Tax sytem in Japan (income tax and resident tax)：所得税と住民税
Employment income of foreign employees working in Japan is subject to two kinds of taxation. One is national income tax (including the special income tax for reconstruction) and the other is inhabitant tax (local tax).
Income tax is administered by Tax Offices and inhabitant tax is administered by municipal offices.
Japan has the withholding tax system on employment income in which employers (salary payers) withhold the amount of income tax of their employees (salary recipients) from their salaries and pay the tax to the government on behalf of the employees. All employers are required to withhold and pay their employees’ income taxes levied on their salaries.
The taxation methods and scope of taxable income differ depending on whether an employee is a “resident” or “non-resident.”
- Residents and non-residents：「居住者」と「非居住者」
A “resident” is an individual who has an address in Japan or who is currently living in Japan and has lived continuously for more than one year. As a general principle, a foreigner who is a resident will be taxed at the same rate as Japanese nationals in general, according to his or her income.
A “non-resident” is an individual who does not fit into the resident category. As a general principle, he or she will be taxed at a rate of 20% of income.
- How to pay (withholding tax and filing income tax returns)：納税方法（「源泉徴収」と「確定申告」）
People who receive salaries and bonuses from companies (salaried workers etc.) (salary income earners) do not need to file income tax returns. The company of a salary income earner carries out payment of tax by automatically deducting income tax from his or her salary each month, which constitutes tax payment. This is called “withholding tax.”
By contrast, Persons running businesses must calculate their own income, necessary expenses, amount of tax etc., and file this at their direct tax office. This is called “filing income tax returns.”
Inhabitants tax is the fee for living as a “inhabitant” in the region where you live. Local inhabitants tax is made up from a per-capita levy and a levy on income.
- How to pay inhabitants tax (special tax collection and ordinary collection)：納税方法
- special tax collection：特別徴収
In this method, the tax is paid at source through deduction (withholding) from your salary. The company which is the place of work for the salary income earner will deputize the payment. The company deducts the amount of tax from the monthly salary, and pays the monthly taxation amounts before the 10th day of the month following the month.
- Ordinary tax collection：普通徴収
People such as independent business proprietors, farmers and freelancers pay the tax in four installments over the course of a year through a tax notice which is issued by their municipal administrative office in June. The payment is carried out at the person’s nearest bank, post office etc. The person can also use bank transfer (automatic payment) which will debit the amount from his or her bank account or post office account.
Procedures for avoiding double taxation：税金をはらいすぎないために
There are many cases where funds earned through working in Japan are used to start up a business or used to purchase land in the person’s own country. There is a risk that in such cases double taxation could occur, whereby a large amount of tax is demanded by your own country. For this reason, Japan has signed bilateral tax treaties with the United States, China, South Korea, Brazil, Indonesia, the Philippines, Thailand and other countries (please refer to the following chart) to avoid double taxation; by proving that you paid tax on your
income in Japan, you can avoid double taxation when you return to your own country.
For details please visit： the National Tax Agency’s website.
・Final tax return “kakuteishinkoku” ：確定申告について
・Payslips ; Japanese-English contrast ：給与明細の項目を英語にしたら？
・Social Insurance System in Japan：日本の社会保険制度
・Health insurance system in Japan：健康保険制度
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