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. 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.
Summary
- A published case with about ¥261,000,000 in undeclared income and about ¥116,000,000 in additional tax. Rent from overseas property and interest and investment gains in overseas accounts went undeclared.
- Overseas remittances above ¥1,000,000 are reported in overseas remittance records, and information on overseas accounts arrives via CRS from 86 countries and regions, about 2.06 million items a year, with no minimum amount.
- Residents must declare their worldwide income in Japan. Tax paid abroad is adjusted through the foreign tax credit.
- If foreign assets exceed ¥50,000,000 on December 31, you must submit a statement of overseas assets. Submitting reduces the penalty tax by 5%; not submitting or false entries add 5%.
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This article is general information. International taxation turns on residence status and treaties; consult a tax accountant experienced in cross-border work.