More and more couples who move to Japan after living abroad are being audited by the tax office. We see this often with couples where a foreign husband moves to Japan with his Japanese wife. We have supported many clients through this kind of audit, and we can confirm that the number of cases is really increasing.

Summary of this article:

• Two main reasons for the increase: international sharing of financial account information (CRS), and the weak yen, which makes overseas assets an easy target for tax authorities
• An audit usually starts one to three years after you move to Japan or send money here. Even if some years have already passed, this does not mean you are safe
• For income tax, what matters is your nationality. For gift and inheritance tax, what matters is your visa type. Because of this, the rules can be different for each spouse
• Three issues appear again and again in these audits: when you actually became a Japanese tax resident, who really owns the overseas assets, and how foreign exchange gains are taxed when money is converted to yen
• Unpaid or unreported tax can also affect the foreign spouse’s future application for permanent residency (eijyuken)

In Japan, the tax office’s administrative year starts in July, so audit activity is increasing again around this time. In this article, we explain how these audits happen and what issues usually come up. We use the most common case we see: a foreign husband with a spouse visa, and his Japanese wife, who moved to Japan together after living abroad for many years. As you will see, the tax rules are sometimes different for the husband and the wife, and this difference is often the reason for filing mistakes.

1. What Triggers a Tax Audit?

The most common trigger is a large money transfer from overseas to Japan. People usually do this to buy a house or to cover living expenses.

Japanese banks must report any international remittance over 1 million yen per transaction to the tax office. The larger the amount, the more attention it receives, and the more likely an audit will follow.

2. When Does an Audit Start? “It’s Been Years, So I’m Fine” Is Not Correct

An audit usually starts about one year after you move to Japan or send money here, at the earliest. In most cases, it starts two to three years later.

In principle, the statute of limitations for tax assessment in Japan is five years. The tax office does not need to rush. It observes how you file taxes after you arrive in Japan, and slowly decides who to audit. Thinking “we moved several years ago, so we should be fine now” is not a safe assumption.

3. How the Tax Office First Contacts You

If a licensed tax accountant (zeirishi) has been preparing your tax returns, the tax office will contact the accountant first. If you do not have one, the tax office will contact you directly, by phone or by letter. In some cases, tax officials may visit your home without notice.

4. The Rules Are Different for the Husband and the Wife

Before we look at the specific issues, it is helpful to understand what Japan can tax, and why. For income tax, the important factor is nationality. For gift and inheritance tax, the important factor is visa type.

Income Tax

The husband is a “non-permanent resident” for income tax during his first five years in Japan. More precisely, this applies as long as his total time living in Japan is five years or less within the past ten years. This is true no matter what visa he has. During this period, Japan taxes his Japan-source income, and also any foreign income that he sends to Japan. This is called the remittance rule.

After five years, he becomes a “permanent resident” for income tax purposes. From this point, his worldwide income is taxable in Japan, even if he never sends the money to Japan. Many people do not realize this.

His wife cannot be a “non-permanent resident” at all, because this status is only for foreign nationals. So her worldwide income is taxable from her very first day as a Japan resident. Interest, dividends, and gains from selling securities in overseas accounts must all be reported from her first year. A common but incorrect assumption is: “My husband is still a non-permanent resident, so we don’t need to report our overseas income yet.” This wrong assumption is one of the main reasons for filing mistakes on the wife’s side.

Gift and Inheritance Tax

For this tax, visa type matters, not nationality. A foreign national with a family-status visa, such as a spouse visa, is treated the same as a Japanese national from the day they arrive in Japan. This is the husband’s situation in our example. So if his parents overseas give him a gift, even if the money moves only between two overseas bank accounts, he must still report it in Japan.

People with a work visa have a grace period. Gifts and inheritances from abroad are usually not taxed during their first ten years in Japan (more precisely, while their total time in Japan is ten years or less within the past fifteen years). Because this rule is well known, many spouse-visa holders assume the same grace period applies to them. It does not. This is one of the mistakes we see most often.

The wife, as a Japanese national, must report any gifts or inheritance she receives from overseas, with no grace period at all.

