With the significant tightening of the so-called minimum tax regime starting in 2027, some individuals may be considering relocating overseas during 2026.
If you become subject to Japan’s exit tax, one of the first key issues to consider is whether to elect the tax deferral.

While the deferral allows you to postpone your tax liability, it also comes with additional burdens, such as interest charges, collateral requirements, and ongoing compliance obligations. Therefore, electing deferral is not always the right choice, and careful consideration is required based on your individual circumstances.

In this article, we outline the basic framework for making this decision.

<Comparison of Systems>

	Payment at Exit	Tax Deferral
Submission of Tax Agent Notification	○Optional If not submitted ・ Valued at the fair market value as of the exit date ・ Filing and payment are due by March 15 of the following year ・If you sell the relevant assets by March 15 of the following year, you can use the actual sale price to calculate the capital gain. If not submitted ・ Valued at the fair market value as of three months prior to the exit date ・ Filing and payment are required by the exit date	×Required ・Valued at the fair market value as of the exit date ・ The fair market value as of three months prior to the exit date cannot be used
Need to prepare funds at exit	×Required	○Not required(but collateral is needed)
Collateral requirements/ post-exit reporting	○None	×Required
Interest tax	○None	×Required
Recalculation when stock price declines	×Not available	○Available
Cancellation period(Return）	×5 years	○10 years
10-year rule for gift/inheritance tax	○Treated as a non-resident of Japan from the exit date	×Treated as a Japanese resident during the deferral period

<Post-Exit Stock Price Changes>

	Payment at Exit	Tax Deferral
Stock price increases	○No action required Post-exit gains are not taxable in Japan; taxed in country of residence upon sale	×Expiration / termination / sale → deferred tax + interest tax must be paid
Stock price decreases	×Re-entry into Japan within 5 years → tax canceled (No relief after 5 years)	○Re-entry into Japan within 10 years → tax canceled OR Expiration / sale → deferred tax (based on reduced value) + interest tax must be paid

Interest Tax
<Calculation at the time of providing collateral>
Deferred tax amount × deferral period × 7.3% per annum (standard rate)
* A special reduced rate may be applied based on the Special Interest Tax Rate (e.g., 1.3% in 2026)

<Calculation at the time of actual payment>
Deferred tax amount × deferral period ×the lower of 7.3% or the Special Interest Tax Rate (approximately 1% level)

Minimum Tax
2026 : JPY 330M → 22.5%
2027 : JPY 165M → 30%
* Return to Japan → tax canceled → re-exit → tax rates in effect at that time apply

Our firm provides advisory services on planning strategies for Japan’s exit tax, as well as assistance with tax deferral procedures and tax return preparation. If you have any questions, please feel free to contact us.

This article is based on Japanese tax laws as of April 2026. Certain aspects have been simplified for ease of understanding. Please note that the actual tax treatment may vary depending on your specific circumstances. We recommend consulting with us before taking any action based on the information provided in this article.

Our consultation fee is JPY 30,000 (including tax) per hour.
As licensed tax accountants, we are bound by strict confidentiality obligations. Any information you share with us will not be disclosed to third parties, including the tax authorities, without your consent.

• For inquiries by phone, please call us at +81-3-6369-8180 during business hours (Monday to Friday, 9:00 AM – 6:00 PM JST).
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