File and explain. Electronic filing, plus a written explanation of the numbers so you can answer questions later.

Pricing

What we need from you

• Identification. Residence card or passport, and your My Number.
• Your Japan withholding statement (gensen-chōshū-hyō). Issued by your Japan employer.
• Vesting statements and grant agreements for every award that vested.
• Sale confirmations, if you sold any shares.
• A bank account for any refund.

Common questions

I have not sold any shares. Am I still taxed?

Yes. Vesting is a taxable event in its own right. The employment income arises when the restriction lifts, regardless of whether you sell.

My company did the year-end adjustment. Isn't that enough?

No. Year-end adjustment settles Japanese payroll. Equity granted by an overseas parent is paid outside Japan, is not withheld, and is not covered by that process.

The share price fell after vesting. Does my tax fall too?

Not for the vesting event. That tax was fixed by the fair market value on the vesting date. A later decline can produce a capital loss when you sell, and that loss can be netted against gains on other listed shares you sell in the same year — but it cannot be offset against your salary income. Where the shares are held then matters: the loss-relief regime in Article 37-12-2 of the Act on Special Measures Concerning Taxation — offsetting the loss against listed-share dividend income, and carrying it forward for three years — applies only to sales made through a Japanese financial instruments business operator or registered financial institution (NTA No.1474). Shares sold in an overseas plan-administrator account fall outside that list, so neither the dividend offset nor the three-year carry-forward is available.

My grant is ¥200,000 or less. Do I really have to file?

Yes. The exemption requires two things — employment income of ¥20 million or less for the year, and that all of it was, or should have been, subject to Japanese withholding. Income paid by an overseas parent carries no Japanese withholding obligation, so the exemption does not apply to you regardless of the amount.

Can I file in English?

The return itself is filed in Japanese, as required. All communication with you is in English. We also work in Japanese and Chinese.

If your family situation also involves a gift or inheritance from abroad, see our guide to Japan inheritance and gift tax for foreign professionals.