Key Points to Consider for Overseas Remittances from the U.S. to Japan

When sending money from the U.S. to Japan, be aware of the following tax risks and tax-saving strategies.

The Japanese tax office monitors remittances from overseas!

The Japanese tax office monitors all remittances from overseas exceeding ¥1million.
If there’s a perceived risk of unreported taxes (such as foreign exchange gains, gifts, or remittance-related taxation), you may receive an “Otazune” (inquiry from the tax office) or even face a tax audit.

Currency exchange gains may be taxed?

When converting U.S. dollar-denominated deposits or assets into Japanese yen, any profit realized from exchange rate fluctuations (known as foreign exchange gains) carries the risk of being subject to taxation in Japan.
Ideally, the safest approach is to convert funds to yen and transfer them to Japan before you return. If that’s not feasible, you will need to consider strategies such as converting to yen via services such as Wise while still residing in the U.S., or transferring funds to Japan in U.S. dollars.

Watch out for gift tax!

When transferring money from a joint account to Japan, each spouse should receive funds into their individual Japanese account based on their respective contribution ratio to the joint account. If the funds aren’t properly divided, the excess amount transferred to one spouse may be deemed a gift and subject to gift tax.

Strategies for U.S. Citizens to Manage Remittance Taxation

If a U.S. citizen remits income earned in the U.S. during their “non-permanent resident” period to Japan, it may be subject to Japanese tax (“remittance taxation”).
To avoid this, effective strategies for the first five years after returning to Japan include having living expenses sent from funds held by a spouse who is a Japanese national.