Taxes in Japan

August 10th, 2010By Category: Uncategorized

There’s no getting away from it, you’re going to have to pay your taxes in Japan: so how, when and how much should you expect to have to pay? Please note that we are not tax accountants and this section is not an official tax site, just a starting point for you to get an overview of the tax system in Japan. Please read our disclaimer. Taxes in Japan are broken up into two major categories: National Tax and Local Tax. After that, it gets very complicated! There are more than 25 additional taxes on “consumption”, including everything from “bathing tax”, “golf course utilization” (no, this isn’t a joke!) to “gasoline tax” (part of the reason prices are 2 to 3 times higher than in the US). This may sound alarming, but the vast majority of these taxes are already included in the price you pay. An overview of the various tax types follows…

Income tax

The Japanese income tax is progressive, meaning that the more you make the higher the rate of the tax to be paid will be. In 2007 the tax rate was between 5-40%. There is a standard basic deduction of 380 000 yen per year for each individual – if you earn less than that amount you will not be required to pay any income taxes. When calculating your earned income keep in mind that apart from your regular salary, any bonuses, house allowances and so on is also subject of taxation. Commutation compensation is non-taxable up to a certain amount (depending on way of commutation). Commutation by public transportation has a non-taxable amount of up to 100 000 yen per month in reasonable fares. There are a number of deductions that can be made and especially if you have your own company the possibilities for deductions is well worth checking out. As your income tax obligations as a foreigner in Japan can be quite complicated – it’s highly recommended that you talk to a tax advisor before coming to Japan.

Status and responsibilities

Japan bases income tax obligations on resident status which is divided into Resident and Nonresident. In most cases, you will be responsible for income tax generated outside of Japan if you are a resident of Japan. Conversely, you may be responsible for income generated in Japan even if you are a non-resident, depending on: 1) Whether the actual transfer of funds takes place inside or outside of the country and 2) On the type of tax treaty that your country has with Japan.

A Resident is defined as someone who has domicile in Japan or has had a residence in Japan for one year or more. Those who do not fall under the status of Resident will be considered a Non-resident. Resident status is then divided into Non-permanent resident and Permanent resident.

If you are not a Japanese national and have have stayed in Japan for an aggregated time period of five year or less within the last ten years you are considered to be a Non-permanent resident otherwise you will be taxable as a Permanent resident. A Non-permanent resident has to pay taxes for incomes earned in Japan as well as incomes from sources abroad that are paid in Japan. A Permanent resident is taxable for all incomes from Japan and abroad. Filing a Tax Return

The individual income tax is based on a self-assessment system in Japan. Each taxpayer is required to calculated their tax and fill out a Final Tax Return form to give to the Tax Office. The final tax will then be calculated and adjustments will be made regarding the amount of actual tax you have paid and the amount you should have paid. Depending on how much you have paid in during the year and your final tax you might need to pay in extra or you could get a tax returns paid back to you.

If you are employed and you’re company withdraws money from your salary to pay taxes you might not need to to fill out a Tax return. Any final year adjustments will be made by the company and the adjustments will be seen on your pay slip. However you can always fill out a Tax return if you for example have deductions that you wish to make. If your company do not handle your tax payments or if your total employment income exceed 20 million yen you need to fill out a Tax Return. Also note that it is the total earned income that you are taxable for which means that if you have more than one employer or engage in other income earning activities you need to add all the incomes together.

The Tax Return should be handed in to the Tax Office where you live during the period of February 16 to March 15 of the following year and the tax should be paid before March 15.

Author of this article


GaijinPot is an online community for foreigners living in Japan, providing information on everything you need to know about enjoying life here, from finding a job and accommodation to having fun.

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  • Philip Gregory says:

    Don’t go home. It would be idiotic. Stay in Japan.

  • Kaylene says:

    I am an american expat. I have lived in japan for over 25 years. I want to go home. Will I have to make up income tax and Social Security taxes for the last 25 years?

  • Deepak Kaushik says:

    Thank you for bringing more information about Taxes in Japan. I’m truly grateful and really impressed. Cheers !!

  • I have a question and am seeking answers.

    I am a retiree from the US Air Force living in Japan
    (only 3 years thus far I retired Nov 2009). My wife is from here and I
    have a residence card. My wife doesn’t work and claims zero in her Japanese
    tax and included me as also earning zero in Japan.

    I have a pension that I receive from the US
    Government for serving 26 years.

    I do not work or haven’t yet so no SOFA agreement
    applies to me.

    We barely make it, but we manage so far because of
    VA (the Post 9/11 GI Bill or Chapter 33) paid my rent money when I attended
    college full time face to face (in which I did and am finishing up on).

    Here is what is confusing, I pay US taxes on my
    pension at 5% approx. every month but “NOW” am being told that I have
    to pay Japanese taxes on my pension and VA money as well (even though it is
    considered a foreign pension). My VA is not taxed and won’t be according
    to US law; it’s a earned entitlement.

    I checked the treaties and even explained to the
    city office but they didn’t seem to understood and told me that I
    have to pay on my “pension money and even my VA money” since
    I receive it here in Japan.

    ** I didn’t receive it in Japan – it is deposited
    into my American bank in the states and I have to withdraw it (on base) and
    then exchange it off base for yen to pay my apartment which cost me almost $15 thousand in rent this year.

    I cannot afford a lawyer to get this sorted out –
    the City Office is still trying to figure this out. They told me long ago
    that I did not have to pay taxes as long as I didn’t earn a salary here in
    Japan (but now are saying they made a mistake and I have to pay back taxes).
    They are not for sure and are checking into it more precisely.

    How can I get double taxed on a pension when I earned it from the US
    Government, paid by the US Government and is derived
    from the United States for a retirement?

    I love Japan but this is confusing.

    I am dreading Social Security/…..

  • I am a retiree. I do not work and my wife is sponsoring me to live here. I am an American Citizen and receive a small pension for retiring from the USAF. The Japanese City Hall is double taxing my pension. I have lived here for 3 years. How can a retiree get double taxed – isn’t there a treaty in place?