Introduction:

Japan is rarely the first country that comes to mind when one thinks of a “tax paradise,” yet its fiscal system offers distinct advantages for foreigners, expats, and internationally active businesses. As the world’s third-largest economy, Japan combines a highly developed infrastructure, political stability, and access to dynamic Asian markets with a tax framework that—when navigated correctly—can be remarkably favorable. For individuals, one of the most attractive features is Japan’s residency-based taxation system. Non-permanent residents (generally foreigners who have lived in Japan for less than five out of the past ten years) are subject to Japanese tax only on their Japan-sourced income and, with certain exceptions, on foreign income that is actually remitted into Japan. This approach creates opportunities for internationally mobile professionals and investors to optimize their global tax exposure while benefiting from Japan’s high quality of life and business environment.  

For companies, Japan has steadily reformed its corporate tax system to enhance competitiveness. In recent years, corporate tax rates have been lowered relative to historical levels, and incentives are available for research, innovation, and international investment. Japan’s network of double taxation agreements further strengthens its appeal to cross-border entrepreneurs and multinational groups. Of particular relevance to German, Austrian, and Swiss nationals and companies, Japan maintains comprehensive treaties with all three countries. These agreements are designed to eliminate double taxation, provide reduced withholding tax rates on dividends, interest, and royalties, and clarify rules on permanent establishments. This ensures that cross-border income flows between Japan and these European economies are structured with greater legal certainty and tax efficiency.  

Taken together, these features position Japan as an attractive jurisdiction not only for conducting business in Asia but also for structuring personal and corporate income in an internationally-aware manner. While Japan may not be a “tax haven” in the traditional sense, its nuanced system provides strategic advantages that—when coupled with strong treaty protection—make it a compelling option for discerning taxpayers. 

On the Map & What Others Say

Situated in East Asia, Japan is an island nation in the Pacific Ocean, positioned to the east of the Korean Peninsula, China, and Russia, and separated from its continental neighbors by the Sea of Japan. The country consists of four main islands—Honshu, Hokkaido, Kyushu, and Shikoku—alongside thousands of smaller islands, stretching in a long arc roughly 3,000 kilometers from north to south. This geography gives Japan striking variety: from the snowy mountains of Hokkaido to subtropical Okinawa, it is a country where diverse climates and landscapes exist in close proximity. Its capital, Tokyo, lies on the eastern coast of Honshu, overlooking the Pacific, and serves as both an economic powerhouse and cultural hub.  

Japan’s distinctive blend of tradition and modernity has long drawn the attention of travelers and cultural commentators. Travel blogs frequently praise its efficient infrastructure, safety, and balance of urban dynamism with quiet traditions. For example, many writers note the captivating contrast between neon-lit districts in Tokyo and the serene temples of Kyoto. International magazines often emphasize the country’s sense of order and attention to detail, describing daily life as both highly structured and subtly artistic—from the presentation of cuisine to the etiquette of social interactions.  

Travel bloggers commonly highlight its lifestyle appeal, pointing to the reliability of public transportation, the cleanliness of cities, and the seasonal beauty of cherry blossoms and autumn foliage. Others remark on the rich cultural heritage embedded in everything from tea ceremonies to festivals, while also noting the vibrancy of Japan’s technology-driven creative industries. Collectively, these perspectives paint a picture of a country where ancient traditions are carefully preserved yet stand comfortably alongside innovation and modern global culture.  

In short, Japan’s geographic setting as an island nation on the Pacific Rim has not only shaped its history and economy but also inspired an international reputation as a destination that uniquely harmonizes natural beauty, cultural depth, and contemporary sophistication.  

How the Tax System Works in Japan

Japan’s tax system is characterized by a multi-layered structure that incorporates national, prefectural, and municipal taxation, reflecting the country’s decentralized approach to public finance. For individuals and businesses operating in Japan, understanding how taxes are levied and administered is crucial, as they impact both day-to-day financial planning and long-term investment decisions.  

At the broadest level, Japan collects three main categories of taxes: personal income taxes, corporate and business-related taxes, and a variety of additional indirect or local levies. These tax categories are designed to ensure that revenue is collected fairly across different levels of society and economic activity, while also balancing the fiscal needs of the central government with those of local administrations.  

