Side Income (副業) Tax Guide for Foreigners in Japan

The ¥200,000 rule 20万円ルール

The most important number for anyone with a side income in Japan is ¥200,000. Under 所得税法第121条, salaried workers (給与所得者) who earn side income of ¥200,000 or less per year are exempt from filing a 確定申告 (income tax return). This is often called the "20万円ルール" and it is the starting point for everything in this guide.

A few critical details about this rule:

• It applies to 所得 (income), not 収入 (revenue) -- meaning you subtract allowable expenses from your gross earnings. If you earned ¥300,000 freelancing but had ¥120,000 in legitimate business expenses, your 所得 is ¥180,000 -- under the threshold.
• It only applies if your main income is salaried (給与所得) from one employer who performs 年末調整 (year-end tax adjustment). If you have two or more employers, or your main job does not do 年末調整, different rules apply.
• It only exempts you from income tax (所得税) filing -- you still owe 住民税 (resident tax) on any side income, even ¥1. More on this below.
• The ¥200,000 threshold is per year (January 1 to December 31), not per month or per client.

If your side income exceeds ¥200,000: You must file 確定申告 by March 15 of the following year. There are no exceptions. You will report all of your income -- main job salary plus side income -- on a single tax return. Your employer-withheld taxes from your main job will be credited, and you pay the difference (or receive a refund if you overpaid).

Types of side income 副業の種類

Not all side income is taxed the same way. Japan's tax system categorizes income into 10 types (所得の種類), and the type determines how it is reported, what deductions are available, and how it interacts with your main salary. Here are the most common forms of side income for foreigners:

Filing requirements 申告の要件

Here is a clear decision tree for whether and how you need to file, based on your side income amount:

Filing 住民税 separately (the step most people skip): If your side income is under ¥200,000, you are exempt from 確定申告 -- but you must still report that income to your municipal office for 住民税 purposes. Go to your 市区町村役所 (city/ward office) and ask for the 住民税申告 form. You will list your side income and expenses. The deadline is typically around March 15, though some municipalities allow slightly later filing. This step is often overlooked, but failure to file can result in a 住民税 shortfall notice and potential penalties.

When you file 確定申告: If your side income exceeds ¥200,000, you file a full 確定申告 at the 税務署 (tax office). This covers both income tax AND 住民税 -- the tax office forwards your information to your municipality automatically. The filing deadline is March 15 of the following year (e.g., for 2025 income, file by March 15, 2026). You can file via e-Tax (online), at the tax office in person, or by mail.

Keeping side income private from your employer 自分で納付

This is one of the most frequently asked questions from foreigners in Japan: "Will my company find out about my side income?" The short answer is: not if you handle the 住民税 correctly.

Here is how it works. Normally, 住民税 (resident tax, approximately 10% of your income) is collected through your employer via 特別徴収 (special collection) -- your company deducts it from your salary each month. If you file 確定申告 with side income and do nothing special, the total 住民税 (main salary + side income) is sent to your employer as one combined amount. If the amount is noticeably higher than what your salary alone would generate, your company's HR department may notice.

The fix: 自分で納付 (jibun de nōfu / self-payment). When filing 確定申告 (or your 住民税申告), there is a section where you choose how to pay 住民税 on your non-salary income. You will see two options:

• 特別徴収 (through your employer) -- your company pays it for you via payroll deduction. This is the default, and this is what reveals your side income.
• 自分で納付 / 普通徴収 (self-payment) -- you receive a separate 住民税 bill at home and pay it yourself (at a convenience store, bank, or via bank transfer). Your employer only sees 住民税 based on your main salary.

Caveats: Some municipalities do not always honor the 自分で納付 request, particularly for small amounts. While rare, it happens. Also, if your side income is classified as 給与所得 (i.e., you are working a second part-time job as an employee), many municipalities will combine all 給与所得 into 特別徴収 regardless of your preference. The 自分で納付 option works most reliably for non-salary income types (freelance work, rental income, etc.).

Also note: legally, your employer cannot prohibit you from having side income in most cases. However, many Japanese companies have internal rules (就業規則) that restrict or require disclosure of 副業. Public servants (公務員) are generally prohibited from side work by law. Check your employment contract and company rules -- but know that Japan's government has been actively encouraging companies to allow 副業 since 2018 (厚生労働省 副業・兼業の促進に関するガイドライン).

事業所得 vs 雑所得: why the classification matters じぎょうしょとく vs ざつしょとく

When you report side income that is not salary (給与所得), you need to classify it as either 事業所得 (business income) or 雑所得 (miscellaneous income). This classification has a significant impact on your tax bill because it determines which deductions you can claim.

When does side income qualify as 事業所得? The NTA tightened the rules in October 2022 (国税庁通達). As a general guideline, your side income is more likely to be recognized as 事業所得 if:

• You have a 開業届 (business registration) on file
• You earn income continuously and repeatedly (not a one-off project)
• You maintain proper bookkeeping (帳簿) and can produce records
• The activity has a profit motive and generates meaningful revenue (the NTA uses ¥3,000,000 as an informal benchmark, though it is not a hard rule)
• You dedicate significant time and effort to the activity

If your side income is small, occasional, or lacks the characteristics of a business, it will be classified as 雑所得. This is fine -- it just means you cannot access the powerful deductions and loss-offset features available to 事業所得 earners. For most people with casual side income, 雑所得 is the correct and appropriate classification.

