If you work at the Japanese subsidiary of a global company like Google, Apple, Amazon, Meta, or NVIDIA, chances are your parent company grants you RS (Restricted Stock) or RSU (Restricted Stock Unit).

RS/RSU are typically held through overseas brokerage accounts such as Charles Schwab, Fidelity, or Morgan Stanley. Because of this, many employees mistakenly assume these awards fall outside the scope of Japanese taxation.

A common misunderstanding is: "I haven't sold the shares, so no Japanese tax applies."

But leaving this income unreported can later lead to inquiries from the tax office, and to unexpected penalties such as additional tax and delinquency tax. This article explains, in plain terms, how RS/RSU are taxed in Japan and why most recipients need to file their own tax return (確定申告, Kakutei Shinkoku).

1. RS/RSU Are Taxed Twice — at Vesting and at Sale

In Japan, RS/RSU are taxed at two separate points in time:

Stage 1: At Vesting (Taxed as Salary Income)

With RS, you already hold the shares themselves from the time they are granted; what happens at vesting is that the transfer restriction is lifted, and that is the date taxation is triggered. With RSU, it works a little differently — what vests is the restriction on a "unit" equivalent to a share, which is then exchanged for the actual shares through a "conversion" (Convert), and here the taxable event arises on the date that restriction lifts and your right to receive the shares becomes fixed. In either case, the National Tax Agency treats the economic benefit arising at that point as compensation for your work in Japan, and taxes it as salary income.

• Income category: Salary income (給与所得, Kyuyo Shotoku)
• Taxable amount: (share price at vesting × TTM at vesting) × number of shares
• Tax rate: Progressive rates, up to a combined maximum of 55.945% (income tax + reconstruction surtax + inhabitant tax)

Tax arises in the year the shares vest — even if you sell zero shares.

Example：

Suppose 100 shares vest on a day when the share price is USD 150 and the TTM rate is ¥150 per USD:

• Yen value per share: USD 150 × ¥150 = ¥22,500
• Salary income to declare: ¥22,500 × 100 shares = ¥2,250,000

That ¥2,250,000 is added on top of your regular salary and taxed at your marginal rate. If, purely for illustration, your marginal combined rate (income tax + reconstruction surtax + inhabitant tax) is 40%, the additional tax is roughly ¥900,000 — payable in cash, in a year when the vesting itself gave you no cash at all. This is exactly why some employees sell a portion of the vested shares immediately: to fund the tax on the vesting.

Keep this figure of ¥22,500 per share in mind. It is not only your salary income — it also becomes your yen cost basis for Stage 2.

If You Are a Non-Permanent Resident Who Was Granted RS/RSU Before Coming to Japan

The calculation above assumes you are a permanent resident for Japanese tax purposes (非永住者以外の居住者), who is taxed on worldwide income. If that describes you, the entire amount is taxable in Japan — including the portion relating to service you performed outside Japan.

The treatment differs if you are a non-permanent resident (非永住者) — a resident without Japanese nationality who has had a domicile or residence in Japan for five years or less within the preceding ten years — and you were granted your RS/RSU while working outside Japan, then vested after arriving here.

In that case, the portion corresponding to your service period outside Japan is foreign-source income, and is not subject to Japanese tax unless you remit funds to Japan. What Japan taxes is the portion corresponding to your Japanese service period, apportioned across the period from grant to vest. Note, though, that the remittance need not be your RS/RSU sale proceeds — money sent from your home country for living expenses can trigger it too.

For example, if you were granted the award on April 1, 2023 while working in your home country, transferred to Japan on April 1, 2024, and the award vested on April 1, 2025:

• Grant-to-vest period: 24 months
• Of which worked in Japan: 12 months → 50%
• Vesting value of ¥2,250,000 × 50% = ¥1,125,000 is Japanese-source income, taxable in full
• The remaining ¥1,125,000 is foreign-source income, taxable in Japan only to the extent you remit funds to Japan that year

Many employees fall into this category during their first years in Japan, so this is far from an unusual situation. Declaring the full amount without applying this apportionment can mean paying tax you don't actually owe. Confirm your residency status and your work-location history before you file.

Stage 2: At Sale (Taxed as Capital Gains)

When you sell the vested shares, you trigger the second taxable event, taxed as capital gains.

• Income category: Capital gains (譲渡所得, Joto Shotoku)
• Capital gain: (share price at sale × TTB − share price at vesting × TTM at vesting) × number of shares
• Tax rate: 20.315% (income tax 15.315% + inhabitant tax 5%)

Continuing the example above — you later sell all 100 shares at USD 180 when the TTB rate is ¥155:

• Sale proceeds per share: USD 180 × ¥155 = ¥27,900
• Cost basis per share (from vesting): ¥22,500
• Capital gain: (¥27,900 − ¥22,500) × 100 shares = ¥540,000
• Tax at 20.315%: approximately ¥109,700

Notice that the yen gain is driven by both the change in share price and the change in the exchange rate. Even if the share price is flat in dollar terms, a weaker yen between vesting and sale produces a yen-denominated capital gain that is taxable in Japan.

2. At Sale, Your Cost Basis Must Be Tracked Using the "Method Equivalent to the Total Average Method"

RS/RSU typically vest in multiple batches — quarterly, or several times a year. Each time they vest, the amount calculated as "share price at vesting × TTM at vesting" becomes the cost basis for the shares acquired in that batch. As a result, even for the same stock, the yen-denominated cost basis per share usually differs from one vesting to the next.

