Personal income tax (所得税) is the duty and right of every citizen. In Japan, besides the resident tax depending on the area you live in, personal income tax makes up a significant amount of your income. Income tax can be up to 43%, if your income is 4千万/year or more. Similar to developed countries, the way to calculate income tax, based on tax provisions in Japan is very complicated.
How many times a year do you pay taxes? At about what time? How is tax and tax refund 年末調整 calculated? Let’s figure out how what is income tax refund in Japan and how can you claim this back with Sugoi Japan – tax refund service.
What is personal income tax in Japan?
Personal income tax is a tax calculated on your annual income, according to predetermined milestones. The range of taxable income of foreigners working in Japan depends on the type of residence in Japan. There are 2 types of residency:
- Non-resident: A foreigner living in Japan for less than 1 year to the present time.
- Resident: A foreigner with a registered “address” and living in Japan for more than 1 year up to the present time.
Residents are divided into two subgroups, “permanent” and “permanent”. Those who have Japanese nationality or who have lived in Japan for more than 5 years (in the last 10 years from the present time) and want to settle down for a long time. The “permanent” group does not have the characteristics of the “permanent” group.
Types of taxable income in Japan
- Permanent residents: Income in Japan, income abroad, and income paid from abroad but received in Japan.
- Permanent residents: domestic income and income paid from abroad but received in Japan.
- Non-residents: domestic income.
An easy way to remember: the longer you stay, the higher the personal income tax you have to pay.
How to calculate income tax in Japan
Please follow these steps to calculate your income tax, but a more convenience way is contacting Sugoi Japan with our tax refund service, we will do a free estimation for you.
- Step 1: Total YEAR income – deductions = earned income.
- Step 2: Earned Income – deductions from earned income = taxable income.
- Step 3: Taxable income x tax rate = income tax.
- Step 4: Income tax – deductions from income tax = income tax payable.
Deductions from income
Step 1: Total YEAR income – deductions = earned income.
Step 2: Earned Income – deductions from earned income = taxable income.
Step 3: Taxable income x tax rate = income tax.
Step 4: Income tax – deductions from income tax = income tax payable.
How to pay personal income tax in Japan
When your income is salary, the amount of income tax will be calculated and deducted from your monthly salary (aka deduction at source). In addition, the resident must submit to the employer (the company you are working for) “the declaration of deduction for the family circumstances for people with taxable income from wages (when changing jobs)” until first payday of the year. Thanks to the tax system at source, most people living and working in Japan do not need to file their own personal income tax returns.
Cases of self-declaration and payment of personal income tax:
- The person leaves Japan before the end of the tax year.
- When the person’s company is working outside of Japan, no income tax is withheld from the employee.
- That person works for more than 1 company.
- If the person’s annual income is over 20,000,000 yen.
- If the person has an external income of more than 200,000 yen
Note: non-residents cannot file “reductions for taxable income from wages (when changing jobs)”.
Year-end tax adjustment
Non-residents are not subject to year-end tax adjustments.
In the case of residents, when you receive your last salary of the year, the difference between the total annual income tax paid by the company every month for you, and the actual amount of income tax payable (the annual tax amount ) will be settled. This procedure is called “year-end tax adjustment”.
Usually, the company or union will help you make your personal income tax adjustments at the end of the year. You will receive a Tax Adjustment Form (年末調整) and simply fill in the information.
However, if you do your own tax adjustment, maybe after calculating the actual personal income tax payable, you can do one of the following two ways to receive a Tax Adjustment slip (年末調整).
Visit the website NTA Tax Authority >> Download the tax return and fill in the Tax Adjustment Form (年末調整).
Go to the Tax Department (税務署 – Zeimusho) or the People’s Committee of the District / City (区役所、市役所 – Kuyakusho, Shiyakusho) where you live to do the procedure. The best time is in February every year. The tax staff is very dedicated and specific, so you can rest assured.
You can also keep up to date with new tax policies prescribed by the Japanese Government at the website Japanese Tax Service. Note: the tax refund from year-end personal income tax adjustment only applies to those who have worked and paid taxes.
How to adjust tax at the end of the year
The documents the company will distribute to the Intern include:
給与所得者の基礎控除申告書(兼)給与所得者の配偶者控除等申告書(兼)所得金額調整控除申告書: Basic deduction declaration for people with salary income / Withholding declaration for spouse, cum Income adjustment deduction declaration.
給与所得者の扶養控除等(異動)申告書: Deduction declaration for the person you support monthly.
給与所得者の保険料控除申告書: Insurance premium deduction declaration.
For the Insurance Withholding Statement, usually the intern does not need to fill it out. Or, if you are interested, you can find out at the website Japanese Taxationon Insurance policies that are regulated by the Government to withhold personal income tax. When coming to Japan, you should have documents such as household registration book (notarized copy), birth certificate (original) or the above documents to be able to flexibly use when needed.
Don’t hesitate to contact Sugoi Japan on messenger to get consulting about how much you can get refund in easy!