JAPAN Law and Practice Contributed by: Yutaka Shimoo, Anderson Mōri & Tomotsune
1. Sources and Principles 1.1 Domestic Sources of International Tax Law Both domestic tax laws and the applicable tax treaties are the main sources of international tax law in Japan. Since Article 84 of the Japanese Constitution states the principle of no taxation except by law, all taxation is calculated according to domestic tax laws such as the Income Tax Act (Act No 33 of 1965), the Corpora - tion Tax Act (Act No 34 of 1965), the Inheritance Tax Act (Act No 73 of 1950), the Consumption Tax Act (Act No 108 of 1988) and the Act on Special Measures Concerning Taxation (Act No 26 of 1957). In addition, treaties are generally superior to domestic laws, and the applicable tax treaties override domestic rules (Article 98 paragraph 2 of the Japanese Consti - tution). However, domestic tax laws have adjustment provi - sions, and the provision of the applicable tax treaties is not a direct source of taxation. In addition, while tax administrative guidance works as an interpretation of domestic tax law and such guidance is significant in practice, it is not a direct source of taxation. With regard to treaty networks, as of 1 February 2026, Japan had concluded 90 tax treaties, applicable in 157 jurisdictions, designed to avoid double taxation, prevent tax evasion and foster the exchange of infor - mation and assistance in the collection of taxes. 1.2 Hierarchy of Sources The direct source of taxation is domestic tax law. However, since treaties are superior to domestic laws, according to Article 98 paragraph 2 of the Japanese Constitution, the applicable tax treaties override domestic tax rules, especially regarding tax-resident status and the source rules.
1.3 OECD Model/United Nations Influence on Treaty Practice Tax treaties executed by the government of Japan generally follow the OECD Model Convention. There is no significant difference between the OECD model and most of the actual tax treaties. 1.4 Multilateral Instrument The Multilateral Convention to Implement Tax Treaty- Related Measures to Prevent Base Erosion and Profit Shifting came into effect in January 2019. As of 12 November 2025, Japan had adopted most of this treaty and had selected 43 jurisdictions as applicable areas.
2. Territoriality, Residence and Permanent Establishment
2.1 General Principle of Territorial Taxation Domestic tax laws apply across Japan. However, it is generally interpreted that any distinctions made by foreign governments or international organisations related to questions of public interest are excluded from the area where domestic tax laws apply. There are no areas to which special tax rules apply territorially within Japan. 2.2 Tax Residence of Individuals Under domestic tax laws, an individual tax resident means an individual having a residence in Japan, or having a dwelling place (a temporary place to stay) in Japan for no less than one year. However, domestic rules on the tax residence of indi - viduals may be overridden by the rules of the appli - cable tax treaties, especially where an individual is deemed to be a tax resident in several jurisdictions. 2.3 Taxation of Resident Individuals Residents are generally subject to income tax on worldwide income. However, with regard to residents who do not have Japanese nationality and have had a residence or a dwelling place in Japan for a period not exceeding five years in the most recent decade (non-permanent
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