Settling in Japan? Your Global Assets May Need to Be Reported to the Japanese Government

In recent years, as the Japanese government has more strictly enforced tax compliance for foreign residents living in Japan, foreign nationals residing in Japan should pay closer attention to their tax filing obligations. Among these obligations, the “Statement of Overseas Assets” system has become an increasingly important tax reporting requirement for foreigners who have lived in Japan for an extended period of time.

In particular, with the widespread implementation of the CRS (Common Reporting Standard) and international automatic exchange of financial account information, the Japanese tax authorities are now able to obtain information regarding overseas bank accounts, foreign securities investments, and overseas real estate through international information-sharing frameworks. Therefore, even if assets are located outside Japan, this does not mean that the Japanese tax authorities are unable to identify them.

Regulations of the Japanese National Tax Agency

The “Statement of Overseas Assets” is a reporting system established under the Act on Submission of Statements of Overseas Wire Transfers, etc. In principle, individuals who qualify as Japanese tax residents (excluding non-permanent residents) and whose overseas assets exceed JPY 50 million as of December 31 each year are required to submit a Statement of Overseas Assets to the Japanese tax office by June 30 of the following year.

In simple terms, foreign nationals who have maintained a domicile or residence in Japan continuously for more than one year and who have resided in Japan for more than five years within the past ten years may become subject to this reporting obligation.

One of the most commonly misunderstood concepts in Japanese tax law is the definition of a “non-permanent resident.” The term “permanent” here does not refer to immigration or visa status such as permanent residency; rather, it is purely a tax classification. A foreign national is considered a “non-permanent resident” if the total period during which the individual has maintained a domicile or residence in Japan is five years or less within the past ten years.

Therefore, even if an individual holds a work visa, business manager visa, spouse visa, or similar status, they may still qualify as a non-permanent resident for Japanese tax purposes if they have not exceeded the above five-year threshold. As a result, newly arrived foreign residents in Japan may not yet be required to submit a Statement of Overseas Assets even if they own substantial overseas assets. However, as their years of residence in Japan increase, they may eventually fall within the scope of the reporting requirements.

Types of Overseas Assets Subject to Reporting

In general, almost any type of “asset” may fall within the reporting scope. Examples include overseas bank accounts, foreign securities accounts, listed foreign stocks, shares in privately held companies, investment funds, bonds, real estate, overseas insurance policies, cash, receivables, antiques, artwork, precious metals, and other valuable assets.

How Overseas Assets Are Valued

Under the rules, overseas assets are generally valued based on their fair market value as of December 31 each year. If obtaining a direct market value is difficult, a reasonable estimated value may be used instead. For example, inventory may be valued based on appraisal value, while depreciable assets may be valued based on their book value after depreciation.

For overseas real estate in the form of land, the Japanese National Tax Agency recognizes three acceptable valuation methods:

1. Using the taxable assessed value under a local property tax system similar to Japan’s fixed asset tax;

2. Estimating the current value based on the original acquisition cost and reasonable subsequent price fluctuations; or

3. If the land is sold between January 1 of the following year and the filing deadline, using the actual sales price.

   
   

In addition, if assets are denominated in foreign currencies (i.e., currencies other than Japanese yen), such as U.S. dollar deposits, Taiwanese stocks, or overseas investment funds, they must be converted into Japanese yen to determine whether the JPY 50 million threshold is exceeded. The exchange rate conversion date is fixed as December 31 each year.

Accordingly, if the value of overseas assets is close to the JPY 50 million threshold, taxpayers should pay particular attention to year-end exchange rate fluctuations and carefully calculate asset values to ensure compliance with the reporting requirements.

Penalties

According to the Japanese National Tax Agency, if a person submits a Statement of Overseas Assets containing false information, or fails to submit the statement by the filing deadline without justifiable reason, the individual may be subject to imprisonment for up to one year or a fine of up to JPY 500,000.

For individuals residing in Japan who hold overseas financial accounts or overseas assets, it is important not only to determine whether overseas income must be reported, but also to confirm whether they fall within the scope of the Statement of Overseas Assets reporting system.

In recent years, investments through overseas brokers in U.S. stocks, holdings of crypto assets, and ownership of overseas real estate have become increasingly common. At the same time, the Japanese tax authorities have continued to strengthen their scrutiny of cross-border assets. Properly understanding one’s Japanese tax residency status, valuation methods, and reporting thresholds at an early stage can help effectively reduce future tax risks.