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Last updated: June 11, 2026
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The Japanese tax system is too complex... I'm scared to even open the envelopes from city hall...
Mid-January. Do you feel that anxiety when you see the "Gensen-Choshu-Hyo" (Withholding Tax Statement) arrive in your mailbox?
February 16th marks the start of Japan's tax return season (Kakutei Shinkoku). For foreigners who aren't fluent in Japanese, this annual event can be a nightmare. Especially if you have a "Side Hustle" or hold "Cryptocurrency (Crypto)," making a mistake in your filing can affect your visa renewal or lead to penalty taxes years later.
Many guides are too difficult to understand, leaving you asking, "So, what do I actually need to do?" Furthermore, there is a dangerous misconception that "if side income is under 200,000 yen, you don't have to do anything."
In this article, we thoroughly explain three key points for foreign engineers and freelancers:
By reading this, you will be able to complete your tax return smoothly using just your smartphone and PC—without hiring an expensive tax accountant—and potentially get back overpaid taxes (refunds).
"If my side hustle profit is under 200,000 yen, I don't need to file a tax return." Believing this rumor and doing nothing is likely tax evasion.
There are two main types of taxes in Japan:
In other words, even if you don't file a final "Income Tax Return," you must go to your city hall separately and file a "Residence Tax Declaration." If you forget this, it will result in unpaid taxes appearing on the "Tax Payment Certificate" required for Permanent Residency applications or visa renewals, potentially causing you to fail the screening.
Note: If you want to know more about how Residence Tax works, please refer to this article. Residence Tax: Why does my take-home pay drop in the 2nd year? The "Post-pay" system and traps for foreigners
Going to city hall just to declare residence tax is a hassle. We recommend filing a standard tax return with the tax office (National Tax) even if your income is under 200,000 yen. The data is automatically sent to your city hall, completing all procedures in one stop.
"I can't read Japanese tax terms (Kanji), so it's impossible." Here are the strongest tools (weapons) for you. Japanese tax software has evolved, and you can create documents even with zero bookkeeping knowledge.
30-day free trial. Browser version works great with English translation tools to eliminate calculation headaches.
If you use the PC browser translation function, it effectively becomes an 'English Version'. The most balanced choice.
freee Accounting is Japan's No.1 cloud accounting software. Its biggest feature is that you can complete documents just by answering "Yes / No" questions, without knowing bookkeeping.
Start by trying it for free and linking your bank account.
Just 'Swipe Right' for expenses. The fastest option for Uber Eats or simple side hustles.
Taxnap is an innovative app where bookkeeping is done just by "swiping" like a dating app.
If you want to finish the tedious work in "seconds," this is the only choice.
Complete your tax return just by swiping. The trending app usable with zero accounting knowledge.
Money Forward can link with over 3,000 financial institutions. If you already use the budgeting app "Money Forward ME," data integration is seamless, making this highly recommended. It is suitable for people who use overseas remittances or multiple bank accounts.
What company employees fear most is their main employer finding out about their side hustle. 99% of the time, the cause of discovery is the "Residence Tax Notification." The residence tax for your side hustle gets added to the notification sent to your company (for payroll deduction), and payroll staff notice, "Wait, this employee's residence tax is too high for their salary."
There is only one way to prevent this. You must change a setting on "Table 2 (Second Table)" of the tax return form.
Just by doing this, the bill for your side hustle's residence tax will be sent to your home, and your company will not be notified. To use this technique, "daring to file a tax return" even if your profit is under 200,000 yen is the safest strategy.
Reference: If you are worried about visa impacts, please check here. Visa Rules: Can I do a "Side Hustle" on an Engineer/Humanities Visa?
The basis of tax saving is correctly claiming expenses. However, not everything counts as an expense.
If you work from home, you can claim a portion of your rent as an expense (House Apportionment).
A simple trip home (Home leave) is not an expense. However, it may be recognized as an expense if it includes:
Note: You must record "who you met" and "work content," and calculate the cost based on the percentage of days you actually worked during the stay.
Cafe costs for work are expenses. Drinking parties (Entertainment expenses) are OK only for meals with "people related to business." Always write the "Partner's Name" and "Purpose" on the back of the receipt.
If you hold crypto assets like Bitcoin, be careful. Japan's current tax rate is up to 55% (Miscellaneous Income / Aggregate Taxation). However, major changes are planned for the 2026 tax reform.
Thinking "If I use overseas exchanges (Binance or Bybit), I won't get caught" is a huge mistake. Japan participates in CRS (Common Reporting Standard), and overseas account information is shared with the Japanese tax office. Non-declaration will definitely be discovered.
If the calculation is too complex to handle, relying on a crypto-specialized tax accountant or calculation tool is an option.
Consult a Crypto Tax Accountant (2026 Strategy)
Finally, let's organize the actual flow.
Related Article: Year-End Adjustment vs Tax Return: How Employees Can Get Refunds
Tax returns are not an "enemy." If done correctly, they are a chance to "get back overpaid taxes (Refunds)." Especially with the Invoice System and Crypto Tax reforms coming in 2026, early preparation is key.
First, register for a free trial of accounting software and link your bank account. Just doing that will show you the numbers: "How much tax do I owe (or how much will I get back)?"
【Next Action】
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This internal guide does not decide individual eligibility; it helps organize document prep and software options.
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A: Most salary workers don't need to file if their employer handles 年末調整 (nenmatsu chosei). You must file a 確定申告 if: you have two or more income sources, your annual income exceeds ¥20 million, you're self-employed or freelance, you want to claim home loan deductions, or you changed jobs and didn't get year-end adjustment.
A: The 確定申告 filing period is February 16 to March 15 each year for the prior calendar year. Filing online via e-Tax allows you to start from January 4 and submit any time in January–March. Late filing is possible but may incur late filing penalties if tax is owed.
A: Yes. e-Tax allows online filing. You need either a My Number Card with IC chip reader, or your tax office-issued ID and password (obtained in person at the tax office). The system has basic English guidance but is primarily in Japanese. Tax software like freee or yayoi (confirming foreign use) can help prepare the forms.
A: Income tax (所得税) is a national tax withheld from monthly salary. Residence tax (住民税) is a local tax (prefecture + municipality) at approximately 10% of prior year income, billed annually from June. First-year residents pay no residence tax until the second June. This creates a "deferred tax" shock for new arrivals.
A: Yes. Common refund situations for foreigners: (1) leaving Japan mid-year means overpaid income tax, (2) first year with medical expenses over ¥100,000, (3) earthquake/disaster damage, (4) home purchase first year. File a 確定申告 or have your employer handle the adjustment. Refunds are paid to your registered Japanese bank account.
CEO / Native Japanese Expert
Updated on: June 11, 2026
※ The information in this article is accurate as of the time of writing. Laws and regulations may change, so please always check official sources for the latest information. We assume no liability for any damages resulting from the content of this article.
