Japan capital gains tax: Complete 2026 guide for residents, foreigners and US expats
Japan capital gains tax depends first on the asset you sell and your Japanese tax residency. In 2026, listed-share gains are generally taxed at 20.315%, while Japanese real estate held for no more than 5 years can face an effective 39.63% rate.
For Americans, capital gains tax in Japan is only one part of the filing picture. US citizens and green card holders generally remain subject to US tax reporting on worldwide gains, so the same sale may require Japanese reporting, a US Form 1040 and Schedule D, and potentially Form 1116, Form 8621, FBAR, or Form 8938.
Japan capital gains tax: Quick answer guide (2026)
Does Japan have capital gains tax? Japan taxes gains from assets including shares and real estate, with the National Tax Agency administering national income-tax rules. For 2026, the headline rate is 20.315% for taxable listed-share gains, while real-estate rates depend on the January 1 holding-period test.
Japan taxes taxable gains on listed securities at an effective 20.315% for 2026: 15% national income tax, a 0.315% reconstruction component, and 5% local inhabitant tax. Long-term Japanese real-estate gains are also effectively 20.315%, while qualifying short-term real-estate gains reach 39.63%.
Capital gains tax in Japan does not use one universal rule for every asset. US taxpayers comparing the two systems should also review the TFX guide to reporting capital gains and losses because US holding-period and reporting rules differ from Japan’s.
How Japan's capital gains tax system works
Capital gains tax in Japan separates major investment gains rather than folding every gain into ordinary progressive income. In 2026, listed shares are generally subject to separate taxation at an effective 20.315%, while land and buildings have a distinct short-term and long-term regime based on ownership at January 1.
The first main category is financial assets, including shares and specified securities. The National Tax Agency sets the income-tax treatment, while the Financial Services Agency supervises Japan’s financial markets and programs such as NISA.
The second category is real property. Land and buildings are also subject to separate taxation, but the rate changes sharply depending on whether the property has been held for more than 5 years under Japan’s January 1 measurement rule.
A separate securities transaction tax does not apply to ordinary Japanese securities sales – Japan abolished that tax on April 1, 1999. The current system taxes the resulting gain instead.
Japan capital gains tax rate on stocks and securities
The standard Japan capital gains tax rate for taxable listed-stock gains in 2026 is 20.315%. The NTA states a 15% national income-tax rate plus 5% local tax, with the reconstruction surtax adding 2.1% of the 15% national component, or 0.315 percentage points.
For a ¥1,000,000 taxable listed-share gain in 2026, the combined tax at 20.315% is ¥203,150 before considering eligible loss offsets or other special rules.
| 2026 component | Effective percentage of gain |
|---|---|
| National income tax | 15% |
| Special Income Tax for Reconstruction | 0.315% |
| Local inhabitant tax | 5% |
| Combined rate | 20.315% |
This is the core rule behind capital gains tax on Japanese shares and what an embedded version of the brief’s “Japan capital gains tax listed stocks 20.315 official NTA” keyword is intended to describe. Japan’s tax rules for qualified dividends are separate from capital-gain treatment, and US dividend classification should not be assumed from the Japanese treatment.
A 2026 change is already enacted for January 1, 2027. The reconstruction surtax rate falls to 1.1% of base income tax and the new Defense Special Income Tax adds 1%; the NTA says the combined withholding rate for these investments remains unchanged.
Capital gains tax on property in Japan
Japan capital gains tax property rules divide real-estate gains into 2 holding-period categories. Property owned for more than 5 years on January 1 of the sale year is long-term, while property owned for 5 years or less on that date is short-term, even if the anniversary occurs later that year.
The following 4 rules determine the standard capital gains tax for Japan property calculation:
- Measure ownership at January 1. Japan tests how long the land or building has been owned as of January 1 in the year it is sold.
- Short-term capital gains: When ownership is 5 years or less, the standard national rate is 30% plus 9% local tax. The 2.1% reconstruction levy on the national component brings the 2026 effective rate to 39.63%.
- Long-term capital gains: When ownership exceeds 5 years, the standard rate is 15% national plus 5% local, with the reconstruction component bringing the 2026 effective rate to 20.315%.
- Calculate the taxable gain: Start with sale proceeds, subtract adjusted acquisition cost and qualifying transfer expenses, then account for any applicable special deduction. Building basis is reduced for depreciation.
Because Japan tests the holding period on January 1, reaching a fifth purchase anniversary during the sale year does not by itself convert the property to long-term treatment.