• Personal taxation in Japan relies heavily on a progressive national income tax, augmented by prefectural and municipal taxes. Taken together, an individual’s effective rate can be significantly higher than just the national portion, especially for high earners. Deductions and allowances play an important role in reducing taxable income, and foreign residents may face different rules depending on their residency status. For example, someone earning the equivalent of around USD 75,000 annually will pay not only the progressive national income tax but also the so-called “inhabitant taxes” at the local level, typically about 10%.  

• Corporate taxation in Japan is also layered. Companies are subject to a national corporate income tax, and on top of this, prefectural and local enterprise taxes apply. The effective tax rate for standard corporations generally falls in the range of 30% to 34%, though smaller enterprises often benefit from slightly reduced rates. Japan also imposes a local enterprise tax, which can increase the overall burden depending on the size and profitability of the business.  

• Other taxes make up an important component of the system. Japan levies a value-added tax—known locally as the consumption tax—currently set at 10%, which is broadly comparable to VAT or GST systems in other countries. Additionally, there are various property-related taxes, inheritance and gift taxes (which can be relatively steep compared to international standards), and excise duties on specific goods such as alcohol, fuel, and tobacco.  

In essence, Japan’s tax framework is designed to distribute liabilities across individuals, companies, and consumers, relying on a balance of direct and indirect taxation. The subsequent sections of this discussion will look more closely at each of these pillars—starting with personal taxation, then exploring corporate taxation, and finally addressing other key taxes—to provide a comprehensive understanding of how Japan structures its fiscal landscape.  

Taxation of Individuals

Japan’s taxation of individuals is structured around residency status, types of income, and progressive tax rates. The system distinguishes between residents and non-residents, with significant differences in how income is taxed.  

Residency Status and Scope of Taxation

• Permanent Residents: A person who has had a domicile or residence in Japan for more than five of the past ten years and who is not classified as a non-permanent resident is treated as a permanent resident. Permanent residents are subject to Japanese tax on their worldwide income.  

• Non-Permanent Residents: Foreign nationals who have a residence in Japan but have lived in Japan for five years or less in the preceding ten-year period are considered non-permanent residents. They are taxed on (i) income sourced within Japan and (ii) foreign-sourced income only to the extent that it is paid in or remitted to Japan.  

• Non-Residents: Individuals without residence or domicile in Japan for more than one year are taxed solely on their Japan-sourced income.  

Income Tax Rates  

Japan applies national income tax at progressive rates, supplemented by local inhabitant taxes. As of recent legislation:  

• 5% on taxable income up to JPY 1.95 million  

• 10% on JPY 1.95–3.3 million  

• 20% on JPY 3.3–6.95 million  

• 23% on JPY 6.95–9 million  

• 33% on JPY 9–18 million  

• 40% on JPY 18–40 million  

• 45% on income exceeding JPY 40 million  

In addition, a local inhabitant tax (comprising prefectural and municipal taxes) is generally levied at around 10% of taxable income.  

Example:  

If a permanent resident earns JPY 10 million annually, their taxable income is distributed across these progressive brackets. After applying applicable deductions and credits (e.g., employment income deduction, basic allowance), their effective tax burden would typically comprise national tax in the progressive bands plus the roughly 10% local inhabitant tax. For high-income earners, an additional 2.1% surtax is temporarily applied to national income tax, further increasing the overall burden.  

Deductions and Allowances  

Japan allows various deductions to reduce taxable income, including:  

• Employment income deduction: Automatically calculated for salaried employees to account for work-related expenses.  

• Basic allowance: Available to most taxpayers, subject to income thresholds.  

• Deductions for dependents and spouses: Structured based on the relationship and income of dependents.  

• Social insurance premiums: Contributions to national health insurance, pension, and employment insurance are fully deductible.  

• Medical expenses, life insurance premiums, and earthquake insurance premiums: Certain limits apply.  

Special Regimes for Foreigners and Expatriates  

• Non-permanent residents benefit from a narrower scope of taxation, as only worldwide income remitted to Japan is taxable. This can create planning opportunities for expatriates who maintain foreign investments but avoid remitting income to Japan.  

• Non-residents face flat taxation on Japan-sourced income. For example, employment income earned in Japan is subject to a flat 20.42% tax (including surtax), withheld at source. Rental or dividend income sourced in Japan is likewise subject to withholding.  

• Tax treaties: Japan maintains an extensive treaty network, which often provides relief from double taxation and may reduce withholding tax on income such as dividends, interest, and royalties.  

