Rent from a property abroad, interest and fund gains sitting in a foreign account — "the Japanese tax office cannot see any of it." That assumption fails twice over. Overseas remittances above ¥1 million are automatically reported by the bank, and foreign account balances themselves arrive at Japan's NTA from 86 jurisdictions — about 2.06 million records a year, with no minimum amount, under the CRS. This instalment reads a published case with approx. ¥261 million in undeclared income to show exactly how foreign income is already visible.
The case: only the capital gain was declared
The taxpayer had declared only a capital gain. Examining the overseas remittance records, the tax office found large sums arriving from abroad; CRS data suggested foreign financial accounts as well.
In the audit, the taxpayer explained having bought a residence in country A while working abroad. Checking its current use showed it was let through a property manager, producing rent. An account in country B was also receiving investment-fund income and deposit interest. Both were assessed.
The baseline rule: a resident of Japan (other than a non-permanent resident) is taxed in Japan on worldwide income — foreign rent and foreign interest belong on the Japanese return.
The two pipes that make foreign income visible
Overseas remittance records
Any cross-border transfer above ¥1 million — either direction — triggers a report from the handling bank stating name, amount and counterpart country (since 1998; the threshold fell to ¥1 million in April 2009). Receive foreign rent in a Japanese account and the arrival is on file.
CRS (Common Reporting Standard)
The OECD framework for automatic exchange of financial-account information. Japan receives about 2.06 million records a year from 86 jurisdictions — balances, interest, dividends — with no minimum amount. Never remit a yen and your foreign account still reports itself.
The two differ in kind: remittance records catch money crossing the border; CRS catches the balance sitting abroad. "Just don't send it to Japan" is precisely the strategy CRS closes. In the published case they worked together — the remittance records opened the file, CRS corroborated the accounts.
Residents whose foreign assets exceed ¥50 million on 31 December must file a foreign asset report by 30 June. Filing earns a 5% reduction in penalties on related omissions; failing to file, or filing falsely, adds 5%.
How foreign income goes on the Japanese return
| Foreign income | Japanese treatment |
|---|---|
| Rent on foreign property | Real estate income, aggregated; convert receipts and costs to yen |
| Foreign deposit interest | Unlike domestic deposits, not settled by withholding — declaration required |
| Foreign funds and shares | Dividends and gains declared; no automatic reckoning like a domestic specified account |
| Tax paid locally | Relieved through the foreign tax credit — declare in Japan first, then credit the foreign tax. Local payment does not replace the Japanese return |
Audits of wealthy individuals recover about ¥8.55 million per case — 2.9 times the all-audit average — and overseas holdings are an explicit priority. Holding assets abroad is entirely legitimate; leaving the income they produce off the Japanese return is what creates the case.
FAQ
Q. Can the Japanese tax office see money in my foreign account?
A. Yes. Under the CRS Japan receives about 2.06 million financial-account records a year from 86 jurisdictions — balances, interest, dividends — with no minimum amount. Separately, cross-border transfers above 1 million yen are reported by the handling bank.
Q. I pay tax on the rent locally. Must I still declare it in Japan?
A. Yes. Residents (other than non-permanent residents) are taxed on worldwide income, so foreign rent is declared as real estate income in Japan. Local tax is then relieved through the foreign tax credit — declare first, credit second.
Q. If I never remit the money to Japan, is it invisible?
A. No. Remittance records capture movements, but CRS reports the account itself — balance and income — every year regardless of any transfer. In the published case both sources fed the audit.
Q. Several years are already missing. What should I do?
A. File amended or late returns voluntarily before advance notice of an audit and penalties fall sharply — no understatement penalty, and the non-filing penalty is 5 percent in principle. After an audit they are far heavier, and 35 to 40 percent if concealment is found. International cases are complex; use a tax accountant experienced in cross-border work.
Sources
This article is general information. International taxation turns on residence status and treaties; consult a tax accountant experienced in cross-border work.
