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For Individual Clients > Taxes
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As long as you work in Japan and receive income from the work, you have to pay your tax.
Besides the consumption tax, you need to understand two tax schemes under Japanese Tax systems.
Income Tax
Income Tax is calculated based on your annual (Jan-Dec) taxable income. Taxable income is calculated as total annual income minus various deductions (i.e. "standard salary deduction", "dependent deduction", "insurance deduction", medical disbursements etc).
The following table shows Japan individual income tax rates for 2009:
| Taxable Income(JPY) |
Tax Rate |
Additional Deduction |
| 1 - 1,950,000 |
5% |
0 |
| 1,950,001-3,300,000 |
10% |
97,500 |
| 3,300,001 - 6,950,000 |
20% |
427,500 |
| 6,950,001-9,000,000 |
23% |
636,000 |
| 9,000,001 - 18,000,000 |
33% |
1,536,000 |
| 18,000,001 and over |
40% |
2,796,000 |
For example, if your annual taxable income is 7,000,000JPY, the tax amount is as followings;
7,000,000 X 0.23-636,000 = 974,000
There are two ways to pay tax.
-Withholding Tax
If you are employed by the company, your income tax is withheld on monthly basis and paid by the company. The monthly amount is calculated based on the annual estimated tax amount, and the final adjustment is done in the Year-End(December).
-Filing Tax Return Form
If you are not employed and receiving your income as a contractor or a private business owner, you need to file the Tax Return Form and make the tax payment against Japanese Tax Authority. Filing period is between middle of February and middle of March. Even if you are employed, you need to file it when you have other income besides salary.
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*When you leave Japan before filing period, you need to appoint the tax agent (it can be anyone who you trust) and submit the tax agent nomination form so that the agent will complete the tax procedure. Otherwise you have to file the tax return form before your departure.
*In order to apply the extension of status of residence, you need to show either the withholding record given by the company or the copy of the tax return form.
Local (Municipal/Prefectural) Tax
Local Tax is calculated based on your annual taxable income in the "previous" year. Taxable income is calculated as total annual income minus various deductions (i.e. "standard salary deduction", "dependent deduction", "insurance deduction", medical disbursements etc.) Roughly speaking, the local tax amount is 10% X taxable income.
The local tax system has two ways to make payment, like income tax.
-Self-payment
This is the standard method. Around June in every year, the tax authority send bills to your residence and you have to make payment in one-time or 4 times installment.
-Withholding Tax
Your company can apply to the local tax authority that your local tax is withheld and the company makes payment on behalf of you.
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*When you leave Japan before receiving bills, you need to appoint the tax agent (it can be anyone who you trust) and submit the tax agent nomination form so that the agent will complete the tax procedure. Otherwise you have to pay tax at the local tax office.
*Note
There is an important point that you must know. Around June, the local tax bills are sent to tax-payers who has residence in Japan as of 1st/January of the year. This means that if the person leaves Japan on 31st of December, this person will not have to pay the local tax even if he/she received income in the previous year. Sometimes this fact causes trouble between employer and employee especially the person leaves only after 1st/January without knowing this fact.
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