Considerations for Digital Nomads  

Japan does not currently offer a digital nomad visa or a special expatriate tax regime akin to those in some European jurisdictions. Digital nomads residing in Japan for more than one year typically trigger resident taxation rules. However, short-term stays (generally under 183 days coupled with no permanent establishment or employment arrangement in Japan) often result in non-resident treatment, limiting taxation to Japanese-source income only.  

In summary, Japan’s individual tax system is progressive and residency-driven, with meaningful distinctions between permanent residents, non-permanent residents, and non-residents. While the system is relatively burdensome for long-term residents, especially given the combined national and local levies, specific rules for non-permanent residents offer temporary tax advantages that are particularly relevant for expatriates.  

Taxation of Corporations

Japan’s corporate tax regime is considered relatively complex, reflecting the country’s effort to balance revenue generation with competitiveness on the global stage. The system applies corporate income tax at both the national and local levels, with effective rates that vary depending on company size and location of operations.

At the national level, corporations are subject to a statutory corporate income tax rate of approximately 23.2%. On top of this, local enterprise and inhabitants’ taxes are levied, raising the combined effective tax burden for large corporations to roughly 30%–31%. Smaller companies—defined generally as those with paid-in capital of less than JPY 100 million (around USD 670,000)—benefit from a reduced rate of about 19% on a portion of their taxable income. This tiered approach provides some relief for small and medium-sized enterprises, which make up the majority of Japan’s business landscape.

As with most corporate tax regimes, deductible expenses play an important role in determining taxable income. Interest payments on business loans, salaries and bonuses, social insurance contributions for employees, depreciation on fixed assets, and reasonable entertainment expenses (subject to limits) can generally be deducted. Special deductions also exist for research and development (R&D) expenditures: companies investing in innovation may claim tax credits that effectively reduce their overall burden, a policy aimed at encouraging Japan’s continued leadership in technology and advanced manufacturing.

Japan also offers targeted incentives through Special Economic Zones (SEZs) and designated areas such as National Strategic Special Zones. Within these, businesses may enjoy preferential tax treatment, relaxed regulatory requirements, and additional deductions—for example, enhanced loss carry forwards or accelerated depreciation allowances. These incentives are designed to attract foreign direct investment, promote new business models, and stimulate regional development where economic activity lags behind the major metropolitan hubs. In practice, these incentives can lower the effective tax rate by several percentage points, especially for companies engaging in innovative fields like biotechnology, renewable energy, or advanced IT services.

Overall, Japan’s corporate income tax environment remains a balancing act. While effective rates around 30% place it slightly above some regional competitors, the network of deductions, credits, and targeted zone-specific incentives provides avenues for businesses to strategically reduce their tax liability. For foreign investors, understanding how these elements interact is essential to structuring operations in Japan efficiently.

Other Significant Taxes

In addition to Japan’s progressive income tax system, residents and certain non-residents may be subject to a range of other taxes that can significantly shape their overall fiscal burden. Understanding these taxes is critical for individuals living, investing, or working in Japan.  

Capital Gains Taxes

Japan taxes capital gains differently depending on the asset category. Gains from the sale of listed securities (such as stocks and bonds) are subject to a flat national and local tax rate of roughly 20.315%. This same rate also applies to profits on cryptocurrency disposals, though crypto may alternatively be taxed as “miscellaneous income” in some contexts, which can result in higher progressive rates. Real estate capital gains are taxed more heavily: properties held for five years or less are taxed at a combined rate of just over 39%, while those held for more than five years benefit from a reduced rate of about 20%. Because property values vary widely, the tax burden for higher-value real estate can be substantial, easily reaching into tens or even hundreds of thousands of US dollars.  

Dividend Income  

Dividends received from Japanese corporations are generally taxed at the same flat 20.315% (national and local) rate, although income tax residents may elect alternative taxation methods that combine the income with salary or business profits. Non-residents are typically subject to a withholding tax, most often 15–20%, depending on double tax treaties. For example, a dividend of ¥1,000,000 (roughly USD 6,700) would leave the shareholder with around USD 5,300–5,700 after Japanese taxes.  

Consumption Tax (VAT/GST)  

Japan levies a national consumption tax, akin to VAT, at 10%, with a reduced rate of 8% applying to essentials such as food and non-alcoholic beverages. For expatriates and businesses, this is an important part of daily financial planning, as this tax is embedded in consumer prices. For example, a meal costing ¥3,000 (about USD 20) includes about ¥300 (USD 2) in consumption tax.  

