Taxes In Japan

February and March is the tax season in Japan. Filing a tax return isn’t really easy, but doing it in different language and in another country can be especially challenging.

Luckily, if you work for an organization and that’s your only source of income, they will manage everything for you. But, if you have more than one source of income or are self-employed, you need to file a Tax Return "Kakutei Shinkoku - 確定申告".

Taxes In Japan

Taxes in Japan are broken up into two major categories: National Tax and Local Tax. The two main forms of tax are Income Tax "Shotokuzei - 所得税", and residence Tax "Juminzei - 住民税". The rates you pay for both kinds of tax are calculated according to your earnings. Below is the list of general taxes applicable to individuals:

• Consumption Tax – General merchandise and services are subject to consumption tax, which is paid by consumers at time of purchase. The rate currently is 10 percent (February 2020).
• Property Tax - It is a Municipal tax which is paid annually by individuals who own land, housing and other types of depreciable assets. Both purchased and gifted properties are taxable. See the Outline of Property Tax and City Planning Tax.
• Enterprise Tax - It is a Prefectural tax which is paid annually by self-employed individuals, and the amount is calculated based on the person's net income. 
• Vehicle Related Taxes - A municipal light vehicle tax is paid annually by individuals who own motorbikes or other type of light vehicles. A prefectural car acquisition tax is charged on the purchase of both new and second-hand vehicles. Also a prefectural automobile tax is paid annually by individuals who own a car based on the engine's displacement starting with engines below 1000cc, and increasing at 500cc intervals to a top bracket of 6000cc and above. A national motor vehicle tonnage tax is paid by vehicle owners at the time of the mandatory inspections "Shaken - 車検". Personal vehicles pay more than vehicles identified as business use. 
• Income Tax – It is calculated based on the net income of the individuals, and paid on the national, prefectural and municipal levels.

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Note: You will be required to file tax returns and make tax payments for special income tax for reconstruction (2.1% of the amount of income tax for each year, in principle) from 2013 through 2037 annually together with income tax of respective years, for securing necessary funds for measures to carry out reconstruction from the Great East Japan Earthquake.

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Income Tax

In Japan, the income tax is based on the self-assessment system, meaning a person determines the tax amount himself or herself by filing a tax return in accordance with his/her own residential status. This procedure is called the filing of the final return or income tax return.

Employees normally do not need to file a tax return, as their employer will have their income taxes withheld from their salary, and when necessary the adjustment is made with the year's final salary. However, employees will need to file a tax return if one of the following conditions applies:
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• If you bought a house or received a loan
• If your annual income exceeds 20,000,000 yen
• If you have more than one employer
• If you have side income of more than 200,000 yen
• If you work for an employer based outside Japan and/or does not withhold taxes
• If you leave Japan before the end of the tax year

Those who are required to file a tax return must do so at the local tax office (Zeimusho - 税務署).

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Final Return Forms

The form refers to earnings and expenses for the previous calendar year, from January 1st to December 31st. In addition to calculating your taxable income, the form will be used to determine the rates you pay for residence tax and health insurance.

By filing the tax return, certain individuals who overpaid in tax may qualify for a rebate. Examples include those who changed jobs or had a period of unemployment during the previous year, paid over 100,000 yen in medical fees, made charitable donations or who suffered losses as a result of an accident or crime. Basically, there are two types of final return form; Form A and Form B.

Form A

Form B

Content Of Final Return

​Those who are self-employed or gain the majority of their income through freelance work may find it advantageous to request the Form B, which allows for special deductions, such as for businesses expenses, including office products, meeting expenses, travel and even a portion of their rent and utilities if they work from home. 

Expenses Breakdown - 1

​Those who are completing form B and also fall into any of the categories listed from 1 to 8 in the above chart, should attach a separate taxation form or case of loss form depending on the content of the return.
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Expenses Breakdown - 2

For tax purposes, foreigners living in Japan are classified into three categories:
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• Non-Permanent Resident – Is a person who has lived in Japan for less than five years within the last ten years, but do not intend to live in the country permanently. They pay taxes on all of their income except income from abroad that is not remitted to Japan.
• Permanent Resident – Is a person who has lived in Japan for at least five years or intends to stay in the county permanently. They pay taxes on all income from Japan and abroad.
• Non-Resident – Is a person who has lived in Japan for less than one year, but his primary base of living is not in the country. They pay taxes only on their income from sources in Japan, and not income from abroad.

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​Note: Tax treaties between Japan and many countries can take precedence over the above guidelines. You can find the list of countries that have tax treaties with Japan on the Ministry of finance Japan Website.

Scope Of Income Subject To Taxation

When To Pay Taxes

The filing period for final tax return of the previous fiscal year "January 1st to December 31st", is from February 16 to March 15. For example, if you have to pay national income taxes for 2019, the payment should be done by March 15, 2020.

Note: When a taxpayer files his or her return after the statutory due date of filing return or fails to pay tax by the due date of tax payment, the additions to tax will be imposed on the principal tax. 
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Tax Rates

The tax rate is calculated based on the taxable income, which is the total earnings minus exemptions for dependents and different types of deductions, such as deductions for medical expenses and business expenses of the self-employed individuals. For more information visit National Tax Agency Japan Website. 

National Income Tax Rates

How To File Tax Return

You can file your tax return through any of the following ways.

• Submit the return to the reception desk of the Tax Office in the district where you reside. Tax returns may also be submitted in after-hours mailbox at the Tax Office.
• Send the tax return by mail to the Tax Office in the district where you reside. If final tax returns are sent to Tax Offices by mail, the date shown as the date of postage "post mark" will be treated as the date of filing. 
• File online by e-Tax. 

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Documents Required To Submit When Filing Final Return

As a result of the introduction of the social security and tax number system "My Number System", those who submit a final return need to write their Individual Number in their final return for fiscal 2016 and onward.

In addition, when submitting the final return, it is required to present your identification document/passport or attach a copy of such document to the forms, bankbook, Inkan "if you have one", and "Withholding Statement", along with any other documents showing any other sources of income. For an exemption for overseas dependents, proof such as a birth certificate or a marriage certificate along with bank transfer statements are required. For an exemption on medical expenses, all medical statements and receipts are required. For those who purchased a house, all relevant loan documents are required.

For more information about filing final returns, visit your local tax office. Note that during the tax season, free consultation is offered at the tax-office, by staffs, in several languages. They would also help you to fill out the forms. Use the Japan Tax Calculator to quickly get an idea of the amount of taxes you might have to pay.

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Related Reading:

• Establishing A Sole Proprietorship In Japan
• Why You Should Learn Japanese
• Furusato Nozei "Hometown Tax"