Japanese Residence Tax

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All residents of Japan, including foreign residents, are required to pay Residence Tax. The municipality in which you were residing in on January 1 of the current year is the municipality that will administer your Residence Tax bill. The amount of Residence Tax to be paid, this includes Prefectural Residence Tax and Municipal Residence Tax, is determined by the amount of income received between January and December of the previous year, and the number of dependents you have.

If, on January 1 2015, you had lived in Japan continuously for one year or more, or if your occupation requires you to live in Japan for one year or more, then under the eye’s of the law, you are a resident and therefore are required to pay Residence Tax this year. If the above applies to you, then June’s arrival of the Residence Tax bill in your mail box should not come as a surprise to you.

Even if you were living in another city in Japan on January 1st and have recently moved to Nagoya, then your previous municipal office will issue you a bill to your Nagoya address. Alternatively if you were living in Nagoya on January 1st but have recently moved to another city in Japan, then the Nagoya Municipal Tax Office will issue you a bill to your new address. If you are new to Japan this year, you won’t get a bill this time and you can breathe a sigh of relief until next June…

How and Where do I pay?
Either your employer will deduct tax payments from your salary each month from June to May and then pays the tax to the Ward Office for you. Or you will receive payment slips in the mail directly from the Nagoya Municipal Tax Office. The payment slips are issued in June, August, October and January. If you fail to pay your taxes by the deadline, a delinquency charge will be added. Residence Tax can be paid at a bank, a post office, convenience store, ward office / city hall, or directly to at the issuing Municipal Tax Office. If you move out of Nagoya or permanently leave Japan, you must pay any remaining balance you have, or appoint a proxy to pay the remaining balance to your the Municipal Tax Office.

Q. How is Residence Tax calculated?
Income Tax has 6-tier system (5%, 10%, 20%, 23%, 33%, & 40%) depending on your income and circumstances – all of it going to the central government. Residence Tax has one flat rate of 10% (9.4% for Nagoya City); it goes to your local governments and is divided between your city and prefecture. All the key numbers are on your income tax withholding statement which you received from your place of employment in January. An example of an income tax withholding statement and explanation can be found here.

To put it simply (taxes are never simple),

Residence Tax = Your Total Taxable Income (課税所得 kazei-shotoku) x 10%.

And Your Total Taxable Income is your Total Annual Income minus your Employment Income Deduction (see Note 1) minus your Total fixed-rate exemptions (see Note 2).


Let’s look at Jane Smith’s example. In Jane’s case her net income in 2014 was 5 million Yen.


Note 1: Employment Income Deduction (Table 1)

In Jane’s case her net income in 2014 was 5 million Yen. From the below table Jane is in the 3,600,0001 to 6.6 million bracket.

Annual Income (Yen) Employment Income Deduction
Up to 1,625,000 650,000 Yen
1,625,001 to 1.8 million Annual Income x 0.4
1,800,001 to 3.6 million Annual Income x 0.3 + 180,000 Yen
3,600,001 to 6.6 million Annual Income x 0.2 + 540,000 Yen
6,600,001 to 10 million Annual Income x 0.1 + 1.2 million Yen
Over 10 million Annual Income x 0.05 + 1.7 million Yen

 

Therefore her Employment Income Deduction is 5,000,000 x 0.2 + 540,000. A total of 1,540,000 Yen.

Note 2: Total fixed-rate exemptions
Everyone gets a basic allowance of 380,000 for income tax. Taxpayers with dependents or individuals with certain circumstances may, in some cases, be eligible for additional tax exemptions.

In Jane’s case she gets a 600,000 Yen exemption for her Social Welfare Insurance contributions, a 100,000 exemption for her life insurance payments, a 330,000 exemption for her dependant spouse, a 660,000 exemption for her other dependants, and a basic deduction of 380,000.

In all a deductible total of 1,955,000 Yen.

Putting it all together
Jane’s
Total Taxable Income is  5,000,000 Yen minus 1,540,000 Yen minus 1,955,000 Yen = 1,505,000 Yen.
So Jane’s Residence Tax for 2014 is 1,505,000Yen x 10% = 150,500 Yen.
If Jane lived in Nagoya – here Residence Tax bill would be at a lower total of 135,600 Yen.

 

Payment
Jane’s Residence Tax is not deducted from her salary by her company and so receives a bill directly from Sakae Municipal Tax Office. She receives her first bill in June and can either pay the whole year in one lump sum or just pay the first installment. She will receive further bills in August, October and the following January.

 

For more tax-related resources, please see the Taxes section of the City of Nagoya website.

 

Key Vocabulary

  • Income Tax Withholding Statement = kyuyo-shotoku-gensen-choshu-hyo 給与所得源泉徴収票
  • Residence Tax = jumin-zei 住民税
  • Prefectural Residence Tax = kenmin-zei 県民税
  • Municipal Residence Tax = shimin-zei 市民税
  • Total Annual Income = kyuyo-shunyu 給与収入
  • Employment Income Deduction = kyuyo-shotoku-kojo 給与所得控除
  • Total fixed-rate exemptions = shotoku-kojo 所得控除
  • Income after employment income deduction = kyuyo shotoku 給与所得
  • Total Taxable income = kazei-shotoku 課税所得

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