We are Murata General Tax and Accounting Office, located in Miyakojima Ward, Osaka City, specializing in inheritance tax and international taxation.

In this article, we explain, in a Q&A format, the Japanese tax treatment applicable when a non-resident sells shares through a Japanese securities account.

1. Case

I left Japan in 2001 and, after marrying my Dutch spouse in 2003, have continuously maintained my principal place of residence in the Netherlands.

Since leaving Japan, my stays in Japan have been limited to temporary visits, and I have spent the vast majority of my time living in the Netherlands.

Since I do not have my principal place of residence in Japan and my stays in Japan are only temporary and for short periods, I believe that I qualify as a non-resident for Japanese income tax purposes.

I have maintained an account with a Japanese securities company for many years and have held and traded shares through this account. In 2025, I sold shares that had appreciated significantly in value and paid a substantial amount of Japanese income tax on the resulting capital gains.

Was it correct for me to pay Japanese income tax on these gains?

2. Answer

We believe that no Japanese income tax should have been payable on the capital gains from the sale of the shares, and that a claim for correction should therefore be filed to seek a refund of the Japanese income tax that was overpaid.

3. Reasons

Under the Japanese Income Tax Act, a non-resident is generally subject to Japanese income tax only on Japan-source income.

Capital gains from the sale of shares by a non-resident are generally not subject to Japanese income tax unless they fall within certain exceptions prescribed under Japanese tax law, such as the sale of shares that are treated similarly to a transfer of a business.

Furthermore, where the shares were not sold while the taxpayer was staying in Japan, the capital gains do not fall within the category of Japan-source income prescribed under Article 281 of the Order for Enforcement of the Income Tax Act. Accordingly, the capital gains in this case are not subject to Japanese income tax.

The Japan-Netherlands Tax Treaty also addresses the taxation of capital gains from the disposal of shares. Except for certain special cases, such as shares deriving their value principally from immovable property, Article 13(6) provides that gains from the disposal of such property are taxable only in the country in which the person disposing of the property is a resident.

Accordingly, in this case, the Netherlands has the taxing right over the capital gains from the sale of the shares, and Japan does not.

Therefore, from the perspective of both Japanese domestic income tax law and the Japan-Netherlands Tax Treaty, we believe that the capital gains arising from the sale of the shares in 2025 should not be subject to Japanese income tax.

Conclusion

There are cases where non-residents mistakenly pay Japanese income tax on income that is not actually subject to taxation in Japan.

If you are facing a similar situation or have any questions regarding the Japanese taxation of non-residents, please feel free to contact us through our inquiry form.