1. Introduction  
We mentioned “Japanese Individual Income Tax Return for Non-Permanent Resident” in News as of March 2, 2015. As revised in corporate taxation, the scope of taxable income for non-permanent residents (NPRs) under the individual income tax was also amended in line with the Attributable Income Principle. In this News, for the upcoming season for an individual income tax return, we will mention the summary of the tax reform related to NPRs.

2. Resident Status and Taxable Income
Under Japanese Income Tax Law, individuals are classified into three categories; permanent residents, NPRs, and non-residents. The scope of taxable income for each individual taxpayer is as follows:

Residents:　Permanent Residents：① Japanese source income
　　　　　　　　　　　　　　　　　② Foreign source income
　　　　　　NPRs： ① Income other than foreign source income
　　　　　　　　　　② Foreign source income provided that it is paid in Japan
　　　　　　　　　　③ Foreign source income provided that it is remitted to Japan

Non Residents:   Imposed only on Japanese source income

3. Non-permanent residents’ capital gains taxation
The new definition for the scope of taxable income for NPRs was applied from the 2017 individual income tax; the definition of “Japanese source income” was amended to “income other than foreign source income” (mentioned in 2.NPR ①). Further, in the 2017 Tax Reform, the part mentioned in 2.NPR ① was amended to income other than foreign source income (including capital gains derived from sales of foreign-transacted securities, which is stipulated in the Cabinet Order ). This reform will be applied to sales of securities conducted on or after April 1, 2017.

Therefore, capital gains from sales of foreign-transacted securities for NPRs are treated as follows:
a. Up to 2016
  Non-taxable
b. From January 1, 2017 to March 31, 2017
  Taxable
c. From April 1, 2017
  Taxable if either of the following case is applied
  ・The timing of acquiring such securities is on or after April 1, 2017, and it is acquired during the period of NPR.
  ・The proceeds are paid in Japan or remitted to Japan.

4. Conclusion
In this News, we mentioned “Non-Permanent Residents’ Tax Return for 2017.”
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.