Understanding the Exclusion of Commuting Allowance from the Annual Income Requirement for Japan’s Highly Skilled Professional Visa#

The “Highly Skilled Professional (HSP)” visa is a status of residence in Japan designed to attract talented foreign professionals who are expected to contribute to Japan’s industrial innovation and economic growth. The approval process for this visa utilizes a point-based system, where applicants are evaluated on criteria such as academic background, professional experience, and annual income. An applicant must score 70 points or more to be eligible.

Among these criteria, annual income is a critical component that carries significant weight, as it serves as an objective indicator of a professional’s expertise and market value. However, there are specific rules for calculating this income. Notably, the “commuting allowance” (通勤手当, tsukin teate), which is provided by many Japanese companies, is generally excluded from this calculation. This article provides an objective and detailed explanation of why the commuting allowance is not included in the annual income requirement, based on the underlying principles of the system.

The Role of Annual Income in the Highly Skilled Professional System#

The HSP system is divided into three categories based on the applicant’s activities: “Advanced academic research activities (HSP 1-a),” “Advanced specialized/technical activities (HSP 1-b),” and “Advanced business management activities (HSP 1-c).” All categories are assessed using the Point Calculation Table.

For “Advanced specialized/technical activities” and “Advanced business management activities,” points for annual income are awarded as follows:

JPY 10 million or more: 40 points
JPY 9 million to less than JPY 10 million: 35 points
JPY 8 million to less than JPY 9 million: 30 points
JPY 7 million to less than JPY 8 million: 25 points
JPY 6 million to less than JPY 7 million: 20 points
JPY 5 million to less than JPY 6 million: 15 points
JPY 4 million to less than JPY 5 million: 10 points

As this table illustrates, the amount of annual income directly impacts the total points, making an accurate calculation essential for a successful application. It is also important to note that a minimum annual income of JPY 3 million is required to be eligible for consideration.

The Basic Principle for Excluded Allowances#

Under Japan’s Immigration Control and Refugee Recognition Act, the income assessed for the HSP visa is defined as “remuneration” (報酬, hoshu). This term specifically refers to payment received from a Japanese organization as “consideration for the performance of duties.”

Based on this definition, any payment that is not considered “consideration for the performance of duties” is not included in the remuneration. A prime example of this is an allowance that has the nature of an “reimbursement for actual expenses” (実費弁償, jippi bensho). This refers to money paid to cover costs that have been or are expected to be incurred in the course of performing one’s work.

Why is the Commuting Allowance Excluded from Annual Income?#

The commuting allowance is a classic example of an allowance that serves as a reimbursement for actual expenses. It is provided to cover the transportation costs incurred when traveling between one’s home and place of work. As such, it is not considered compensation for the labor provided by the employee.

Therefore, the standard practice is to exclude the entire amount of the commuting allowance from the HSP annual income calculation, regardless of whether it falls within the non-taxable limit under Japanese income tax law.

For instance, if a monthly salary breakdown is “Base Salary: JPY 350,000 + Position Allowance: JPY 50,000 + Commuting Allowance: JPY 20,000,” the monthly amount used for the annual income calculation would be JPY 400,000 (JPY 350,000 + JPY 50,000), excluding the commuting allowance.

Other Allowances Potentially Excluded from Income#

Similar to the commuting allowance, other payments that may be considered “reimbursements for actual expenses” and thus excluded include:

Business Trip Allowances: This covers transportation, accommodation, and per diems associated with work-related travel.
Relocation Allowances: Payments intended to cover moving expenses and other costs associated with transferring to a new work location.
Housing Allowance: The treatment of this allowance can be complex. If the company reimburses the actual cost of rent, it is likely to be treated as an expense reimbursement and excluded. However, if a uniform amount is paid to all employees regardless of their housing situation, it may be considered part of the remuneration (a form of welfare-related salary) and included. The determination depends on the specific terms of the employment contract and how the allowance is administered.

The key criterion is always whether an allowance is paid as “compensation for labor” or as a “reimbursement for incurred expenses.”

Examples of Allowances Included in Annual Income#

Conversely, the following types of allowances are considered “consideration for the performance of duties” and are included in the annual income calculation:

Base Salary
Position/Duty Allowances: Payments corresponding to an employee’s rank or specific job responsibilities.
Overtime Pay, Late-Night Work Pay, Holiday Work Pay: Compensation paid for labor provided beyond standard working hours or under specific conditions.
Bonuses: Payments typically linked to company performance and individual contributions, which are considered a form of compensation for labor.

These payments are included because they are directly tied to the employee’s skills, responsibilities, contributions, or hours worked.

Conclusion#

When applying for the Highly Skilled Professional visa, annual income is a pivotal factor in the point-based evaluation. It is crucial to understand that not all payments listed on a pay slip or employment contract can be included in this calculation.

The commuting allowance, in particular, is generally excluded because it is considered a reimbursement for transportation expenses rather than remuneration for work. To ensure a smooth application process, it is essential for applicants to carefully review the nature of each allowance they receive and accurately determine which components constitute “remuneration” as defined by the immigration authorities.