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. Taxes in Japan are broken up into two major categories: National Tax and Local Tax.
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.
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, who do not need to file a tax return, will have their income taxes withheld from their salaries by their employer, and an eventual adjustment is made with the year's final salary.
Employees only need to file a tax return if at least one of the following conditions is true:
But people who are required to file a tax return, such as self-employed and those who have multiple sources of income, must do so at the local tax office.
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 from; Form A and Form B.
For tax purposes, people living in Japan are classified into three categories. This categorization is not related to visa types:
Note: Tax Treaties between Japan and many countries can take precedence over the above guidelines. The Ministry of finance Japan gives you the list of countries that have tax treaties with Japan.
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.
If not withheld by the employer, national income taxes are due in full by March 15 of the following year. For example, if you have to pay national income taxes for 2016, they have to be fully paid by March 15, 2017.
If prefectural and municipal income taxes are not withheld by the employer, they are to be paid in quarterly installments during the following year. For example, the 2016 taxes are paid in four installments in June, August and October 2017 and January 2018.
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.
The tax rate is determined based on the taxable income. Like in other countries, taxable income is the total earnings minus a basic exemption, exemptions for dependents and various types of deductions, such as deductions for insurance premiums, medical expenses and business expenses of the self-employed. For more information visit National Tax Agency Japan Website.
How To File Tax Return
You can file your tax return through any of the following ways.
Documents Required 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, contact your local tax office. And if you could use a helping hand filling it out, note that the tax offices as well as many city and town offices, offer free consultations with tax-office staff around this time of the year.