Japanese companies paying overseas contractors and freelancers: withholding and payments

Japanese companies increasingly work with developers in Vietnam, designers in the Philippines and consultants in Europe. Most services performed abroad carry no Japanese withholding, but royalties and work done in Japan do. The payment itself should land in the contractor's currency.

Rashidatou K.Payments editor

Published: 20 October 2026
Reading time: 2 min read

A Tokyo e-commerce company works with eight developers in Ho Chi Minh City, three designers in Manila and a UX consultant in Berlin. It also licenses illustrations from an artist in Seoul. Its accountant treats them differently: the development, design and consulting done abroad carry no Japanese withholding, while the illustration licence is a royalty and may.

Where the work happens

Japan taxes non-residents on Japanese-source income. For services, the place where the work is performed decides the source:

services performed entirely outside Japan are generally foreign-source, with no Japanese withholding,
services performed in Japan, for example during a visit, can be Japanese-source.

Royalties

Payments for the use of copyrights, designs, software rights and similar are royalties. Royalties paid to non-residents are generally Japanese-source when used in Japan and subject to withholding at 20.42 percent: 20 percent plus the reconstruction surtax.

Treaties

Japan's tax treaties often reduce or remove withholding on royalties and on business profits. To apply them, the non-resident completes an application form for income tax convention, which the payer submits to its tax office before payment. Without it, the domestic rate applies and the payee must claim a refund.

Paying well

Yen by SWIFT to Ho Chi Minh City or Manila is converted by the contractor's bank, often with fees, and can take days. Paying dong to Vietnamese developers and pesos to Filipino designers on local rails delivers the agreed amount. Agree the currency in the contract.

Paying into Japan: the local rail

What	Detail
Local rail	Zengin System
Run by	Japanese Banks' Payment Clearing Network (Zengin-Net)
Settlement	Within the day in core hours; the More-Time System settles around the clock for participating banks

Source: Zengin-Net. Checked when this guide was last updated; the scheme's own page has the current figures.

Where Rivet fits

A Rivet business account accepts registered companies after verification, including Japanese companies, and pays contractors in 120+ countries in local currency where available. Bulk payouts send the month together, rates show before you confirm, and from the Growth plan a second approver can be required. Rivet is not a bank; regulated partner institutions hold the funds.

See paying a remote team abroad.

Questions people ask

Does a Japanese company withhold tax on payments to an overseas freelancer?

Usually not, when the services are performed entirely outside Japan. Royalties, and services performed in Japan, are different. Check each type.

What is the 20.42 percent rate?

The 20 percent national income tax withholding on certain payments to non-residents plus the 2.1 percent reconstruction surtax on that tax.

How are treaty benefits claimed?

The non-resident submits an application form for income tax convention to the payer, which files it with the tax office before payment.

Should we pay in yen?

Paying in the contractor's local currency usually leaves them with more, since their bank does not convert and charge.

Sources

Written by

Rashidatou K.

Payments editor

Rashidatou writes Rivet's guides to how money moves between countries: the payment rails, what each one costs, and the account details a company needs to get paid in another currency. Every figure in Rashidatou's articles is traced to the scheme rulebook, the regulator or the provider's published price list, and those sources are listed at the end.