5. What the Tax Office Actually Checks

The tax office’s job is to find out the facts, through interviews and documents, and then to decide how much tax should be assessed.

The statute of limitations is five years for income tax, and six years for gift tax (seven years if there is deliberate concealment). The audit will cover this entire period. Because the tax office already has records of your remittances into Japan, you will likely be asked to provide bank statements from the overseas accounts where the money came from, for the full audit period, along with copies of the tax returns you filed in your previous country.

Three issues come up again and again.

Issue 1: When Did You Actually Become a Japanese Tax Resident?

This is the foundation of the whole audit, so it is the most important issue. It is also the most difficult one to argue about. Once the tax office decides on a date, it is very hard to change their mind. There is little room for negotiation after that.

The basic idea is simple: you become a Japanese resident on the day you move the “center of your life” from abroad to Japan. The problem is that there is no clear, fixed test for finding this date. It is a judgment based on all the facts of your situation. This is exactly why this issue causes the most disagreement with the tax office, and why it is so important to prepare before you move.

The Three Most Important Factors

For couples moving to Japan, often around retirement age, the audit usually focuses on three factors:

• Number of days in Japan – how many days per year you actually spend here
• Where your family lives – the location of your spouse and children
• Your housing situation – whether you have a home in Japan, and how you use it

Of these three, the number of days matters the most. Once your time in Japan gets close to six months per year, the risk of being treated as a resident increases sharply. As a rough guide, if you spend about 100 days or less in Japan per year (in other words, your days in your main country of residence are at least double your days in Japan), it becomes easier to argue that you are still a non-resident. Please note, though, that this is only a rough guide, not a legal rule by itself.

There is one more point for couples. It is common for the wife and children to move to Japan first, while the husband continues to travel back and forth to finish his work abroad. In this case, the fact that his family already lives in Japan can make the tax office decide that his residency also started earlier. Each spouse’s residency start date is decided separately, but the situation of one spouse can be used as evidence for the other spouse’s case.

Issue 2: Who Actually Owns the Overseas Assets?

If you’ve spent years abroad as a married couple, chances are most of your assets were built together. For joint U.S. accounts, the tax office’s default position is to attribute ownership based on each spouse’s actual financial contribution. Things get murkier for assets built in a community property state like California – there’s real debate over whether ownership should follow local law (a 50/50 split) or the contribution-based approach Japan normally applies.

This ownership question also affects taxation between the spouses themselves. Say money from a joint account, built mostly from the husband’s income, gets transferred into an account under the wife’s name in Japan – or used to buy property in her name. The tax office may treat that as a taxable gift from husband to wife. Running household finances as one shared pool feels completely normal when you’re living abroad. But in Japan, a mismatch between whose name is on an asset and whose money paid for it can turn into a real problem. Worth keeping in mind.

Issue 3: FX Gains When Converting to Yen

Even for foreign currency you earned while living abroad, the tax office’s current position is that converting it to yen after you’ve moved to Japan triggers a taxable FX gain that needs to be calculated and reported. With the yen staying weak for so long, assessments on this specific issue have jumped.

Final Thoughts: File Before They Call

Unreported or unpaid tax doesn’t just mean back taxes and penalties. It can also affect the foreign spouse’s future application for permanent residency (eijyuken).

Proper fulfillment of tax obligations is an explicit factor in permanent residency screening. And for applications made as the spouse of a Japanese national, immigration also looks at how well the household has met its public obligations – not just the applicant. That means a filing gap on the wife’s side isn’t some separate issue that only affects her. It can weigh against the husband’s permanent residency application too, even though he had nothing to do with her filing.

There is a big difference between reporting voluntarily and only responding after the tax office contacts you first, both in terms of the penalty amount and how the process goes overall. If anything in this article sounds familiar to you, we strongly recommend reporting voluntarily now, before the tax office contacts you.

Our firm supports clients fully in English, from advising on how to report overseas assets and income, to preparing voluntary disclosures, to representing you during a tax audit. Even if you are only at the stage of “I’m not sure if this applies to me,” please feel free to contact us.

This article is for general informational purposes only and isn’t individual tax advice. Your specific situation may lead to a different result – please consult a qualified professional.