About Taxes

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About Taxes 税金について

 

Income tax and resident tax 所得税と住民税

In Japan, individual taxpayers are subject to nationally-levied income tax and locally levied resident tax on their income. Individual taxpayers are classified as Resident or Non-Resident; residents are subclassified as Permanent Resident or Non-Permanent Resident; this classification is important in determining the scope of taxable income for income tax purposes.

・Resident (居住者): An individual who has a “Jusho (住所 / domicile)” in Japan, or who has had a “Kyosho (居所 / residence)” in Japan for one year or more. A resident without Japanese nationality who has had a domicile or residence in Japan for five years or less in total in the past 10 years is classified as Non-Permanent Resident. A resident who does not fall under this category is classified as Permanent Resident.

・Non-Resident (非居住者): All individuals who are not Residents.

How to pay income tax

Individual income taxpayers are processed as either “residents” or “non-residents”:

1. Residents

Income tax is levied on private income (profit received after deduction for expenses, etc). The taxpayer completes a tax return after calculating both their income and tax amounts, and then pays their income tax when filing the final return (確定申告 / Kakutei shinkoku) at the relevant tax office. However, in the case of earned income, employers (salary or wage payers) pay employees’ income tax by withholding a fixed amount at source from their wages (calculated in accordance with a specified method) and paying the tax authorities (源泉徴収 / Gensen chōshū).
For example, a salaried worker will have a part of their monthly wages and bonuses deducted at source by their employer, and if there has been an application for an income tax rebate to the employer on behalf of the employee, the company will make a year-end adjustment (年末調整 / Nenmatsu chōsei) for the employee in December to settle the difference between the total amount of withholding income tax actually withheld from the monthly payments in the year and the annual tax liability to be withheld from the total of those payments. Most salaried workers have their annual income tax affairs settled by the year-end adjustment (Nenmatsu chōsei) and do not need to file a final tax return (Kakutei shinkoku).

2. Non-residents

In principle, 20.42% of income earned during the employment period in Japan will be withheld at source. However, non-residents are required to file a final return should, for example, income derived from office(s) and/or real estate for rent in Japan exceed a certain amount.

◆What is resident tax?

Resident tax is a local tax that is levied separate to income tax, which is a national tax. It is formed from municipal tax and prefectural tax on a per capita levy and per income levy. Resident tax and prefectural tax in relation to individuals are levied and collected together by the municipal bodies. Foreigners who have a domicile within Japan as of January 1 (base date for assessment) must pay residence tax based on their income from the previous year to the municipality in which they live by January 1.
In addition, a foreigner who has a house, office, or business place within the ward as of January 1, but does not live in the ward is subject to only a per capita levy.

How to pay resident tax

The resident tax is usually paid in four installments: June, August, October and January of the following year, upon receipt of a Tax Notice or Tax Payment Slip sent by municipal tax offices. If you are a salaried employee, the resident tax is divided into 12 installments and withheld from your salary on a monthly basis from June until
May of the following year on the basis of a notice from the City of Nagoya.
The resident tax is calculated based on total income received in the previous year and collected during the following year. Those currently living in Japan as of January 1 each year and had income during the previous year must prepare a resident tax report and submit it to the municipal tax office in charge of the area in which they live not later than May 15 of each year.
If your salary was your only source of income in the previous year and you received year-end adjustments through your company, or if your total income was filed by March 15 on your final return of national income tax of the previous year, you are not required to submit your resident tax report.

 

 


Tax Returns 確定申告

To help foreigners with this paperwork and general tax matters, the NIC holds free personal income tax consultations, together with the Nagoya Certified Public Tax Accountants’ Association. More information can be found about this free service on this website early in the New Year . Reservations are required and places are limited.

If you do manage to make a reservation and come in, make sure you bring all your required paperwork with you on the day. You’ll need:

1. Income tax withholding statement (源泉徴収票 / Gensen chōshū-hyō) and all other paperwork which shows any withheld tax.

2. Resident Card (在留カード / Zairyū kaado)

3. Passport

4. Bank account passbook

5. Seal (inkan/印鑑)

6. Those who have made payments to dependents outside of Japan;

• Evidence to support your relationship with the dependent (birth/marriage certificate etc.)
• Proof of remittance (transfer slips etc.)

7. Those who wish to apply for medical expense deductions are required to bring their receipts issued by the respective medical institution/s.

8. Those enrolled in National Health Insurance or Social Insurance are required to bring proof of payment of all premiums.

9. Those who purchased a home in Japan using a loan, should ask their financial institution for a 住宅ローン年末残高証明書.

 

To learn more about the Nagoya International Center,
please watch our video.

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