Case 3
<Question>
Regarding non-residents, could you tell the details? My co-worker from UK plans to work in Japan for only 5 months. In this case, is the National Income Tax imposed?
<Answer>
Further information is necessary to judge the tax status precisely, however, on the premise that your co-worker won’t work over 5 months, and the salary during that period will be paid by a UK company of which she is not a director, the Treaty Exemption for Short-term Business rule will be applied based upon a Japan-UK tax treaty.
Japan-UK tax treaty (Article14②)
Remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned Contracting State if:
(a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the taxable year or year of assessment concerned;
(b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other Contracting State; and
(c) the remuneration is not borne by a permanent establishment which the employer has in the other Contracting State.
Under these rule, no Income Tax will be imposed in Japan. If the above requirements are not met, a 20% withholding tax will be imposed on the salary in Japan.
Additionally, “APPLICATION FORM FOR INCOME TAX CONVENTION” has to be filed to the tax office to adopt this rule.
( Refer to “http://www.ny.us.emb-japan.go.jp/en/q/form_15.pdf” )
By Certified Public Accountant (CPA) & Tax Accountant, Koji Takahashi
Tokyo & Yokohama
