How can an Umbrella Company Help with Contracting in Japan?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Japan. Even better, most are experts in Japan and expat tax law, meaning they’ll also help you optimise your earnings in Japan.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Japan.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Japan, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Japan and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Japan
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 in Japan
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 Filing as a Contractor 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, https://www.e-tax.nta.go.jp/|
How to File Taxes in Japan as a Contractor
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(link is external).
Step 3: Download the ‘Documents to Submit’ form available here(link is external).
Step 4: Enter e-tax(link is external) 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(link is external).
- 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.
Tax Figures in Japan
|Currency||Japanese Yen (JPY)|
|Tax-free Threshold in Japan||None|
Tax Residency in Japan
When do you become a tax resident in Japan
You become a tax resident in Japan when:
For the purposes of taxation in Japan, taxpayers are classified into 3 categories:
- 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.
- 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.
- Non-resident: Individual who has lived in Japan for less than 1 year and does not have a primary base of living in Japan.
Does the 183 day rule apply in Japan
Am I taxed on my global income in Japan
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.
Can you set up your own Limited Company in Japan?
|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.|
Tax Calculator in Japan
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 in Japan
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 in Japan
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!
A Contractor’s Guide to Work Permits in Japan
Immigration is one of the primary concerns for any contractor hoping to start working in Japan. Permanent employees will find it easy to get their Japan work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
There are many statuses of residence for individuals working in Japan, each allowing the holder to work in a specific field (e.g. professor, artists, religious activities, business manager, legal/accounting services, medical services, researcher, education, engineering, entertainment and skilled labour). These various Japanese residence permits are dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Japan is difficult because the work visa is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
Work Permit Processing Time
Can Work Permit be Processed in Country?
Certificate of Eligibility (COE) applications need to be done in Japan’s immigration office. After receipt of COE, applicants continue their visa applications from their country of origin.
Work Permit Application Process
A Japanese sponsor such as an employer, school or spouse makes the application on behalf of the individual wishing work in Japan. They submit the application at their local immigration office in Japan. Once obtained, a Certificate of Eligibility is valid for three months, in which time the visa application should be made. Applications for a work visa should be made at a Japanese embassy or consulate in the applicant’s home country.
Visa applications must be accompanied by the following documents:
• Certificate of Eligibility (Original document and an additional copy)
• Completed visa application form
• Application fee
*Applicants may need additional documents, depending on their nationality
Switch Business Visa to Work Permit?
No, as the applicant still needs to apply for the COE in Japan and bring the COE back to their country of origin to apply for the visa.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Japan (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Japan. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Japan and match contractors with the right company for them. If you’ve already secured a contract in Japan, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).