Tax In Japan

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in Japan is complying with the country’s tax system. As well as paying tax in Japan, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge. 

How do I calculate my taxable income: 

If you’re working in Japan under a permanent contract, many employers will handle your tax under a PAYE (pay-as-you-earn) system similar to that in the UK. This means that they calculate and process your taxes in Japan for you each month and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Japan, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in Japan through PAYE is left with the prospect of doing everything themselves.

Do you know much about Japan Tax Law? Does Japan have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Japan can range from 5 to 45 percent, and you need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in Japan, we can supply it to you free of charge. 

Using an Umbrella Company for Income Tax : 

Contractors in Japan are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Japan umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records). 

The companies are experts in Japanese taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Japan tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in Japan, many of whom are experts in tax and immigration laws. If you have any questions about tax in Japan, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Japanese work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Japan but without the overhead of directly dealing with the Japanese tax authorities. Get in touch with us today for some reliable advice on tax in Japan!

 

When Do You Need to Lodge Your Tax Return?: 
The calendar year ends on 31 December. The lodging of tax returns begins on 15 February. Note: refund returns (explained below) can be filed prior to 16 February so it is recommended that these returns be filed as early as possible.
Tax Filing Deadline : 
15 March
Can you file it online? : 
Yes, http://www.e-tax.nta.go.jp/
Currency: 
Japanese Yen (JPY)
Tax-free Threshold in: 
None
Grossed Income: 
Less than 1,950,000
Tax Rate: 
5%
Grossed Income: 
Between 1,950,000 and 3,299,999
Tax Rate: 
97,500 + 10% on excess of 1,950,000
Grossed Income: 
Between 3,300,000 and 6,949,999
Tax Rate: 
232,500 + 20% on excess of 3,300,000
Grossed Income: 
Between 6,950,000 and 8,999,999
Tax Rate: 
962,500 + 23% on excess of 6,950,000
Grossed Income: 
Between 9,000,000 and 17,999,999
Tax Rate: 
1,434,000 + 33% on excess of 9,000,000
Grossed Income: 
Between 18,000,000 and 39,999,999
Tax Rate: 
4,404,000 + 40% on excess of 18,000,000
Grossed Income: 
Above 40,000,000
Tax Rate: 
13,204,000 + 45% on excess of 40,000
How long does it take to set up: 
13 days
How much does it cost: 
10,450 + [0.7% of the capital amount or JPY 60,000], whichever is higher.
Is it easy? : 
Starting a business rank: 106. This low ranking means that setting up a Limited Company in Japan is relatively difficult.
How to File Taxes in: 

In Japan, income tax is based on a self-assessment system. Generally, taxpayers must file tax returns to declare income and deductions and pay the tax due. However, if you’re considered a resident for tax purposes, you may not be required to file taxes due to Japan’s Year-End Adjustment System. This means that wage earners have their tax withheld by the employer and receive an adjustment at year end to refund or pay the tax balance. You will be required to file a tax return if:

  • You leave Japan before the year ends.
  • Your annual salary exceeds 20 million yen.
  • You have employment income paid outside of Japan.
  • You have more than one employer.
  • Your additional income exceeds 200,000 yen.

Even if an individual is not legally required to file a final return, they can file a refund return if they qualify for any deductions.

Filing taxes in Japan for foreign workers:

Step 1: Collect the required documents for filing a tax return. This includes:

  • Individual number card
  • Statements of income.
  • Withholding statement obtained from employer (Gensen-choushu-hyou).
  • Residence card or alien registration certificate.
  • Receipts of payments for dependents, medical expenses, insurance contributions, life insurance, mortgage, earthquake insurance etc,)
  • Proof of other earnings (e.g. dividends, real estate income, capital gains).

Step 2: Fill out the Confirmation of the Type of Resident Status form.

Step 3: Download the ‘Documents to Submit’ form available here.

Step 4: Enter e-tax and fill out the form for a tax return. Print out the completed form.

Step 5: Send the forms from step 2-4 to the local branch of the National Tax Office.

Filing taxes for locals in Japan:

Step 1: Collect the required documents as outlined above.

Step 2: Tax filing can be done through the Final Return Filing Corner at the National Tax Agency’s website.

  • Final returns can be generated here by following the instructions on screen.
  • If the individual is self-employed, they will also fill out a blue final returns form.

Step 3: Print out the data generated and submit it through post, or using e-Tax.

Does the 183 day rule apply in: 

No

When do you become a tax resident in: 

For the purposes of taxation in Japan, taxpayers are classified into 3 categories:

  1. Permanent resident: A Japanese national or non-Japanese national who has been present in Japan for at least 5 years within the last 10 years.
  2. Non-permanent resident: Individual of a non-Japanese nationality who has not resided to maintained domicile in Japan for 5 years or more in the last 10 years.
  3. Non-resident: Individual who has lived in Japan for less than 1 year and does not have a primary base of living in Japan.
Am I taxed on my global income in: 

Yes, if you are a permanent resident. Non-permanent residents are subject to tax on income earned in Japan plus potentially non-Japan source income that is paid in or remitted to Japan. Non-resident taxpayers are only taxed on their Japan sourced income. 

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