US owners should separately review how the same disposal is treated under the TFX foreign property capital gains guide because US basis, depreciation, exchange-rate, and residence-sale rules can produce a different taxable gain.
Calculating your taxable gain on Japanese property: A step-by-step example
A Japanese property gain starts with the sale price and subtracts adjusted acquisition cost, qualifying transfer expenses, and any available statutory deduction. For a building, accumulated depreciation reduces acquisition cost; land is not depreciated. A ¥33 million taxable long-term gain would produce approximately ¥6.704 million of tax at 20.315%.
Based on our client scenario at TFX: assume a property sells for ¥80 million. Its original acquisition cost was ¥50 million, ¥6 million of building depreciation has reduced that basis, and qualifying selling expenses total ¥3 million.
The following 4 steps produce the gain before any special deduction:
- Original acquisition cost: ¥50,000,000.
- Less accumulated building depreciation: ¥6,000,000, leaving an adjusted acquisition cost of ¥44,000,000.
- Add qualifying transfer expenses of ¥3,000,000 to the deductible cost side.
- ¥80,000,000 sale price − ¥44,000,000 adjusted acquisition cost − ¥3,000,000 transfer expenses = ¥33,000,000 taxable gain.
If the property satisfies the long-term test, ¥33,000,000 × 20.315% = approximately ¥6,703,950 before any other relief. The TFX guide to buying and owning property in Japan provides related ownership context for foreign buyers.
Japan capital gains tax for foreigners and non-residents
Japan capital gains tax for foreigners is determined primarily by tax residency status, not citizenship. A person is generally resident for Japanese income-tax purposes if they have a domicile in Japan or have continuously maintained a residence there for 1 year or more; a nonresident is taxed only on Japanese-source income.
The following 3 distinctions matter for foreigners selling investments or property:
- Japanese residents: Full residents are generally taxed on domestic and foreign income. A non-permanent resident has a narrower statutory scope for qualifying foreign-source income, so the facts and timing of offshore securities purchases, sales and remittances require separate review.
- Nonresidents selling shares: Japan does not impose tax on every securities disposal by every nonresident, but specified share gains remain Japanese-source and taxable, including situations listed by the NTA. A permanent establishment can also change the analysis.
- Nonresidents selling Japanese real estate: The buyer generally withholds 10.21% of gross consideration. The withholding exception applies when an individual buyer acquires the property for the buyer’s or a relative’s residence and the consideration is ¥100 million or less.
A 10.21% withholding from a nonresident property sale is not necessarily the seller's final Japanese tax – it is withholding against the applicable tax liability.
The Japan capital gains tax non-resident analysis should therefore start with residence status, asset type and treaty position rather than nationality. See TFX’s guide to capital gains taxation for nonresidents in the US for the separate US-side rules.
For a non-US person who also has US nonresident-alien exposure, the IRS separately explains capital-gain taxation for specified nonresident students, scholars and foreign-government employees. That IRS page does not determine Japanese residency or Japanese tax.
NISA accounts: Tax-free capital gains and dividends in Japan
A qualifying NISA account exempts covered investment gains and distributions from Japanese income tax. Under the system operating in 2026, the annual investment capacity is ¥1.2 million in the accumulation quota plus ¥2.4 million in the growth quota, for a combined maximum of ¥3.6 million per year.
The lifetime book-value tax-free holding limit is ¥18 million, including a ¥12 million sub-limit for the growth-investment quota. The post-2024 NISA also has an indefinite tax-free holding period and permanent account-opening framework.
Put naturally, the brief’s phrase “financial services agency japan nisa tax exempt dividends capital gains” describes this FSA-supervised system: covered NISA dividends and capital gains receive Japanese tax-free treatment. Likewise, NISA capital gains are tax exempt in Japan when the statutory requirements are met.
One detail matters for dividends – the NTA says the Japanese exemption for qualifying listed-share dividends depends on receiving them through the required securities-company method.
Gains inside a qualifying NISA can escape Japan's normal 20.315% listed-security tax, but the Japanese exemption does not create a matching US tax exemption for an American account holder.
Get help with Japan gains reported on your US return
Selling Japanese investments can create 2 separate tax calculations – one under Japanese law and one under US law. TFX prepares US expat returns, so the service scope is US reporting, Foreign Tax Credit calculations, and related international forms rather than preparation of the Japanese income-tax return.
Japan capital gains tax on foreign stocks for Japanese residents
Japan capital gains tax on foreign stocks for residents generally applies when the holder is a full Japanese resident. The NTA states that Japanese residents are normally taxed on gains from shares sold overseas as well as domestic shares; a non-permanent resident needs a more specific source and remittance analysis.
