Tax Planning
How Japan’s FY2026 Tax Reform Impacts Expats, Investors & High Earners
Major changes like raised basic deductions, fairness for high incomes, and incentives for investment will affect expats, asset holders and those with large income.
By NomadicTax Research Team • 5-8 min read • September 3, 2026
## Key Reforms Affecting Expats & Investors
Japan’s **令和8年度税制改正の大綱 (FY2026 tax reform outline)** introduces sweeping changes that touch individual income taxation, exemptions, and international taxation—which directly affect expats, foreign investors, and high earners. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
### 1. Raised Basic and Employment Income Deductions
- Basic deduction for taxpayers with **total income ≤ ¥23,500,000** is increased by **¥40,000**. Previously those thresholds and deduction amounts were lower. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
- Minimum guarantee for the salary income deduction increases from **¥650,000** to **¥690,000**—helping low to middle-income employees and expats alike. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
### 2. Targeting High Earners for Equity in Tax Burden
- The “special deduction amount” applied to calculate additional tax burden for extremely high income earners is lowered from **¥330,000,000 to ¥165,000,000**, and the tax rate increases from **22.5 % → 30 %**. This expands the number of taxpayers facing this higher rate to those with income around **¥600 million**, up from only those with around **¥3 billion** previously. ([mof.go.jp](https://www.mof.go.jp/english/policy/tax_policy/tax_reform/08keyhighlight.pdf?utm_source=openai))
### 3. Expanded NISA & Investment Incentives
- NISA (Nippon Individual Savings Account) investment support extended to those aged **0–17**. Annual investment limit **¥600,000**, total non-taxable limit **¥6,000,000** applies while child is in that age group. ([mof.go.jp](https://www.mof.go.jp/english/policy/tax_policy/tax_reform/08keyhighlight.pdf?utm_source=openai))
- For corporations, generous incentives for “special productivity-enhancing equipment” and “large scale capital spending” are introduced, with possibilities of **immediate depreciation** and **tax credits** to accelerate investment. ([mof.go.jp](https://www.mof.go.jp/english/policy/tax_policy/tax_reform/08keyhighlight.pdf?utm_source=openai))
## What Expats Especially Should Note
- **Residency & deductions**: Expats considered residents with income under thresholds will benefit from higher standard deductions; those over will see steeper marginal burdens.
- **International tax treaties still critical**: For cross-border income or employment, treaty rules (such as 183-day tests) alongside Japanese domestic exemptions still apply. Ensure you submit the “Application Form for Income Tax Convention” (租税条約適用申請書) to maximize treaty benefits. If incorrectly withheld earlier, refunds are possible. ([nta.go.jp](https://www.nta.go.jp/publication/pamph/gensen/gaikokugo/pdf/06_en.pdf?utm_source=openai))
- **Investment strategies**: The expanded NISA for minors may allow planning within families. Foreign expats with children under 18 should explore accounts under child names.
- **Corporate vs personal tax breaks**: Expats owning companies in Japan should review eligibility for investment-linked credits and depreciation; carefully plan timing of large capital outlays before depreciation and credit thresholds shift.
## Examples
- An expat with **¥5 million** salary will enjoy increased deductions under new rules; net taxable income declines somewhat.
- Someone earning **¥700 million** will now be subject to the “high income” special rate, perhaps changing marginal rate and net tax by significant millions of yen.
- Parents (Japanese or foreign) with kids under 18 may open pediatric NISA accounts for children, allowing non-taxable investment growth up to ¥6 million per child over time.
## Tactical Tips
- Review your **expected full-year income** early, to gauge whether you fall into high-income brackets under the new rules.
- For expats, ensure you understand treaty coverage—submit required forms; document days present in Japan carefully.
- If making large investments (for your business or portfolio), align timing to capture incentives before thresholds or deduction base shift.
- Work with a tax advisor to explore whether your compensation includes stock, deferred income or foreign source income—these may be treated differently.
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Japan’s FY2026 reforms aim to relieve pressures from inflation, deepen fairness in the tax system, and stimulate investment. For expats, investors, and high earners, staying ahead of thresholds and residency status is crucial.