Published: October 2026 | Based on National Tax Agency (NTA) pages checked on 15 October 2026

If your business in Japan pays a salary or a fee to someone who does not live in Japan, the withholding rules are different from the ones you use for local staff and local freelancers. The rate is usually higher, there is no year-end adjustment, and a tax treaty can change the answer completely. This guide walks through the general rules as the NTA explains them. It is general information, not advice on a specific case.

A Japanese version of this guide is available at bridgeinvoice.jp/guide/gensen-hikyojusha.

Who counts as a non-resident

Japanese income tax splits individuals into residents (居住者) and non-residents (非居住者). According to an NTA leaflet for foreign workers, a resident is a person who has an address (jusho) in Japan, or who has had a place of residence (kyosho) in Japan continuously for one year or more up to now. Everyone else is a non-resident: no address in Japan and less than one year of continuous residence.

Nationality does not decide the question. A foreign employee who has an address in Japan is generally a resident, and a Japanese national who has moved abroad can be a non-resident.

Which payments are taxed in Japan

Japan taxes a non-resident only on Japan-source income (kokunai gensen shotoku). NTA Tax Answer No.2878 lists, among other items:

  • salaries, bonuses and fees for personal services, to the extent they arise from work or services performed in Japan;
  • the consideration paid to a business that provides personal services in Japan.

If a tax treaty between Japan and the person's country of residence says something different, the treaty generally prevails.

The withholding rates

NTA Tax Answer No.2884 says that a person paying Japan-source income to a non-resident or a foreign company must, as a rule, withhold tax at the time of payment. The main rates are:

Type of payment Rate
Salary, other remuneration for personal services, retirement allowances 20.42%
Consideration for a personal-services business 20.42%
Rent for real estate 20.42%
Royalties for industrial property and copyrights 20.42%
Consideration for the transfer of land 10.21%

For residents, fees such as manuscript or lecture fees are withheld at 10.21% up to 1 million yen and 20.42% above that. For a non-resident's salary or service fee, the NTA leaflet describes a flat 20.42% of the amount paid. Non-residents are not covered by year-end adjustment, and in principle the withholding settles their Japanese tax on that salary, so they generally do not need to file a Japanese tax return for it.

From payments made in 2027, the tax withheld is made up of income tax, the new defense special income tax and the reconstruction special income tax. The NTA explains that the reconstruction surtax falls from 2.1% to 1.1% while the defense tax adds 1%, so the combined rates such as 10.21% and 20.42% do not change.

If you need the resident figures for comparison, the free withholding tax calculator works out the 10.21% and 20.42% amounts for fees paid to residents.

Reducing or removing the tax under a treaty

A tax treaty may exempt the payment or cap the rate. To use it, the non-resident has to file the tax treaty notification form (租税条約に関する届出書). NTA Tax Answer No.2888 sets out the procedure:

  1. The recipient prepares a separate form for each payer.
  2. The form goes through the payer to the tax office that covers the payer's place for tax payment.
  3. It must be filed by the day before the first payment.

If the form has not arrived in time, the payer withholds at the domestic rate, not the treaty rate. The recipient can still recover the difference later by filing the treaty form together with the refund claim for treaty cases (租税条約に関する源泉徴収税額の還付請求書, Form 11), again through the payer.

For a business, the practical point is timing. Ask for the treaty form before the first invoice is paid, not after.

The annual payment record for non-residents

Payers in Japan also report payments to the tax office each year. For a non-resident who received salary or fees for services performed in Japan, the payer does not use the ordinary withholding slip or the resident fee record. Instead it files the payment record for salaries, fees, pensions and prizes paid to non-residents (非居住者等に支払われる給与、報酬、年金及び賞金の支払調書).

According to NTA Tax Answer No.7431 and the 2026 NTA guide to statutory reports:

  • the record is not required if the total paid in the year is 500,000 yen or less;
  • it is due by 31 January of the following year, filed with its own summary sheet;
  • if the person lives in a country or region that exchanges information automatically with Japan, two identical copies are filed;
  • if the non-resident has been notified of a My Number, the number goes on the record.

Consumption tax can apply too

The NTA guide adds a reminder for payers. A non-resident or foreign company that provides services in Japan can become a consumption tax payer, for example when its taxable sales in the base period exceed 10 million yen. The NTA asks payers to explain this to the people they pay.

A short checklist

  • Confirm whether the person is a resident or a non-resident before the first payment.
  • Check whether the payment is Japan-source income.
  • Ask whether a tax treaty applies and collect the treaty form before paying.
  • Withhold 20.42% (or the treaty rate) and keep the calculation.
  • File the non-resident payment record by 31 January if the year's total is over 500,000 yen.

When a case is unclear, such as remote work performed partly abroad, ask the tax office or a tax accountant. The answer depends on where the work was done, the contract and the treaty.

Sources