Property and Fixed Asset Tax  

While Japan does not levy a net wealth tax, there are annual taxes on property ownership. Fixed asset tax is levied at 1.4% of the assessed value of land, buildings, and depreciable assets, with higher rates possible in urban planning zones. For a modest apartment in Tokyo assessed at ¥50 million (around USD 335,000), the annual tax could run close to ¥700,000 (roughly USD 4,700).  

Inheritance and Gift Taxes

Japan has one of the highest inheritance and gift tax burdens worldwide. The top marginal rate reaches 55% on large estates. The tax base applies broadly, and residency rules mean that even foreign assets may fall under this regime if the heir or donor has a “residency nexus” with Japan. For example, an inheritance valued at ¥100 million (about USD 670,000) could face an effective tax bill exceeding USD 200,000–250,000, depending on applicable deductions and taxpayer category.  

Social Security Contributions  

Employees and employers each contribute to Japan’s extensive social insurance programs, covering pensions, health insurance, nursing care, unemployment, and workers’ compensation. Combined employee contributions typically total around 15% of salary, with employers contributing a matching or slightly larger share. For a worker earning ¥10 million annually (about USD 67,000), the employee portion alone could exceed ¥1.5 million (roughly USD 10,000). These contributions are mandatory for most residents, including expatriates with a medium- to long-term stay status.  

Taken together, Japan’s tax system is broad-based and often more complex than it initially appears. While income taxes often get the focus, these “other” taxes—on consumption, assets, transfers, and social security—play a major role in shaping overall tax liabilities for individuals living, investing, or inheriting wealth in Japan.  

Who Benefits Most from Moving to Japan?

Japan’s tax system and overall cost of living profile create different advantages and disadvantages depending on an individual’s financial situation, lifestyle, and long-term plans. While the country offers stability, high-quality infrastructure, and a deeply developed economy, its relatively high tax rates and strict compliance requirements can make it more suitable for some groups than others.  

Entrepreneurs and Professionals in Stable Sectors

Entrepreneurs who are building regionally focused businesses, particularly those serving the Japanese domestic market, may find Japan appealing. The country has strong intellectual property protections, access to advanced technology, and a large, affluent consumer base. For professionals whose work depends on being close to stable institutions, headquarters of multinational companies, or advanced manufacturing hubs, Japan provides reliability and prestige. However, entrepreneurs seeking a low-tax, lightly regulated jurisdiction may find Japan less attractive, as the corporate tax rate is moderately high compared to certain Asian neighbors, and operational compliance requirements are detailed and strictly enforced.  

Digital Nomads and Remote Workers  

Japan is often considered a dream destination for digital nomads due to its fast internet speeds, excellent transportation networks, and cultural richness. However, from a tax perspective, the situation is less favorable. Once an individual becomes a tax resident (generally after 12 months of residence), their worldwide income is subject to Japanese tax, unless they qualify as a “non-permanent resident” (in which case, certain foreign-sourced income may escape taxation if not remitted to Japan). This means digital nomads with geographically mobile income streams may face significantly higher tax burdens compared to alternative bases in Southeast Asia or other lower-tax jurisdictions. Short-term stays or temporary residency, especially under tourist or student visas, may still suit those who wish to enjoy Japan’s lifestyle without becoming enmeshed in its tax system.  

Retirees and Pensioners  

Japan is highly attractive for retirees who prioritize safety, healthcare quality, and cultural amenities. The country’s universal healthcare system, highly efficient services, and urban conveniences are strong draws. However, retirees relying on foreign pension income should carefully evaluate the bilateral tax treaty between Japan and their home country. In many cases, foreign pensions may be taxed in Japan, potentially leading to higher liabilities than in other retirement-friendly destinations. On the other hand, individuals with modest income who value lifestyle over tax efficiency may find the trade-off worthwhile.  

High Net-Worth Individuals (HNWIs)

For globally mobile HNWIs seeking low-tax jurisdictions or favorable residency programs, Japan is generally not optimal. The top marginal income tax rate—including national and local taxes—can exceed 50%, and inheritance and gift taxes are among the most burdensome in the world. While Japan offers stability and prestige, from a wealth-preservation standpoint, other jurisdictions in Asia or Europe tend to provide greater tax efficiency.  

