Tax and Residency Rule for Indian who Resides and Work in Japan

An individual employed in Japan is considering moving to India for 4-5 months to work from home and intends to terminate their apartment lease in Japan to save on rent. They inquire about the possibility and implications of submitting a move-out notification to the local ward office, particularly in terms of potentially saving on resident tax.

The responses highlight several considerations:

1. Cost Implications of Moving Out: Terminating the lease may involve costs such as moving out expenses, key money (礼金), deposits (敷金), and brokerage fees for a new apartment. Additional costs could include a lock change fee and insurance. Given these expenses, the financial benefit of terminating the lease might be negligible as the non-refundable costs already incurred and those for a new lease could be comparable.
2. Resident Tax: One response notes that resident tax in Japan is based on the previous year’s income and is payable regardless of temporary absences, as long as one is drawing a salary in Japan. Another response corrects this, stating that the resident tax is applicable if one is residing in Japan as of January 1st. Therefore, since the individual will still have an address in Japan upon their return within 4-5 months, they will likely need to pay resident tax for the year.
3. Legal and Visa Concerns: Another commenter warns against terminating the contract and notifying the city office, as it could be reported to immigration and the employer, potentially leading to legal issues regarding income tax. It’s advised to maintain both city and income tax payments to avoid complications.
4. Employment and Tax Residency: It’s important to verify with HR about tax implications when living outside Japan for an extended period. There’s a mention of potential dual tax residency issues and the complexities of being taxed in both countries, which could necessitate claiming tax exemptions later.
5. Immigration and Reentry: Before leaving Japan, it’s advisable to obtain reentry permission from the immigration office, and upon finding a new place in Japan, one should notify the ward office.

In summary, while terminating the lease might save on rent, the associated costs, legal implications, and tax responsibilities could diminish these savings. The decision should consider these factors, alongside the hassle of securing a new lease upon return.