On 31 March 2015, the Diet passed the 2015 Tax Reform Proposal into law, which included the “exit tax” provisions that would require the mark-to-market of certain financial assets and the imposition of capital gains tax on any resulting gains for certain residents in Japan moving abroad.
Foreigners will not be subject to the exit tax until five years after the effective date of the law (from 30 June 2020) regardless of the visa type that they hold or the amount of their financial asset holdings.
The exit tax laws are complicated and the expectation is additional guidance and clarification will be needed from lawmakers and Japan tax authorities. For example, vested employee stock options are not specifically excluded from the exit tax regime. As such, a later exercise of the options which have been subjected to exit tax could potentially result in double-taxation.
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