The following 3 points matter when US or other foreign securities are held outside a Japanese brokerage:
- An overseas brokerage normally does not operate Japan’s Tokutei Kouza withholding mechanism, so a taxable gain may need to be reported through the Japanese final return.
- The gain must be calculated in Japanese yen. Under NTA foreign-currency guidance, the basic rule is the TTM rate on the relevant transaction date, not a mandatory TTS rate for both purchase and sale.
- Treaty provisions can affect which country has primary taxing rights, while Japan’s foreign tax credit may apply if qualifying foreign income tax was imposed.
Japanese residents selling foreign-listed shares cannot assume that an offshore broker or a US tax statement has satisfied the Japanese reporting requirement.
US expats in Japan: Double taxation and the foreign tax credit
US citizens and green card holders generally continue reporting worldwide capital gains to the IRS while living in Japan. Where Japan also taxes the same investment gain, Form 1116 can provide a Foreign Tax Credit, subject to sourcing, category, creditability, and limitation rules rather than an automatic dollar-for-dollar offset.
For most personal investment capital gains that are not connected with an active trade or business, the 2025 Form 1116 instructions place the income in the passive category. The US calculation can still differ from Japan because the countries can use different basis, currency, and timing rules.
US expat tax obligations may also include Schedule D and Form 8949, while Japanese tax paid must be evaluated under US foreign-tax-credit rules. Read the TFX Form 1116 guide for US expats before assuming the full Japanese amount is creditable.
The treaty itself requires the United States, subject to US-law limitations, to allow credit for qualifying Japanese tax paid or accrued by a US citizen or resident. This is one of the principal mechanisms for limiting double taxation.
Foreign tax credit vs. foreign earned income exclusion for Japan expats
The Foreign Earned Income Exclusion does not exclude investment capital gains. For the 2025 tax year filed in 2026, the maximum FEIE is $130,000; for the 2026 tax year, it rises to $132,900, but those limits apply to qualifying foreign earned income rather than stock or property gains.
A salary may qualify for Form 2555 while a taxable Japanese investment gain is handled separately. Capital gains not connected with an active business are generally addressed through the applicable US capital-gain rules and, when foreign tax qualifies, Form 1116.
The TFX comparison of the Foreign Tax Credit and Foreign Earned Income Exclusion explains why the 2 provisions solve different tax problems. The IRS likewise limits the Foreign Earned Income Exclusion to qualifying foreign earned income.
PFIC reporting for US expats holding Japanese investment funds
A Japanese mutual fund or investment trust can be a Passive Foreign Investment Company for US purposes if the underlying foreign corporation meets the statutory PFIC tests. US PFIC reporting can require Form 8621 even when the same investment sits inside a NISA and pays no Japanese capital-gains tax.
The following 3 PFIC points are especially relevant to Americans in Japan:
- NISA does not create a PFIC exemption. US classification depends on the underlying entity and Internal Revenue Code rules, not the account’s Japanese tax status.
- Under the default section 1291 regime, gain on disposition is treated as an excess distribution and allocated under special tax-and-interest rules. Calling this an “IRS PFIC penalty” is inaccurate – it is a statutory tax-and-interest regime.
- A valid QEF or mark-to-market election can produce a different annual tax result, but each election has eligibility, timing and reporting requirements. Marketable PFIC stock can qualify for the section 1296 mark-to-market election.
A Japanese investment fund can be exempt from Japanese tax inside NISA and still create Form 8621 reporting and US tax for its American owner.
PFIC reporting for your Japanese investment accounts
Form 8621 has 5 principal filing circumstances in the current IRS instructions, including specified distributions, disposition gains, QEF or mark-to-market reporting, Part II elections and annual reporting under section 1298(f). One NISA account can contain more than 1 underlying fund requiring separate analysis.
FBAR and FATCA reporting for Japanese brokerage and bank accounts
Japanese financial accounts can trigger US reporting even when no asset was sold. The FBAR filing requirements apply when aggregate reportable foreign accounts exceed $10,000 at any time during the calendar year, while Form 8938 uses much higher thresholds that depend on filing status and whether the taxpayer qualifies as living abroad.
The following 3 rules separate the 2 regimes:
- FBAR: A US person generally files FinCEN Form 114 when combined reportable foreign financial accounts exceed $10,000 at any point in the year. The regular deadline is April 15 with an automatic extension to October 15.