Deductions for side work 副業の経費

Whether your side income is classified as 事業所得 or 雑所得, you can deduct expenses that are directly related to earning that income. The key principle: the expense must be necessary and ordinary (必要経費) for the income-generating activity. Here are common deductible expenses for side work:

• Equipment and tools: Laptop, software, camera (for content creators), specialized tools. Items over ¥100,000 must be depreciated over their useful life (¥300,000 limit for immediate expensing applies to 事業所得 with 青色申告 only).
• Communication costs: Phone bill, internet service -- prorate if shared between personal and business use (e.g., 30% business use = 30% deductible).
• Home office (家事按分): A portion of your rent, electricity, and internet can be deducted if you work from home. Calculate the percentage based on floor area used for work or hours spent working. Keep records of your calculation method.
• Transportation: Train fare, taxi to client meetings, gas if you drive for work. Keep receipts or IC card records.
• Supplies and materials: Office supplies, books/courses related to your work, cloud service subscriptions.
• Outsourcing fees: Payments to subcontractors, designers, virtual assistants.
• Professional fees: Tax accountant fees, legal consultation, industry membership dues.

Expenses you cannot deduct: Personal living expenses, clothing (unless specific uniforms or costumes for work), commuting to your main job, entertainment that is not clearly business-related, and fines or penalties. When in doubt, ask yourself: "Would I incur this expense if I did not have this side income?" If the answer is no, it is likely deductible. If yes, it is probably personal.

Visa considerations ビザの注意点

Tax filing obligations are separate from visa/immigration rules, but visa status directly affects whether you can legally perform side work in Japan. This is an area where many foreigners get into trouble -- tax compliance means nothing if you are violating your visa conditions.

Work visas (就労ビザ): Most work visas in Japan (技術・人文知識・国際業務, 教育, etc.) are tied to the type of work you are permitted to do, not to a specific employer. However, the permitted work must fall within your visa's designated activity (在留資格). For example, an engineer visa holder can do freelance engineering work on the side, but working as a bartender would fall outside the scope and require separate permission.

資格外活動許可 (Permission to engage in activities outside your visa status): If your side work falls outside your visa's scope, you need to apply for 資格外活動許可 at your local immigration bureau. This is also required for:

• Dependent visa (家族滞在) holders: Limited to 28 hours per week of work (combined across all jobs). Must obtain 資格外活動許可 before starting any work.
• Student visa (留学) holders: Same 28-hour-per-week limit (40 hours during school breaks). 資格外活動許可 required.
• Spouse visa (日本人の配偶者等) and permanent residents (永住者): No work restrictions -- you can do any type of side work freely.

Permanent residents and spouse visa holders generally have no restrictions on the type or amount of side work. You are free to pursue any legal side income without additional permissions.

Passive income note: Investment income (stocks, crypto gains), rental income, and other passive income sources are generally not considered "work" under immigration law and do not require visa permission. You are free to earn passive income regardless of your visa type -- but you must still report and pay taxes on it.

Frequently asked questions よくある質問

Can my company legally prohibit me from having side income?

In most cases, no. Japanese labor law does not give employers an inherent right to prohibit side work. However, company rules (就業規則) may restrict it -- especially if the side work competes with the employer, uses company resources, or interferes with your main duties. Since 2018, the government's model 就業規則 was revised to allow 副業 by default, and MHLW encourages companies to permit it. If your company's rules prohibit 副業, you should decide whether to comply, request an exception, or accept the (usually low) risk. Termination solely for having a non-competing side job is rare but not impossible.

Does the ¥200,000 rule apply to crypto gains?

Yes. Cryptocurrency gains are classified as 雑所得 and fall under the same ¥200,000 threshold for 確定申告 filing. If your total side income (including crypto gains) exceeds ¥200,000, you must file. Remember that crypto is taxed at progressive income tax rates (up to 45% + 10% 住民税 = 55%), not the flat 20.315% rate that applies to stock trading in a 特定口座.

I earned side income from clients outside Japan. Is it taxable?

Yes. If you are a Japanese tax resident (generally, living in Japan for 1+ year), your worldwide income is taxable in Japan -- regardless of where the client is located or where the payment is sent. Income from US clients paid to a US bank account is still taxable in Japan. You must convert foreign income to JPY using the exchange rate on the date received (or the TTS rate published by your bank).

What if my side income is paid in cash?

Cash income is taxable. The payment method does not affect your tax obligation. Keep a record of each cash payment (date, amount, payer, what it was for). If you do not report cash income and are audited, you may face penalties including 加算税 (additional tax) and 延滞税 (delinquency tax).

Can I deduct home office expenses for a side job?

Yes, via 家事按分 (proration of household expenses). Calculate the percentage of your home used for side work (by area or time) and deduct that portion of rent, utilities, and internet. Be reasonable -- claiming 80% of your apartment as office space for a side job you do 5 hours a week will not survive an audit. A range of 10-30% is typical for side work.

I am on a dependent visa. Can I earn side income?

Only with 資格外活動許可 (permission for activities outside visa status), and limited to 28 hours per week across all employment. Be aware that earning too much may also disqualify you from your spouse's tax and social insurance benefits (the ¥1,030,000 and ¥1,300,000 thresholds). Passive income (investments, rental) generally does not count as "work" for visa purposes but does count for tax/insurance thresholds.