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Employment Taxation for Expats in Japan

Submitted: March 2014

Residence

If you stay in Japan for longer than one year, you will generally be considered a resident (non-permanent). However, residency may apply on arrival, if it is clear that the nature of your proposed employment means that you will be present in Japan for longer than a year. To become a permanent resident you must stay in Japan for more than five years.

You may also be considered tax resident in Japan under the terms of a relevant tax treaty if you stay for longer than 183 days in Japan. Buying a home in Japan, or bringing your family to live with you in Japan, will also affect how soon you will be considered resident.

As a permanent resident you will be taxable on your worldwide earnings. As a non-permanent resident you will only be taxed on income earned in Japan, and on any foreign income you bring into the country. As a non-resident you will only be taxed on Japanese-sourced income.

Once you have moved into a property, you must register your address with the local ward office. Generally this should be done within two weeks of moving in to a property, but must in all cases be done within 90 days of your arrival in Japan.

Tax rates and allowances

The tax year runs from 1 January to 31 December. The standard income tax rates for residents and non-residents are the same (see below). Your employer will withhold tax from your wages or salary every time you are paid. For non-residents the withholding tax rate is generally 20.42%, though it can be possible to arrange to have it withheld at the same progressive rates as residents. Non-residents are not liable for local taxes. The tax withheld acts as a credit towards your final tax bill for the year.

Most benefits paid by an employer are taxable and must be included on your tax return; these include housing allowances, school fees and non-cash fringe benefits.

The following table shows the tax rates for 2014 in the various bands for taxable income, and the total tax rate including the surtax of 2.1%. The rates shown apply to both residents and non-residents:

Taxable Income (¥)RateRate (inc. surtax)
Up to 1,950,0005%5.105%
From 1,950,001 to 3,300,00010%10.21%
From 3,300,001 to 6,950,00020%20.42%
From 6,950,001 to 9,000,00023%23.483%
From 9,000,001 to 18,000,00033%33.693%
Over 18,000,00040%40.84%

Unless you have only had one employer during the year, and income tax has already been deducted correctly by that employer, you will usually have to submit a tax return after the end of the year. The return must be sent to the relevant municipal tax division. The deadline for submission is 15 March of the following year. You will also have to submit a tax return, and pay any outstanding taxes, if you are leaving Japan before the end of the year. There is no such thing as joint filing of tax returns in Japan. Penalties are charged for late filing.

If you earn significant amounts of income, which does not come from regular employment, you may have to pay provisional tax twice a year, at the end of July and November. The amount you pay will be calculated based either on an estimate of earnings for the current year, or on earnings in the previous year.

 

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