- Form 8938 for a qualifying taxpayer living abroad: A non-joint filer generally crosses the threshold above $200,000 at year-end or $300,000 at any time; joint filers use $400,000 and $600,000.
- A sale does not erase the account balance: If a Japanese brokerage exceeded the FBAR threshold before investments were sold or cash was withdrawn, that earlier maximum balance still matters.
The TFX FBAR filing guide explains account coverage and filing mechanics in more detail.
Japan's departure tax: What happens when you leave Japan
Japan's exit-tax regime can deem specified financial assets sold when a qualifying resident leaves the country. In 2026, the core asset threshold is ¥100 million of covered securities, unsettled margin transactions and specified derivatives, together with a residence-history test established by the departure-tax rules.
For the residence-history condition, the NTA guidance applies the regime to qualifying residents with more than 5 years of relevant Japanese domicile or residence during the preceding 10 years, subject to statutory exclusions for specified immigration-status periods.
Japan's departure tax can impose income tax on unrealized appreciation even though the covered securities have not actually been sold.
The phrase “departure tax Japan” is better stated as Japan's departure tax in natural English. Taxpayers preparing to leave should also consider final-return and tax-representative requirements, not only the deemed sale.
US immigration or residence changes are a separate question. TFX’s dual-status alien filing guide explains US filing changes that can arise when US tax residency changes.
The Japan-US tax treaty and capital gains: Key provisions
Article 13 of the current Japan-US income-tax treaty gives Japan taxing rights over gains from Japanese real property and specified interests whose value derives principally from Japanese real property. Other gains follow separate treaty rules, while Article 1’s saving clause preserves the United States’ ability to tax its citizens subject to stated exceptions.
The following 3 treaty provisions matter most for capital gains:
- Japanese real property: Article 13(1) allows Japan to tax gains from Japanese real property. Article 13(2) extends the definition, for Japan, to shares or interests deriving their value directly or indirectly principally from Japanese real property.
- Other property: Gains from business property attributable to a permanent establishment can be taxed where that PE is located. Subject to Article 13’s other exceptions, residual gains are generally taxable only in the alienator’s residence state.
- US citizens: Article 1(4) is the treaty’s saving clause. It generally preserves US taxation of US citizens even when another treaty provision would otherwise assign taxing rights differently.
The treaty can allocate taxing rights and support foreign-tax-credit relief, but it does not broadly remove a US citizen's obligation to report worldwide capital gains to the IRS.
Treaty benefits should be checked against the exact asset and residence facts. Article 23 also contains foreign-tax-credit coordination rules intended to reduce double taxation.
The US-Japan Totalization Agreement is separate from the income-tax treaty and addresses Social Security coverage. See TFX’s guide to Totalization Agreements; the US-Japan Social Security agreement took effect on October 1, 2005.
Withholding tax on capital gains in Japan: How it works
For Japanese listed securities, withholding depends partly on the brokerage-account structure. A Specific Account with withholding can have the broker calculate tax after each taxable disposal using the 15.315% national plus 5% local rate, while other account structures can leave the taxpayer responsible for reporting the gain.
The following 3 common account arrangements affect administration:
- Specific Account with withholding: The broker calculates gains and withholds the applicable Japanese tax. A return is not automatically required solely for those gains, though filing can be useful or required when making particular loss-offset elections.
- Specific Account without withholding: The broker calculates annual gain information, but the taxpayer generally deals with the resulting income-tax return obligation.
- General Account: The investor keeps the records and calculates basis and gains for reporting.
For nonresident Japanese real-estate sellers, Japan withholding tax works differently: the buyer generally withholds 10.21% of gross proceeds unless the ¥100 million residence-use exception is satisfied.
Withholding is a collection mechanism, not always the final tax calculation; filing can still change the amount ultimately payable or refundable.
Loss carryforward and offsetting rules for Japanese capital gains
Qualifying losses from listed securities can be carried forward for up to 3 years if the required returns are filed. They can also be offset against qualifying listed-share dividends when those dividends are reported under the separate self-assessment method – not under aggregate taxation as the original brief stated.
A taxpayer who wants the 3-year carryforward must file the prescribed return and schedules for the loss year and continue meeting filing requirements in subsequent years. The NTA notes that a return is still required in a year with no listed-share transaction if the unused loss is to remain available.
NISA losses receive different treatment. A loss realized inside a NISA account is disregarded for these purposes and cannot be offset against gains or qualifying dividends outside NISA or carried forward.
A ¥1 million qualifying listed-share loss can retain tax value for as long as 3 following years only when the statutory filing requirements are preserved.
