We are Murata Sogo Tax & Accounting Office, specializing in inheritance and international taxation, with an office in Miyakojima-ku, Osaka City.
Recently, we have been receiving an increasing number of consultations from people who earn income overseas while studying abroad in the U.S. and other countries. The patterns of income are diverse, including those who work for a local company for a short period of time and those who earn income by posting videos (Tik Tok, You Tube, etc.) .
In this case, what about taxes?
1. Obligation to File an Tax Return in Japan
(1) In the case of short-term study abroad
If your study abroad is for a short period of time and you plan to return to Japan within a year (or actually return within a year), you are considered a "resident" for Japanese tax purposes.
If you are considered a resident, you are required to file an income tax return in Japan and pay taxes on your income not only in Japan but also worldwide. In this regard, please note that there are many people who do not include their overseas income in their tax returns.
In addition, if you incur taxes overseas, as described in below 2, you should consider the foreign tax credit to avoid double taxation both in Japan and overseas.
(2) In the case of long-term study abroad
A student who studies abroad for more than one year is considered a non-resident for Japanese tax purposes. In this case, if there appears to be no income in Japan, there is no need to file an income tax return in Japan.
2. Obligation to File an Tax Return Overseas
If you have earned income in Japan, the following patterns are possible.
(1) Tax return or withholding at source
If you are considered a local resident, you are required to file an income tax return for your local income. If you are considered a non-resident for short-term study abroad, you will be taxed either by filing an income tax return or by withholding tax if the income is considered to have originated in the country.
In order to determine "income derived from local sources," it is necessary to check the local tax laws as well as tax treaties.
(2) When the income is considered tax-exempt and no tax is imposed
If you are considered a non-resident and your income does not originate from the country, you are not required to file an income tax return. However, please note that certain procedures are required under tax treaties in order to receive withholding tax exemption or exemption, and withholding tax may be imposed if the procedures are not followed.
Be sure to check with the source of payment and follow the tax treaty procedures without omission.
If you work overseas while studying abroad, you will need to take international taxation into consideration.
Murata Sogo Tax & Accounting Office can provide one-stop service not only for Japanese tax returns, but also for overseas tax-related matters through our affiliated specialists.
If you have any questions or concerns, please do not hesitate to contact us.