Japan Tax Bulletin
Taxation on income generated from overseas deposits and shares
June 2021
An individual taxpayer liable for income tax is classified as aresident or a non-resident.
A resident is an individual who has a domicile or has had aresidence continuously for one year or more in Japan.
A non-resident is an individual who is not a resident.
A non-permanent resident is a resident who does not haveJapanese nationality and who has had a domicile or a residence inJapan for not more than five years in total within the past ten years.
With respect to income generated from overseas assets (foreignsourced income), such as interests on overseas deposits ordividends of overseas shares, non-permanent residents are taxed
when those are either paid in, or deemed to be remitted to Japan.
Residents other than non-permanent residents are taxed on
worldwide income.
As such, it is both possible that income generated from assets
owned outside Japan by foreigners who live in Japan be subject toor not subject to Japanese taxation. This newsletter discusses
taxation on income generated from assets outside Japan whenthose are taxable in Japan.
Here to be exemplified are taxation on interests on overseas
deposits, dividends of foreign corporations, and capital gains /losses on shares of foreign corporations as typical items.
I. Interests on Overseas Deposits
Method ofTaxation
Tax Rate
Foreign Tax
Credit 3

Taxation on aggregate income 1
Progressive tax rate 2
Applicable but limited to income tax subject
to ceiling (including tax exemption) as
provided in tax treaty

II. Income generated from shares etc. of foreign corporation“Listed Shares, etc.” include listed shares (including listed stockacquisition rights), foreign listed shares, beneficial interests inpublicly offered share investment trusts, beneficial interests inpublicly offered specified unit shares issued trusts, and investment
interests in certain share investment corporations, etc.
“Unlisted Shares, etc.” are securities other than Listed Shares,etc., such as unlisted shares, and beneficial interests in privately
offered shares investment trusts, etc.
(1) Dividends of foreign corporations(i) Listed Shares, etc.
Method ofSelectable from taxation on aggregate
Taxationincome or separate self-assessment
taxation 4
Tax RateProgressive tax rate in the case of taxation
on aggregate income
20.315% (national income tax etc.
15.315 % + local inhabitant tax 5%) in thecase of separate self-assessment taxation
Dividend Credit
Not applicable
Foreign Tax
Applicable but limited to income tax
Creditsubject to ceiling (including taxexemption) as provided in tax treaty(ii) Unlisted Shares, etc.
Method ofTaxation on aggregate income
Taxation
Tax Rate
Progressive tax rate
Dividend Credit
Not applicable
Offsetting capital Not allowedlosses
Foreign Tax
Applicable but limited to income taxCredit
subject to ceiling (including taxexemption) as provided in tax treaty

Shares or beneficial interests in investment trusts, etc. areclassified into two categories, “Listed Shares, etc.” and “Unlisted
Shares, etc.”

Taxation on aggregate income is a method of taxation by which total income is calculated by aggregating respective income to be used
as a basis of total taxable income. By this method, tax is calculated by applying progressive tax rate to the total taxable income, and is to bepaid by filing final tax return.
2 Progressive tax rate is an income tax rate applied on taxable income that is taxed by the method of taxation on aggregate income, ranging
from 5% to 45％ according to a taxpayer’s taxable income. Moreover, 2.1% of income tax is imposed as a surtax called special income tax
for reconstruction in addition to income tax (together with income tax, “national income tax, etc.”).
3 Foreign tax credit is claimable when a taxpayer is subject to Japanese tax on foreign-sourced income and also subject to foreign tax onthat same income. A taxpayer can claim foreign tax credit for foreign income taxes paid or accrued against Japanese income tax based on
certain calculation.
4 Separate self-assessment taxation is a method of taxation by which the tax is calculated by applying certain flat rate separate fromtaxation on aggregate income, and is to be paid by filing final tax return.
1(2) Capital gains or losses on shares of foreign corporations(i) Listed Shares, etc.
Method ofSeparate self-assessment taxation
Taxation
Tax Rate
20.315% (national income tax etc. 15.315 %+ local inhabitant tax 5%)
Capital losses
Offsetting other
Allowed to offset
on Listed
capital gains /other capital gains
Shares, etc.
dividends
on Listed Shares,etc. in and out ofJapan
Not allowed tooffset capital gains
on Unlisted Shares,etc.
Allowed to offset
dividends of Listed
Shares, etc. when
the capital loss isfrom transaction
through Japanesefinancial firm (onlywhen separate selfassessment taxationis selected)
Loss carry-forward Allowed to carryforward the capital
loss for 3 years if
the loss is fromtransaction throughJapanese financialfirm
Foreign Tax
Applicable unless tax is exempted by tax
Credittreaty in the relevant foreign country(ii) Unlisted Shares, etc.
Method ofSeparate self-assessment taxation
Taxation
Tax Rate
20.315% (national income tax etc. 15.315 %+ local inhabitant tax 5%)
Capital Losses
Offsetting other
Allowed to offset
on Unlisted
capital gains /other capital gains
Sharesdividends
on Unlisted Shares,etc. in and out ofJapan
Not allowed tooffset capital gains
on Listed Shares,
etc.
Not allowed tooffset dividends ofListed Shares, etc.
Loss carry-forward
Not allowed toclaim 3 years loss
carry-forward
Foreign Tax
Applicable unless tax is exempted by tax
Credittreaty in the relevant foreign country© 2021 Grant Thornton Taiyo Tax Corporation. All rights reserved.
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