Who Might Not Find Japan Suitable

Individuals prioritizing tax minimization—such as location-independent entrepreneurs with substantial global earnings or retirees with high pension income—may consider Japan less favorable due to its comparatively high marginal rates and global taxation system. Similarly, those seeking permanent residence with an eye toward estate planning may find Japan’s inheritance and gift tax framework restrictive.  

In summary, Japan is best suited for professionals seeking business opportunities within the country, entrepreneurs serving the domestic market, and retirees who place healthcare, quality of life, and long-term cultural engagement over strict tax efficiency. For purely tax-driven relocations, however, Japan is rarely the first choice.  

Special Considerations for Relocation

Relocating to Japan requires careful planning not only for tax and financial considerations but also for the practical steps that ensure a smooth transition to daily life. Several key areas—immigration status, healthcare access, banking, and personal belongings—should be addressed early in the process.  

Residence Permits and Visas

Foreign nationals entering Japan must obtain the correct visa category before arrival. The visa class depends on factors such as employment, business, study, or family circumstances. Common categories for long-term stays include work visas (e.g., for engineers, researchers, or intra-company transferees), student visas, and family/dependent visas. Each has specific eligibility requirements and documentation standards. Upon arrival, residents are issued a Residence Card (zairyū kaado), which serves as formal identification in Japan. Within 14 days of moving into a residence, newcomers must register their address at the local city or ward office. This registration is a prerequisite for many essential services, including enrollment in the national healthcare system.  

Healthcare System  

Japan has a universal healthcare system, and enrollment is mandatory for residents. Depending on employment circumstances, individuals are either enrolled in Shakai Hoken (Employees’ Health Insurance) through their employer or the Kokumin Kenkō Hoken (National Health Insurance) program through their local municipality. Premiums are typically based on income, and residents are responsible for a portion of medical expenses (generally around 30%), with the insurance covering the balance. Having insurance is not only legally required but also critical for avoiding high out-of-pocket costs, given Japan’s advanced but sometimes expensive healthcare services.  

Opening a Bank Account  

Access to local banking is essential for receiving wages, paying rent, and managing daily transactions. To open a bank account, foreign residents must present their Residence Card, proof of address (from the municipal office registration), and often a personal seal (inkan or hanko), although some banks now accept signatures. Many banks require at least a medium-term visa (valid for more than six months), so short-term visa holders may struggle to open an account. Additionally, while Japan remains cash-focused in many sectors, having a local account is increasingly important for handling utility payments and accessing modern online services.  

Importing Personal Items  

When bringing personal belongings into Japan, residents may import used household goods and personal effects duty-free, provided they submit a Customs Declaration of Accompanied and Unaccompanied Personal Effects. Typically, items must arrive within six months of the resident’s arrival to qualify for duty exemption. Certain goods, such as alcohol, tobacco, and vehicles, are subject to quotas, duties, or specific regulations. Prohibited items include some types of medication, firearms, and controlled substances, so advance confirmation with Japanese Customs is essential to avoid complications.  

In summary, relocating to Japan involves more than simply obtaining the correct visa; it requires early organization in areas such as healthcare enrollment, establishing banking facilities, and managing the entry of personal items. Addressing these practical considerations promptly helps ensure that life in Japan begins smoothly and allows expats to focus on personal, professional, and financial integration.  

The 'Boris Becker Trap': Avoiding a Sham Relocation

When relocating to Japan for tax purposes, one of the most critical considerations is ensuring that the move represents a genuine shift in one’s "center of vital interests"—the concept that tax authorities in many countries use to determine where an individual is truly resident. Simply acquiring an address in Japan or obtaining a residency visa is insufficient. Authorities in countries like Germany, Austria, and Switzerland closely scrutinize whether ties to the former home country have actually been severed and whether Japan has become the true focal point of one’s economic and personal life.

The so-called “Boris Becker trap,” a reference to high-profile cases where prominent individuals were found to have maintained stronger links to their home jurisdiction than to their purported new residence, serves as a cautionary lesson. If a relocation is viewed as a sham, the taxpayer risks being treated as still resident in their home country for tax purposes, despite maintaining formal residence status in Japan. In such cases, income could be subject to full taxation in the home country, often with penalties, interest, and reputational consequences for perceived tax evasion.

