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Withholding Tax on Freelance Work from Abroad 2020/7/3 04:33
Hi there!

I’ve been a US-based freelance Japanese-English translator for years and am looking to expand my practice to include clients based in Japan. To the extent that I have worked with Japanese clients to date there has been an instance of a nasty withholding tax instituted on the client as my labor technically classified as an import from a foreign client. I’m wondering if anyone here knows more about this situation and what preparations to make on my end to set myself up for online payment via PayPal or international bank transfer. I’m also interested in knowing if there are any loopholes, as I find it difficult to believe that all Japanese firms contract with clients in Japan or that all translators are based in Japan. The withholding tax of 20.42% is rather steep, though I could adjust my rates to account for it.

Any advice or resources would be much appreciated.

by Hekuto Kairu (guest)  

Re: Withholding Tax on Freelance Work from Abroad 2020/7/3 12:57
I believe that companies/employers in Japan are required to do that to whatever payments they make to employees/contractors they employ/retain for certain types of services, including translation. The service is provided “in Japan” (to the service recipients, meaning the clients in Japan), so this is applicable.

They assume that you will do tax returns in Japan; the taxpayer would aggregate all payments received during the year, calculate the income taxes, then subtract all the taxes that have been withheld from payment during the year (= already paid through the clients), and pay/receive the balance.

So if you are not doing tax returns in Japan but are taxed already through this withholding tax, then it will be a matter of going through the double taxation process (to get credit for the taxes you already paid in Japan with the IRS).

That rate of 20.42% seems to be the rate that applies to non-residents (of Japan), so your clients are applying the correct rate; I am a Japan-based translator/conference interpreter, and my clients (both direct clients and agencies) in Japan do this at the rate of 10.21%.

I don’t quite understand what you mean about setting up for PayPal or international bank transfer – you need to have some way to receive the money somehow, regardless of whether there is withholding tax or not. It would be preferable to get an account with a Japanese bank of course – PayPal’s service fee is high (for the sender, which they simply pass on to the recipient at times), and bank transfer to a foreign bank account would be cumbersome (for the sender).
by AK rate this post as useful

Re: Withholding Tax on Freelance Work from Abroad 2020/7/3 20:11
Thank you. This answers my question fully!
by Hekuto Kairu (guest) rate this post as useful

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