The question at sale is how to calculate that cost basis. Under Japanese tax rules, where you acquire the same stock two or more times and then sell part of it, the cost basis is calculated using a per-unit figure derived by the "method equivalent to the total average method" (NTA Tax Answer No. 1466). This means: at each sale, you divide the total cost of the shares acquired up to that point by the total number of shares held, to find the average cost per unit.

In other words, even when selling only part of your holdings, you can't simply assume "the oldest lot was sold first" (first-in-first-out). You must use the average cost per share across your entire holding at the time of that sale. For each subsequent sale, you take (the average unit cost calculated at the previous sale × the number of shares remaining after that sale), add the cost basis of any shares vested since then, and divide that total by the new total number of shares held — recalculating the average unit cost again.

How the recalculation works in practice

Working through it:

1. At the February 2025 sale, you hold 200 shares with a total cost of ¥1,740,000 + ¥2,280,000 = ¥4,020,000. The average unit cost is ¥4,020,000 ÷ 200 = ¥20,100 per share.
2. The cost basis of the 120 shares sold is ¥20,100 × 120 = ¥2,412,000. The capital gain is ¥3,060,000 − ¥2,412,000 = ¥648,000, and the tax at 20.315% is approximately ¥131,600.
3. After the sale, the 80 remaining shares carry forward at ¥20,100 × 80 = ¥1,608,000 — not at their original vesting values.
4. After Vest ③, you hold 180 shares with a total cost of ¥1,608,000 + ¥2,480,000 = ¥4,088,000, so the new average unit cost is approximately ¥22,711 per share. That is the figure your next sale starts from.

Note what did not happen: the 120 shares sold were not matched to Vest ① and part of Vest ② at their own prices. Getting this wrong — by using FIFO, or by using the USD cost basis shown on your brokerage statement — will misstate your gain in both directions across multiple sales.

Keep a tracking spreadsheet

For this reason, RS/RSU holders need to keep a tracking spreadsheet that records, for each vesting:

• the acquisition (vesting) date
• the number of shares
• the share price at vesting
• the TTM rate applied on that date
• the yen-converted cost basis

—and that recalculates the average unit cost at each sale. Overseas brokerage statements (Charles Schwab, Fidelity, etc.) do not perform this Japan-specific calculation for you, so you (or your tax accountant) must manage it yourself. The more times your shares vest, the more important this spreadsheet becomes. Starting it at your first vesting is far easier than reconstructing five years of history later.

3. Your Year-End Adjustment Won't Cover RS/RSU

When shares are granted directly by the overseas parent company, Japanese withholding tax is generally not applied. As a result, the RS/RSU amount does not appear on your withholding slip (源泉徴収票, Gensen Choshu Hyo) and is not covered by the annual Year-End Tax Adjustment (年末調整, Nenmatsu Chosei) your employer performs.

So in any year your RS/RSU vest, you will normally need to file a tax return yourself between February 16 and March 15 of the following year — separately from, and in addition to, the year-end adjustment your employer performs on your regular salary.

4. How the Tax Office Learns About Overseas Assets and Income

Under the current system, several mechanisms allow the tax office to identify overseas assets and foreign-source income. The two main ones are:

• Statutory report: When an employee receives stock or similar from a foreign parent company, the Japanese entity is required to submit a report to the tax office titled "Report Concerning Economic Benefits Provided by a Foreign Parent Company, etc., to Officers, etc. in Japan" (外国親会社等が国内の役員等に供与等をした経済的利益に関する調書). If your employer provides you with a copy of this report, you can use the figures on it directly to calculate the salary income you need to declare — saving you from computing share prices and TTM rates from scratch.
• Information exchange between tax authorities: Japan has systems in place to automatically exchange overseas financial account information (including brokerage account balances, dividends, and sale proceeds) with the tax authorities of other countries. Through these, information on overseas brokerage accounts can be identified by the Japanese tax authorities.

If unreported income is discovered, you may owe not only the original tax but also failure-to-file additional tax (無申告加算税) and delinquency tax (延滞税) — which can consume a significant portion of the gains you were trying to protect.

Summary

If you receive RS/RSU from an overseas parent company while working in Japan, keep the following in mind:

• Tax arises at vesting, as salary income, whether or not you sell — and again at 20.315% on any gain when you do sell.
• Convert using the TTM rate at vesting and the TTB rate at sale; exchange-rate movement alone can create a taxable gain.
• If you are a non-permanent resident who was granted the award before arriving in Japan, apportion the vesting income by service location — and watch the remittance rule.
• Recalculate your yen cost basis at every sale using the method equivalent to the total average method, and keep a tracking spreadsheet from your first vesting.
• Nothing is withheld and nothing appears on your 源泉徴収票, so file your own return between February 16 and March 15.
• Ask your employer for a copy of the statutory report on benefits provided by the foreign parent company — it makes the calculation far easier.

Taxation of RS/RSU in Japan requires accurate calculations, careful review of overseas brokerage statements, and currency conversion using the TTM/TTB rates — all specialized knowledge. Incorrect filings or unreported income can lead to later amendments and back taxes.

Oishi Tax & Accounting Office supports foreign employees, engineers, and executives working in Japan with international tax and tax-return services. Just provide your overseas brokerage statements (Charles Schwab, Fidelity, Morgan Stanley, etc.) and your withholding slip (源泉徴収票, Gensen Choshu Hyo), and we'll handle your entire tax return from start to finish — clearly explained, entirely in English. Please get in touch for a complimentary initial consultation.

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