To avoid this outcome, individuals must demonstrate that Japan has become their genuine center of vital interests. This generally entails more than physical presence; it requires establishing a home in Japan, spending significant time there, moving one’s family (if applicable), redirecting professional and business activities, and integrating into the social and economic environment. Conversely, maintaining a primary household, business base, or substantial personal connections in the former country—even if claiming Japanese residence—could undermine the claim to exclusive Japanese residence.

Tax authorities in continental Europe are particularly proactive in assessing relocation claims. They examine factors such as utility records, frequency of visits back home, school enrollments of dependents, and the management location of businesses or investments. They are less interested in formal declarations than in the reality of day-to-day life.

In sum, a relocation to Japan must reflect a genuine re-anchoring of life interests to avoid the legal and financial repercussions of a sham move. Without clear evidence that Japan has become the taxpayer’s true home, the risk of dual taxation or reclassification as a resident in the home country remains high.

What Makes Japan an Attractive Place to Live?

Japan’s appeal as a place to live extends far beyond its tax and financial considerations. The country is widely admired for offering a harmonious balance of tradition and modernity, where dynamic urban environments coexist with serene natural landscapes and centuries-old cultural practices.  

One of the most compelling aspects of life in Japan is its rich cultural heritage. From world-renowned cuisine such as sushi, ramen, and wagyu beef, to traditional arts like tea ceremonies, calligraphy, and kabuki theater, residents can immerse themselves in a culture that places strong value on both innovation and historical preservation. Seasonal festivals and customs bring a sense of rhythm and continuity to daily life, offering opportunities for connection and community participation.  

Lifestyle in Japanese cities is shaped by a deep appreciation for order, cleanliness, and convenience. Tokyo, Osaka, and other metropolitan areas are home to world-class shopping, dining, and entertainment options, but they also emphasize efficiency in everyday living. Small details such as punctual public transportation, convenience stores offering round-the-clock services, and an ingrained societal respect for rules create a highly organized environment that makes day-to-day tasks significantly smoother.  

Climate and nature also play a significant part in Japan’s attractiveness. The country features four distinct seasons, each celebrated in its own way—spring with cherry blossoms (hanami), summer with vibrant festivals, autumn with brilliant foliage, and winter with world-class ski resorts in Hokkaido and the Japanese Alps. Beyond seasonal beauty, Japan offers diverse natural scenery, ranging from pristine coastlines and volcanic hot springs to lush forests and mountainous hiking trails, all within relatively short distances from urban hubs.  

Safety is another hallmark of life in Japan. The country consistently ranks among the safest in the world due to its low crime rates, strong social cohesion, and effective law enforcement. This emphasis on safety provides residents with peace of mind and an extremely rare sense of security in everyday settings, including cities that are home to millions of people.  

Infrastructure further enhances Japan’s livability. The transportation system, particularly its rail network, is legendary for punctuality and speed, allowing for convenient and reliable mobility across the country. Urban planning prioritizes accessibility, with modern airports, well-maintained highways, and widespread public services that meet high international standards. In addition, the nation’s advanced healthcare system and high life expectancy underscore its quality of living.  

Altogether, Japan offers a combination of cultural richness, scenic beauty, urban efficiency, and social stability that makes it one of the most attractive places to live worldwide. For expatriates and locals alike, it provides not only the comforts of modern living but also the opportunity to experience a uniquely immersive way of life.  

Cost of Living

Japan’s cost of living presents an intriguing mix of affordability and expense when compared with Western European countries, depending largely on the category of spending and the city in question. Tokyo and Osaka, for example, are well known for their relatively high housing and service costs, but the overall picture is nuanced.  

Housing Costs  

Rent is often where the most noticeable divergence with Western Europe appears. In central Tokyo, a one-bedroom apartment in the city center might cost around ¥150,000–¥200,000 per month (roughly €950–€1,250), which is generally lower than central London or Paris, where comparable units commonly exceed €1,800 per month. Outside Japan’s major metropolitan centers, rents fall significantly: in regional cities like Fukuoka or Sendai, the same type of apartment can be found for half or less of Tokyo’s cost. In contrast, secondary cities in Western Europe (for example, Seville in Spain or Lyon in France) often remain more expensive than their equivalents in Japan. However, Japanese apartments tend to be smaller in size and more compactly designed compared with Western European norms.  

