SEISEI INSIGHTS — Cross-border Compliance
What Remains After You Leave Japan: The Pension, the Company, and the Clock to Work Backwards From
2026-09-15
Discussion of departure taxation tends to concentrate on the exit tax on unrealised gains. That is an important question, but it is only part of the exit. Even once the exit tax analysis is complete, two things remain on the Japanese side — a pension record and a company — and each runs on its own statutory clock. This article sets out those two, and the timeline they imply, as general information on the regimes concerned.
First: The Exit Tax Has Two Independent Requirements
Article 60-2(1) of the Income Tax Act provides that where a resident making a departure from Japan holds securities and the like, those securities are deemed to have been transferred at the time of departure. Unrealised gains, never sold, become taxable.
Article 60-2(5) disapplies the rule to a resident whose covered assets total less than ¥100 million, or whose aggregate period of having a domicile or residence in Japan within the ten years preceding departure — as prescribed by Cabinet Order — is five years or less. These are two independent exclusions: meeting either one takes you outside the charge. Neither the asset figure alone nor the status of residence alone settles the question; both have to be checked.
The content of that "period prescribed by Cabinet Order" is the part most often missed. It excludes periods of residence held under a status of residence listed in the upper column of Appended Table I (Statuses of Residence) of the Immigration Control and Refugee Recognition Act (Order for Enforcement of the Income Tax Act, Art. 170(3)(i)). Business Manager, Engineer/Specialist in Humanities/International Services, and Highly Skilled Professional are all listed in the upper column of that Appended Table I (Immigration Control Act, Art. 2-2(2)). Permanent Resident, Spouse or Child of Japanese National, Spouse or Child of Permanent Resident, and Long-Term Resident appear in the upper column of Appended Table II, and so fall outside that particular exclusion.
A transitional rule qualifies this. Where a person held a status of residence listed in the upper column of Appended Table II before 1 July 2015, the provision is read such that periods of residence under an Appended Table II status up to 30 June 2015 are also excluded from the count (Order for Enforcement of the Income Tax Act, Supplementary Provisions of Cabinet Order No. 141 of 31 March 2015, Art. 8(2)). Whether and how much it matters depends on the start and end dates of each period of residence and how they overlap the ten-year testing window.
### Deferral Is Not "Post Security and You're Done"
Where the tax does apply, a deferral regime exists. But it turns on several conditions, and missing any of them ends the deferral.
| Requirement | Content | Basis |
|---|---|---|
| Tax agent | Notification of a tax agent by the time of departure | Income Tax Act, Art. 137-2(1) |
| Security | Security equivalent to the deferred tax amount, provided by the filing deadline | Art. 137-2(1) |
| Return content | The final return must state the intention to apply, with attached schedules of the deemed transfers and the computation of the deferred tax amount | Art. 137-2(3) |
| Deferral period | Five years from the date of departure (or the date of return to Japan, if earlier) | Art. 137-2(1) |
| Extension | Filing the extension notification by the day five years from departure elapses changes "five years" to "ten years" | Art. 137-2(2) |
| Annual continuation | A continuation notification for the covered assets held as at 31 December each year, filed by 15 March of the following year | Art. 137-2(6) |
| Effect of failure | If the continuation notification is not filed by its deadline, the deferral ends on the day four months after that deadline | Art. 137-2(8) |
The Pension: A Two-Year Deadline That Is Easily Missed
For those who have paid Japanese pension contributions, a lump-sum withdrawal payment exists, provided for separately under the National Pension and the Employees' Pension.
Under the National Pension, a person without Japanese nationality (and not an insured person) whose contribution-paid months as a Category 1 insured person, aggregated as prescribed, total six or more, and who does not satisfy the eligibility requirement for the Old-Age Basic Pension, may claim the payment (National Pension Act, Supplementary Provisions, Art. 9-3-2(1)). The Employees' Pension contains a corresponding provision for a person without Japanese nationality (and not insured under the National Pension) with six or more months of insured periods who does not satisfy the Old-Age Employees' Pension requirement (Employees' Pension Insurance Act, Supplementary Provisions, Art. 29(1)).
