We are Murata Sogo Tax & Accounting Office specializing in inheritance and international taxation in Miyakojima-ku, Osaka City.
In this issue, we would like to introduce the treatment of the sale of foreign stocks by foreign nationals residing in Japan, which we often receive inquiries about.

1. Treatment under the Income Tax Law

Classification of Tax Payers	Sale of Foreign Shares
Permanent resident	Separete Taxation
Non-permanent resident	- Until December 31, 2016, all payments other than those made in Japan or remitted from outside Japan are exempt from taxation. - Taxable from January 1, 2017 to March 31, 2017. - From January 1, 2017 to March 31, 2017, tax is imposed. Taxation is imposed on payments made in Japan and remittances from abroad. However, those acquired on or after April 1, 2017 and acquired during the period of non-permanent residence within the past 10 years are taxable. Translated with DeepL.com (free version)
Non-resident	Non taxable

2. Treatment under Tax Treaties

With regard to the first point, it is necessary to confirm the treatment under tax treaties in addition to the Income Tax Act, which is a domestic law. If there are provisions in a tax treaty that differ from those in the Income Tax Act, the provisions of the tax treaty shall take precedence over those of the Income Tax Act (Law No. 162).
In this case, for example, if a Japanese resident with U.S. citizenship sells shares of stock at a U.S. securities company, it is necessary to confirm the Japan-U.S. tax treaty.

Under Article 13 of the Japan-U.S. Tax Treaty, all transfers other than transfers of property such as real estate, certain stocks, vessels, and containers are grouped under paragraph 7. There, it states,
“Taxes may be imposed only in the Contracting State in which the transferee is a resident on the income derived from the transfer of the property of a shellfish as defined in paragraphs 1 through 6.”

Therefore, for Japanese residents (permanent residents and non-permanent residents), gains from the transfer of shares are taxed only in Japan, their country of residence.

Therefore, it is important to keep in mind that although the domestic law states that non-permanent residents are subject to remittance taxation as foreign source income, the Japan-US tax treaty states that they are subject to taxation in Japan as domestic source income, regardless of whether or not they remit the income.

In this article, we have described the treatment of foreign nationals who sell foreign stocks in Japan. If you would like to discuss this issue with us, please contact us using the Inquiry Form.