On the 2nd of February, the government announced a new system that will grant the status of residence “Designated Activities” to “digital nomads” who work while traveling around the world using IT. (2024/2/2 Nikkei Asia)
<As Designated Activities>
This system is aimed at people who receive compensation from overseas companies, and is intended for a six-month period of stay.
Even if the project lasts more than 6 months, I believe that if the foreign national extends his/her period of stay, he/she will be able to work in Japan for as long as he/she needs.
<As Engineer/Specialist in Humanities/International Services>
About 20 years ago, I helped a Japanese consulting company accepts (employ) consultants from overseas companies and assist them with their visa applications to engage in work commissioned by domestic clients.
Just like today, the only way to stay in Japan while earning an income was to receive remuneration from the Japanese host company, and at that time, their status of residence was “Engineer” (currently “Engineer/Specialist in Humanities/International Services”). I handled numerous applications for issuance of Certificate of Eligibility and applications for permission to extend period of stay.
All of these people had high incomes, and I remember being surprised when I heard their annual income on their annual tax returns.
<Pros/Cons>
Considering the tax rate and social insurance premiums, I think there will be major cases where people with a resident status of engineer choose to become digital nomads rather than going out of their way to be employed by a Japanese company.
The aim is to create innovation and expand consumption, according to the article. Putting aside whether it will lead to innovation creation or not, expanding consumption is the same idea as having people come to Japan for a short stay as a tourist and spend money in Japan, expecting economic effects and an increase in consumption tax revenue. On the other hand, I think there will also be a negative factor for the country in that income tax revenue will decrease.
It seems that the days Japanese government can expect high tax revenue on high-income foreigners are over.
The new system is scheduled to start operating within the fiscal year, so it looks like the digital-nomads will start to come from coming March.