Japan and Korea tax newcomers’ foreign income only if paid or remitted

A Vietnamese family moving to the United States on green cards, to Japan on Business Manager status or to South Korea as investors meets three different first tax years. The United States taxes worldwide income from the day residence starts.

Japan and Korea tax foreign nationals with five years or less there in the past ten on foreign-source income only if it is paid in the country or remitted, and exempt them from Japan’s foreign-asset report and Korea’s overseas-account report.

The United States: worldwide income from the residency starting date

Under the “green card test”, a lawful permanent resident of the United States at any time in a calendar year is resident for tax purposes, and resident aliens are generally taxed on worldwide income, the same as US citizens, according to Internal Revenue Service (IRS) Publication 519. The arrival year is different.

A person who was not resident at any time in the preceding year is resident only from the “residency starting date” and a nonresident alien before it; the IRS says dual status “usually occurs in the year you arrive in, or depart from, the United States”.

For a green-card holder, the residency starting date is the first day in the year on which they are present in the United States as a lawful permanent resident or, if earlier, under the “substantial presence” test, which weighs days spent in the country over three years.

A person who was resident at any time in the preceding year and is resident at any time in the current year is treated as resident from 1 January. The EB-5 investment amounts and the two-year conditional green card are covered in a separate article.

That date decides what enters the US tax net in the first year. For the resident part of the year, income from all sources is taxed, including foreign income received in that part even if it was earned earlier.

Foreign-source income that is not effectively connected with a US trade or business is not taxed if it is received during the nonresident part, even if the person becomes resident later that year. A dual-status filer cannot use the standard deduction and cannot file a joint return.

The split can also be given up, and that can bring more income in. A person who is a nonresident alien at the start of the year and is married at its end to a US citizen or resident can, if the other conditions in Publication 519 are met, choose to be treated as resident for the whole year and file jointly.

Both spouses are then taxed on worldwide income for the entire year.

US reporting begins with residence

A resident alien under the tax definition is a “United States person” for the FBAR, the report of foreign bank and financial accounts. It is required when the aggregate value of the accounts in which the person has a financial interest, or over which they have signature authority, exceeds $10,000 at any time in the calendar year, and is due on 15 April of the following year.

Form 8938 is a separate form, filed with the income tax return. For taxpayers living in the United States, it is required if specified foreign financial assets are worth more than $50,000 on the last day of the year or more than $75,000 at any time during it, for an unmarried person, or more than $100,000 and $150,000 for a married couple filing jointly.

A person who is a resident alien for only part of the year reports for that part. What the Foreign Account Tax Compliance Act (FATCA) means for US permanent residents is covered in a separate article.

Foreign funds raise a further issue. A foreign corporation is a “passive foreign investment company” (PFIC) if 75% or more of its gross income is passive, or if at least 50% of its assets, on average, produce passive income or are held to produce it.

A US shareholder generally files Form 8621 for each tax year in which one of five listed circumstances applies, and under the default rules the portions of an “excess distribution” allocated to earlier years in which the company was a PFIC bear a separate tax and an interest charge.

In its chapter for examiners of offshore voluntary disclosure cases, the IRS’s own manual says many such cases involve PFIC issues and that “the most common situation involves foreign mutual funds which must be reported as PFICs”.

Japan: foreign-source income is taxed when it comes in

Japan’s Income Tax Act sorts residents into two groups, as the National Tax Agency sets out. A resident, meaning a person domiciled in Japan or with a residence there for a continuous year or more, is taxed on all income wherever it arises, unless they are a “non-permanent resident”.

That is a resident without Japanese nationality whose domicile or residence in Japan totals five years or less in the past ten. A non-permanent resident is taxed on income other than foreign-source income, and on foreign-source income paid in Japan or remitted there.

The “permanent” in the label is a tax term: the Act’s definition turns on nationality and years spent in Japan, and does not refer to the Permanent Resident (永住者) immigration status.

Residence can start on arrival. A person who comes to live in Japan with an occupation that normally requires living there continuously for a year or more is presumed to be domiciled there, and so are a spouse and dependants who share their livelihood and live in Japan.

This indicates that an investor who arrives to run a business on Business Manager status is resident from arrival rather than after a year. The ¥30 million threshold for Business Manager status is covered in a separate article.

The arrival year is split: income of the resident period is taxed under the resident rules, with the non-permanent-resident scope for that period, and income of the non-resident period under the non-resident rules.

One rule narrows the relief and another marks its edge. Money a non-permanent resident receives from abroad is treated first as a remittance of any non-foreign-source income paid abroad, and only then of foreign-source income.

And for sales from 1 April 2017, the Cabinet Order treats as foreign-source the gains on “specified securities”, those acquired ten years or more before the sale or acquired while the person was not a non-permanent resident, when they are sold on a foreign market, through a foreign broker or from an account abroad.