Food and Groceries

Food costs in Japan can be surprisingly reasonable in certain categories. Eating out in a casual restaurant—such as a noodle shop or izakaya—can cost the equivalent of €7–€12, considerably less than a sit-down meal in most European capitals, where €15–€25 is standard. Conversely, imported groceries (cheeses, wines, and certain meats) in Japan are substantially more expensive than in Europe, sometimes double the price, due to import duties and transportation costs. Fresh local produce, rice, and seafood are competitively priced in Japan, often cheaper than in Western Europe; for instance, a bento lunch box can be purchased for under €5, something unlikely in major European centers.  

Services  

Services such as healthcare, personal grooming, and transport in Japan generally compare favorably to Western Europe. A haircut in Japan might average €25–€35 in Tokyo, while in cities like Berlin or Paris, comparable services often range from €40–€60. Public transport in Japan is highly efficient and well-developed: a commuter subway pass in Tokyo for central zones might cost around ¥10,000–¥12,000 (€65–€80) per month, similar to or slightly more affordable than passes in London, though high-speed rail tickets for longer distances can be pricey. Healthcare, while not entirely free as in some European countries, is heavily subsidized, meaning routine doctor visits are often cheaper than in Western Europe for those enrolled in Japan’s national health insurance.  

Overall, Japan’s cost of living can be considered moderate-to-high compared with Western Europe. Housing in Tokyo may be somewhat less expensive than major European capitals, everyday meals and services may in fact be more affordable, but imported goods and quality housing space can drive costs higher. This balance means that while life in Japan’s major cities can be costly, it is not necessarily more expensive than living in Europe’s most prominent urban centers, and it often provides better value in daily conveniences and services.  

Tax Aspects of Leaving Your Home Country (e.g., Germany, Switzerland, Austria)

When leaving a country such as Germany, Switzerland, or Austria to relocate to Japan, individuals—particularly entrepreneurs and high-net-worth taxpayers—must pay close attention to the tax rules governing departure. These countries often impose both "exit taxes" and ongoing limited tax liabilities on certain income streams, ensuring that assets tied to their jurisdictions remain subject to taxation even after the taxpayer has moved abroad.  

Exit Taxation in Germany  

Germany’s exit taxation rules are particularly significant for business owners or those holding substantial shares in corporations. Under §6 of the German Foreign Tax Act (Außensteuergesetz, AStG), residents holding at least 1% in a corporation may be subject to exit taxation when they give up their German tax residency. The rationale is that by leaving Germany, the state loses its taxing rights over future gains if the shares were later sold elsewhere. The deemed capital gain is calculated as if the shares had been sold upon departure, triggering tax liability even without an actual transaction. Although deferral options exist under certain conditions (particularly within the EU/EEA), taxpayers moving to non-EU countries such as Japan must generally settle the tax immediately.  

Limited Tax Liability After Departure

A common misconception is that leaving the country terminates all tax obligations. In practice, Germany (and likewise Switzerland and Austria) continues to levy tax on certain domestic-source income under the principle of "limited tax liability." For example, if a former resident maintains rental property in Germany, dividend-paying shares in a German company, or German pension entitlements, that income remains subject to German taxation. Tax treaties, including the Japan–Germany tax treaty, play a decisive role in preventing double taxation, but they typically preserve Germany’s taxing rights to a substantial degree when the source of income is located domestically.  

Comparison with Switzerland and Austria

Switzerland does not impose an explicit "exit tax" on shareholdings. Instead, issues on departure tend to focus on wealth tax assessments up to the point of emigration, possible taxation of pension entitlements, and ongoing tax obligations tied to Swiss real estate or other Swiss-source income. Austria, by contrast, has introduced its own exit tax rules, particularly targeting shares and other capital gains when taxpayers relinquish unlimited tax residency. As with Germany, Austria applies deferral provisions within the EU/EEA but requires immediate taxation upon departure to third countries like Japan.  

Key Takeaway

For individuals considering a permanent move to Japan, understanding the tax exit regimes of their home countries is crucial. Business owners, in particular, face potentially significant immediate tax costs in Germany or Austria due to exit taxation on shares, while ongoing ties such as property, pensions, or investments can trigger limited tax liability even after departure. Proper planning—ideally well before changing residence—can mitigate these burdens and ensure smoother tax compliance during the transition abroad.  

