Tax exemption for non-resident dependents

The Japanese government has changed the tax laws exempting non-resident dependents from tax. The law came into force on 1 January 2023. The Ecovis experts explain the details.

Background

Taxpayers in Japan are allowed to make a deduction for non-resident dependents from their income. A non-resident dependent is a relative, other than the spouse, who is 16 years of age or older, supported by the taxpayer as part of the taxpayer’s household and whose annual income does not exceed JPY 480,000 (or gross income of JPY 1,030,000 in the case of salary only). The Japanese tax office can verify the above conditions for resident dependents in Japan but is hardly able to check non- resident dependents.

In the 2016 tax reform, a revision was made for a taxpayer to submit or present documents confirming that a non-resident dependent is the taxpayer’s relative, and documents to confirm that the taxpayer has paid the relative’s living or educational expenses. The documentation should be made for each dependent and verified individually. As the income limit for the exemption was based on Japanese domestic source income only, there were still problems with non-resident dependents who received a large amount of income abroad, but no income in Japan. To overcome this, the 2020 tax reform (effective 1 January 2023) more narrowly revised the category of applicable non-resident dependents.

We can support you in getting the tax exemption for non-resident dependents.

Kazuhiko Chiba, President, ECOVIS APO, Tokyo, Japan

The tax exemption for non-resident dependents from 2023

1. Category of the applicable dependents
   Generally, there is no tax exemption for non-resident dependents who are over 30 years of age.
2. Exceptions
   There are exceptions to the general rule above for the following, as these would be less likely to earn any income without support:
   • Persons studying abroad who no longer have a domicile or residence in Japan.
   • Disabled persons
   • Persons who received more than JPY 380,000 from the taxpayer to cover living or educational expense during the year
3. Documents required
   From 1 January 2023, taxpayers applying for the exemption for their non-resident dependents must submit or present the following documents:

   Category of age etc. of non-resident relative		When submitting dependent declaration form	When submitting year-end tax adjustment documents
   16 or older / under 30, or 70 and above		Documents confirming relative status	Documents confirming expenses
   30 or older / under 70	1) studying abroad	Documents confirming relative status and visa documents for studying abroad	Documents confirming expenses
   	2) disabled person	Documents confirming relative status	Documents confirming expenses
   	3) persons receiving more than JPY 380,000 in support	Documents confirming relative status	Documents confirming payment of JPY 380,000 or more
   	Person other than ①　②　③	Not qualified for exemption

For further information please contact:

Kazuhiko Chiba, President, ECOVIS APO, Tokyo, Japan
Email: kazuhiko.chiba@ecovis.jp