File your US expat tax return with Japan capital gains
A Japanese gain can require reporting under 2 tax systems, with different currency, basis, sourcing and credit rules. TFX’s scope is the US side – including the federal return and applicable international forms – rather than preparation of the Japanese income-tax return.
Tax residency status in Japan: How it affects your capital gains
Japanese tax residency has 3 relevant individual categories for this discussion: resident other than a non-permanent resident, non-permanent resident, and nonresident. The distinction affects whether Japan reaches worldwide income, a restricted category of foreign-source income, or only Japanese-source income.
The following 3 categories should be checked before applying Japanese capital gains tax for foreigners:
- Resident other than a non-permanent resident: A resident with Japanese domicile or continuous residence of at least 1 year who does not qualify for non-permanent status is generally taxed on worldwide income.
- Non-permanent resident: A non-Japanese national who is resident and has had a Japanese domicile or residence for an aggregate of 5 years or less during the preceding 10 years receives the special statutory scope of taxation. Foreign securities gains require careful source and remittance analysis rather than a blanket exemption.
- Nonresident: A person outside the resident definition is taxed only on Japanese-source income, including specified Japanese asset disposals.
A Japanese residency category is not the same concept as a US dual status taxpayer, which refers to a person treated as both resident and nonresident for US federal income-tax purposes during one tax year.
Cost basis calculation for Japanese securities: Yen conversion rules
A foreign-security gain for Japanese purposes must be calculated in yen, and the NTA’s basic foreign-currency rule uses the TTM rate on the transaction date. The brief’s instruction to use TTS automatically for both purchase and sale is not the NTA’s general rule, so the cost basis calculation below uses the verified approach.
The following 4 steps apply the general method:
- Record the acquisition price and transaction date in the original currency.
- Convert the acquisition amount to yen using the applicable NTA-accepted exchange rate for that date – generally TTM under the basic rule.
- Convert sale proceeds using the corresponding transaction-date rate.
- Subtract the yen-denominated basis and allowable costs from the yen-denominated proceeds.
Currency movement can produce a taxable yen-denominated gain even when the investment's value appears almost unchanged in US-dollar terms.
Book a tax consultation from Japan
Japanese capital gains can affect Form 1040, Form 1116, Form 8621, FBAR, and Form 8938 differently, depending on the asset and account.
Frequently asked questions
Yes. Capital gains tax in Japan applies to assets including shares and real estate. Taxable listed-share gains are generally subject to an effective 20.315% rate in 2026, while Japanese real estate can be taxed at 20.315% or 39.63% depending on the January 1 holding-period test.
Taxable listed-share gains are generally subject to an effective 20.315% rate in 2026 – 15% national income tax, 0.315% from the reconstruction surtax and 5% local inhabitant tax. The Japan capital gains tax on shares can be withheld through a qualifying Specific Account with withholding.
Japan capital gains tax property treatment depends on ownership as of January 1 of the sale year. A holding period over 5 years generally produces a 20.315% effective rate, while 5 years or less generally produces 39.63%. The gain starts with proceeds minus adjusted acquisition cost, transfer expenses and applicable deductions.
They can. Nonresidents are taxed only on Japanese-source income, but specified Japanese securities gains and Japanese real-estate gains can remain taxable. A nonresident sale of Japanese real estate is generally subject to 10.21% buyer withholding, subject to the ¥100 million personal-residence exception.
Yes, qualifying NISA gains are exempt from Japanese income tax. The 2026 system provides up to ¥3.6 million of annual investment capacity and an ¥18 million lifetime book-value holding limit. The Japanese exemption does not exempt a US person from US tax or PFIC rules on an underlying foreign fund.
Yes, US citizens and green card holders generally report worldwide capital gains on their US return even while living in Japan. Japanese income tax may support a Foreign Tax Credit on Form 1116, subject to US sourcing and limitation rules. Foreign accounts can separately trigger FBAR or FATCA reporting.
For FATCA-specific exceptions and overlapping asset reporting, see TFX’s guide to accounts that may be exempt from FATCA reporting.
Japan can impose deemed-sale taxation when a qualifying departing resident owns at least ¥100 million of covered financial assets and satisfies the residence-history requirements. The rule taxes unrealized appreciation as though a disposal occurred at departure. US IRC §877A is separate and does not arise merely from leaving Japan.
Japan capital gains rules can therefore produce different outcomes for listed shares, real estate, foreign stocks and NISA holdings. US expats should calculate each country’s result separately and then coordinate eligible credits and reporting forms rather than assuming the Japanese tax result carries directly onto the US return.
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