1. Background
Following the 2021 tax reform, effective January 4, 2022, a new method was introduced allowing taxpayers residing outside Japan to directly remit Japanese national taxes through overseas financial institutions. This serves as an important alternative to the previous limitations of the Tax Agent and credit card payment, marking a significant development in international tax practice.
2.Overview of the System and Target Taxpayers
The subjects concerned are taxpayers of State taxes who have an address or residence outside the country (outside the jurisdiction of the State Tax General Law). Traditionally, the means of payment for taxes have been limited to proxy payments to tax agents, transfer payments from domestic bank accounts, or credit card payments.
Under the new system, direct remittance payments denominated in Japanese yen through foreign financial institutions and others have become possible, expanding options for taxpayers.
3.Detailed process of procedures
Pre-contact
As a prerequisite for payment, taxpayers must contact the "Overseas Payment Dedicated Window" of the Tokyo Regional Taxation Bureau by phone. At this time, they will receive detailed guidance on transfer destination information, payment amount, the relevant tax office, tax items, procedures, and points to note. The reception hours are from 8:30 AM to 5:00 PM Japan time (excluding weekends and holidays).
Remittance
On the specified payment date, a remittance will be made in yen through a foreign financial institution. All fees associated with the remittance will be borne by the payer (the client), and the National Tax Agency and others will not bear any costs.
Document submission
After payment, you will submit the "payment slip" and "remittance details" (proof of remittance via overseas offices) via email or other means. Subsequently, a receipt will be sent from the tax office by international mail, and it may take approximately 2 to 3 weeks to arrive.
4. Practical Considerations to note
Available Tax Items and Restrictions
It is available for almost all tax items, but withholding income tax (payment based on the income tax withholding statement) and tax items paid with stamps are excluded.
Remittance and intermediary Fees
When making a remittance, it is necessary to bear the fees from both the financial institution in the sending country and the receiving bank in Japan. The bank fees on the Japanese side are generally around 3,000 yen. It is essential to confirm the total fees at the overseas office before the remittance and to clearly communicate that the entire amount will be the responsibility of the remitter.
Restrictions on payment services (such as Wise)
Remittances using non-bank payment services such as Wise, WorldFirst, and PayForex may be rejected by the National Tax Agency, and the refund process could become difficult. Since this is not explicitly stated on the official website of the National Tax Agency, careful judgment in practice is required.
Language support constraints
Communication via phone or email with the Tokyo Regional Taxation Bureau is primarily conducted in Japanese. Therefore, taxpayers who are not familiar with Japanese may find the procedures complicated.
Comparison with Other Payment Methods
Residents living abroad have the following options:
- Credit card payment (for amounts less than 10 million yen per transaction), required additional credit card fees
- Direct payment and internet banking( holding an bank account within Japan as the precondition)
- Payment on behalf of the taxpayer by the tax agent in Japan
In practice, it seems that third-party payment (tax payment agent) and credit card payments, which have a simple process and support English, are often recommended.