This means a portfolio held before arrival can keep the remittance treatment, while gains on securities bought during the non-permanent-resident years fall outside that rule and are taxed whether or not the money comes in.

Excluding separately taxed income, national income tax runs in seven brackets from 5% to 45%, according to the National Tax Agency, plus a surtax equal to 2.1% of the income tax.

Under the 2026 reform described in an agency Q&A of May 2026, for income arising from 1 January 2027 the surtax is split into a 1% defence special income tax and a reconstruction special income tax cut to 1.1% and extended to 31 December 2047, with the combined 2.1% unchanged.

The individual inhabitant tax adds an income levy of 10%, 4% prefectural and 6% municipal, computed on the previous calendar year’s income and charged on people domiciled in the municipality on 1 January, according to the Ministry of Internal Affairs and Communications.

This means a family that arrives after 1 January owes no inhabitant tax during the arrival year; its first bill, in the following year, is computed on arrival-year income.

Residents other than non-permanent residents whose foreign assets exceed ¥50 million at 31 December must file a foreign asset report by 30 June of the following year. Non-permanent residents, and anyone not resident at 31 December, are outside it.

Korea: a similar five-in-ten test, judged at the end of the year

Under Korea’s Income Tax Act, a resident is an individual with a domicile in Korea or a residence there of 183 days or more.

The Enforcement Decree deems a person living in Korea to be domiciled there if their occupation normally requires living in Korea continuously for 183 days or more, or if they have family sharing their livelihood in Korea and their occupation and assets indicate they will stay that long.

A non-resident becomes resident on the day such a ground arises, the day a domicile is established or the day residence reaches 183 days. This indicates that an investor who moves to run a business can be resident from arrival. Korea’s three investor routes to permanent residence are covered in a separate article.

Article 3 taxes residents on all income, with a proviso: a foreign resident whose domicile or residence in Korea totals five years or less in the ten years before the end of the tax year is taxed on income arising abroad only if it is paid in Korea or remitted there.

National income tax runs from 6% to 45%. Local income tax is charged on the same base at standard rates from 0.6% to 4.5%, and under the Local Tax Act a local government may raise or lower the rate by up to 50% of the standard rate by ordinance. This indicates that the standard local schedule is one-tenth of the national one.

Residents whose overseas financial accounts total more than KRW 500 million on any month-end day must report them to the tax office from 1 to 30 June of the following year, with residence judged at the end of the year.

The National Tax Service lists two exemptions relevant here: foreign residents within the Article 3 proviso and, from accounts held in 2025, people recognised as residents of the other country under a tax treaty.

The first year side by side

The Vietnamese side

Vietnam’s tax authority lists its treaty with Japan, signed on 24 October 1995, as in force since 31 December 1995, and its treaty with Korea, signed on 20 May 1994, as in force since 11 September 1994; Japan’s Ministry of Finance gives the same dates for Japan in its list as at 26 June 2026.

On the Vietnamese list, last updated on 4 June 2019, the agreement with the United States signed on 7 July 2015 is shown as not yet in force.

Vietnam can keep its own claim. Under Article 2 of Law 109/2025/QH15 on personal income tax, in force since 1 July 2026, a person is resident if present in Vietnam for 183 days or more or if they have a habitual residence there, including a registered permanent residence or a home rented under a fixed-term lease; residents are taxed on income arising inside and outside Vietnam.

How that test applies to the holder of a second passport is explained in a separate article, and the newcomer rules of Canada, Australia and New Zealand are covered in another.

What this article has not established

It was not established whether the two-year conditional green card issued to EB-5 investors counts for the green card test; none of the IRS texts read mentions conditional residents.

Nor was it established whether US law resets the cost basis of assets a person holds on arrival: the only fair-market-value-on-arrival rule found, in section 877A(h)(2) of the Internal Revenue Code, applies solely to the expatriation tax.

Whether years before residence count in a PFIC holding period, whether the FBAR covers the nonresident part of the arrival year, whether any particular Vietnamese fund is a PFIC, the further conditions of the full-year joint election and the separate first-year choice were not examined.

For Japan, it was not established whether the remittance basis also governs the inhabitant-tax base, and no National Tax Agency guidance applying the presumption of domicile to Business Manager holders was found.

For Korea, no National Tax Service guidance applying the deemed-domicile rule to investors was found; the content of a 28 February 2025 amendment to the Enforcement Decree’s rule on counting residence days was not established, and the treaty with Vietnam was checked only on the Vietnamese list.

Whether the US–Vietnam agreement has entered into force since June 2019 was not established; the US Senate record was not checked. The Vietnamese implementing rules and the tie-breaker rules of the treaties were not examined.