MBA Japan

Taxes in Japan


 

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There are 47 prefectures in Japan. The governmental authorities of the prefectures do not have the same degree of legislative power and autonomy as the state legislatures in the U.S. and they generally do not have separate labor or tax laws. However, even though both businesses and individuals are required to pay national and local taxes, the prefectures generally follow the rules set by the national government.

Taxes paid by individuals are made on the national, prefectural or municipal levels. These include income tax (national), resident and sales tax (prefectural and municipal levels). Anyone who spends more than 6 months of fiscal year on Japanese soil, must pays taxes. Income and resident taxes are automatically deducted from your monthly salary. All other income earners who do not participate in the maintenance tax system must file their tax return at the tax office and pay their resident tax to the local government office. Below is a summary of some of these types of taxes:

Income TAX

Japan bases income tax obligations on resident status: Permanent Residents or Non-Permanent Residents. Permanent residents are taxed at the same rate as Japanese citizens, whereas non-permanent residents are taxed over 20% of their income. For the latter, some exceptional cases can be seen through tax laws.

Income tax is paid on all earnings between January and December of a given year. It is calculated based on total annual income and paid insurance fees. Surplus or deficit in income tax calculations will be settled. Income tax returns are usually filed by employers.

For individuals with non-deducted taxes, multiple sources of income, or extra income (besides salary), income tax returns must be filed at the local tax office, from February 16th to May 15th of the following fiscal year.

A certificate of income and withholding tax will be issued from the Department of Revenue or issued through your employer. This certificate is necessary to renew your visa or alien registration as proof of tax payments and should be kept in a safe place.

The following items are required to file your income tax return:

  1. Certificates of income of the previous year (the withheld tax slip and payment certificate)
  2. Necessary items for tax exemption for dependents (birth certificate of dependents or a remittance certificate to dependent(s)
  3. living in her/his home country)
  4. Necessary items for insurance premium deduction (Deduction Certificate of Insurance)
  5. Alien Registration Card
  6. Hanko (Seal) or Signature

Residence TAX

This tax is included in the Metropolitan Tax and Special City Resident Tax, and they are usually lumped together and called "Shinminzei". As the tax is based on personal income from the previous year, all individuals with a valid address are subject to pay a resident tax to the local government on January 1st, regardless of their nationality (only alien residents are not required to pay this tax during their first year in the country).

For salaried employees, tax payments are made in installments and will be deducted from their monthly paycheck from June to May. Individuals whose taxes have not been deducted will receive a payment notice from the government and must make the payment at a financial institution or at the post office.

Sales TAX

A sales tax in Japan is a consumption tax charged at the point of purchase for certain goods and services. Ideally, a sales tax is fair, has a high compliance rate, is difficult to avoid, is charged exactly once on any item, and it is simple to calculate and simple to collect. The current tax rate is 5%. The listed price usually includes the sales tax.

Automobile TAX

Automobile tax applies to individuals who own a car before April 1st of a given year. The local government issues the tax payment notice and payment must be made at the bank by the due date. If you need more details you could ask a person who understands Japanese to enquire for you at your prefecture's Automobile Tax Administration Office or Prefectural Tax Office.


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