Under both, no claim may be made in any of the following cases (items of paragraph (1) of the respective articles).
| Claim barred | Content |
|---|---|
| Domiciled in Japan | Where the person has a domicile in Japan |
| Existing entitlement | Where the person has held entitlement to the Disability Basic Pension (Disability Employees' Pension under the Employees' Pension) or other benefits prescribed by Cabinet Order |
| Two years elapsed | Where two years have elapsed from the date insured status was last lost (or, for a person domiciled in Japan on that date, the date they first ceased to be domiciled in Japan thereafter) |
Three structural points are worth holding onto.
First, the regime applies only to persons without Japanese nationality. Second, its relationship to the qualifying period: the National Pension provides that the Old-Age Basic Pension is not payable where contribution-paid and contribution-exempted periods together fall short of ten years (National Pension Act, Art. 26 proviso), and the Employees' Pension makes ten years the corresponding requirement for the Old-Age Employees' Pension (Employees' Pension Insurance Act, Art. 42(ii)). A person who has reached ten years sits, as a matter of the statutory text, on the side that does not meet the lump-sum requirements. This is not a comparison of which is more advantageous — which framework you fall into is determined first, by the provisions themselves.
Third, the effect of claiming. Where a lump-sum withdrawal payment is received, the insured periods on which the amount was calculated are deemed not to have been periods of insured status (National Pension Act, Supplementary Provisions Art. 9-3-2(4); Employees' Pension Insurance Act, Supplementary Provisions Art. 29(5)). The corresponding participation record under the Japanese pension system does not remain. Whether to claim is therefore both a decision bounded by a deadline and a decision that cannot be reversed afterwards.
The Company: Two Months You Cannot Compress, If It Is a Kabushiki Kaisha
Where you leave Japan still holding shares or an equity interest in a Japanese company, this article deals with three directions — liquidation, continuation, or sale (not an exhaustive list; merger, special liquidation and dormancy are among the other constructions available). Continuation raises the operational question of who handles banking, receipt of documents, and day-to-day correspondence on the Japanese side; a sale connects to the separate question of how the transfer itself is structured for tax.
If you choose liquidation, part of the calendar is fixed by statute for a kabushiki kaisha. A liquidating stock company must, without delay after the relevant dissolution event, give public notice in the Official Gazette that creditors should state their claims within a specified period, and must give separate notice to known creditors — and that period may not be less than two months (Companies Act, Art. 499(1)). Two months at minimum for the notice period alone, with further procedure on either side of it.
Note that this provision addresses liquidating stock companies. Godo kaisha and other legal forms are structured differently, so the procedure must be checked against the form actually held. Nor does the law require liquidation to be completed before departure. The point is one of sequence: once a statutory minimum of two months is built into the process, a plan worked backwards from a travel date frequently will not accommodate it.
The Information May Arrive Ahead of You: CRS
For accounts after departure, automatic exchange of financial account information under the Common Reporting Standard becomes relevant. It is not, however, an unconditional mechanism. Whether Japan and the other jurisdiction stand in a reporting relationship for that year, whether the account is a reportable account, and what residence information has been certified to the financial institution all bear on whether an exchange occurs.
Do Not Anchor the Calculation to the Departure Date
Recast along a timeline, the departure date is the last point, not the first.
- Establish the status-of-residence history and the asset position — neither of the two exit-tax requirements can be considered without it
- If deferral is used — tax agent notification by the time of departure; security and the return content by the filing deadline; a continuation notification every year thereafter
- If a stock company is liquidated — the full process including a creditor claim period that cannot be shorter than two months
- The pension — the two-year claim period runs from the date insured status was last lost (or, for a person domiciled in Japan on that date, the date they first ceased to be domiciled thereafter), which does not necessarily coincide with the date of departure
These depend on sequence and span more than one financial year. Fixing a departure date first and working backwards makes it structurally likely that something will not fit. Moving your tax position and setting your travel date are two separate acts, and should be handled as such. Determinations of application, deadline management, and whether a return is required in any particular case require confirmation by a licensed professional.
This article provides general information on tax systems and does not constitute individual tax consultation. Specific filings and tax computations are handled by licensed partner tax accountants whom we introduce.