We have recently seen a sharp rise in enquiries about RSU income that was left out of Japanese tax returns.

When RSUs vest, the market value of the shares at vesting is taxed as employment income, so a tax return is required. Employers usually communicate this point, and most people handle it correctly.

The problem usually arises on sale

The difficulty comes when the vested shares are later sold. Because tax was already charged at vesting, many people assume the matter is closed and that nothing needs to be reported on sale.

In fact, the tax at vesting covers only the employment-income element. If the shares are subsequently sold at a gain, that gain must be reported separately as capital gains on shares. Overseas brokerage accounts do not withhold Japanese tax in the way a Japanese “specified account” (tokutei koza) does, so the gain is not settled unless you report it yourself.

Ignoring the cost basis can mean paying too much

We have also seen the opposite mistake: reporting almost the entire sale proceeds as a gain, without deducting the acquisition cost. For RSUs, the acquisition cost is, in principle, the market value at vesting that was already taxed as employment income. Leaving it out taxes the same amount twice and results in an overpayment.

If you have already filed and overpaid, you may be able to recover the excess by filing a request for correction (kosei no seikyu).

As someone who files a Japanese tax return including RSUs myself, I can help not only as a tax accountant but also from the taxpayer’s side, including the small practical questions that come up when completing the return. If you have any concerns about reporting RSUs or their sale, please contact us via the enquiry form.

This notice is a general summary and does not constitute tax advice. The treatment of individual cases depends on residency status and other facts.