Correct Preparation for the Move

When preparing to move to Japan, careful planning is essential not only for immigration compliance but also for tax efficiency and smooth integration into the Japanese system. Below is a practical checklist outlining the key steps individuals should take before departure:  

1. Clarify Visa and Residence Status Requirements  

• Determine the appropriate visa category: Japan issues visas based on purpose of stay, such as work, study, business management, or spousal/family-related visas. Each has distinct eligibility criteria and allowable activities.  

• Confirm documentation needs: Common requirements include a Certificate of Eligibility (COE) issued by a sponsoring employer or institution, proof of financial means, and valid health insurance coverage.  

• Apply through the Japanese embassy or consulate: Begin the application process several months in advance to account for processing times.  

• Understand status of residence obligations: Be aware of restrictions linked to your visa (e.g., limitations on supplemental work) and procedures for extension or change of status once in Japan.  

2. Review Tax Residency Implications  

• Familiarize yourself with residency rules: In general, Japan considers individuals who reside continuously for more than one year to be tax residents. Residency status determines the scope of taxation on worldwide versus Japan-sourced income.  

• Evaluate home country exit tax rules: Some jurisdictions impose exit taxes or require reporting on capital gains and foreign assets when giving up tax residency. Consider professional advice to mitigate unintended liabilities.  

• Check for tax treaty benefits: If your home country has a double tax treaty with Japan, review its provisions to avoid double taxation and confirm eligibility for exemptions or credits.  

3. Complete De-Registration from Your Home Country  

• Inform your local municipality and tax authority: In many countries, you must file formal notice of departure to stop accruing local residency-based taxes.  

• Cancel or adjust health and social insurance: Ensure contributions or benefits tied to your residence status are properly closed out.  

• Address voting and civil registrations: Depending on your home country, you may need to register as an overseas voter or update records for military, pension, or social benefit systems.  

4. Organize Financial and Administrative Affairs 

• Banking arrangements: Decide whether to maintain or close home-country bank accounts; plan to open a Japanese bank account after arrival, which usually requires a residence card.  

• International mobility of assets: Consider exchange rate fluctuations, investment repatriation rules, and any restrictions on transferring funds abroad.  

• Health insurance coverage: Japan requires enrollment in its national health insurance or employer-sponsored plan. Verify whether your home coverage continues during the transition. 

5. Prepare for Relocation Logistics  

• Shipping and customs regulations: Research Japan’s customs rules regarding household goods, personal items, and high-value possessions, ensuring necessary forms and inventories are properly documented.  

• Housing arrangements: Be aware that many rental agreements require a guarantor and upfront costs such as key money and deposits.  

• Language and cultural preparation: While not a legal requirement, basic Japanese proficiency and understanding of administrative processes will ease interactions with local authorities. 

Carefully addressing these steps before departure will reduce unnecessary complications, prevent overlapping tax obligations, and ensure a smoother transition into Japan from both a legal and financial standpoint.

Automatic Information Exchange (CRS)

Japan is a committed participant in the OECD’s Common Reporting Standard (CRS), having implemented the framework in 2017. This means that Japanese financial institutions are legally required to identify account holders’ tax residency and report relevant information on non-resident individuals and entities to Japan’s National Tax Agency (NTA). The NTA, in turn, automatically exchanges that information with the tax authorities of other jurisdictions that have also adopted CRS and maintain reciprocal agreements with Japan.  

For foreign nationals residing in Japan, this has important implications when holding bank or investment accounts overseas. Accounts maintained in other CRS-participating jurisdictions will generally be reported back to the NTA, providing Japanese authorities with visibility into offshore financial assets. This significantly limits the opportunity for Japanese tax residents to keep foreign accounts outside of the government’s awareness.  

Conversely, Japanese nationals or residents who open accounts in Japan should expect their account details to be shared with the tax authorities of their home jurisdictions abroad if they are tax residents elsewhere. As a result, individuals with cross‑border financial arrangements must carefully consider their reporting and compliance obligations in both Japan and their country of residency.  

In practice, Japan’s participation in CRS reinforces the importance of transparency. Residents are required to disclose overseas assets above certain thresholds (through the “Overseas Assets Report” system), and the automatic exchange mechanism ensures that discrepancies between self-declared information and foreign-reported data are more easily detected. For expatriates and long-term residents, this means that maintaining proper documentation and ensuring timely reporting of offshore holdings is essential to avoid penalties and potential scrutiny.