Income Tax

Income Tax is tax charged on personal incomes such as income occurring from business, salary and bonuses paid out by employer.

One way of paying tax is to declare one's earnings to pay tax at the tax office that has jurisdiction over one's place of residence, in the same way with someone who is running a business. Another way is for the employer that pays the salary to deduct the income tax from the salary and pay tax on behalf of the income earner as income tax on salary.

Withholding tax charged on income

This refers to tax payment to the government made by the employer by deducting income tax in paying out salary. The slip indicating the total amount of salary paid out from 1 January to 31 December through the employer and amount of income tax withheld is called the “Certificate of Income and Withholding Tax”, which is handed over by the employer to the income earner in January the following year.

It must be kept in a safe place as it is an important document that proves one's income and tax (Required when filing an income tax return).

Year-end Tax Adjustment

With most income earners, the salary payer is to collect income tax from the monthly salary, and the excess or deficit tax is to be settled by the salary payer calculating the year's income tax amount on paying out the last salary or bonus in December. This is referred to as the Year-end Tax Adjustment.

Income Tax Return

Residents (Those who have a domicile in Japan or have held a domicile without interruption for over a year up to the present time) who are paid salaries beyond a definite amount of income from over two places of employment, or those who are not getting their tax withheld as their salary is paid overseas, and those who are not income earners, must pay income tax by calculating the amount of income tax on their income for the year starting 1 January to 31 December, and file a tax return to the Tax Office between 16 February to 15 March the following year.

This procedure is referred to as Filing an Income Tax Return. The form can be obtained from the Tax Office or the Local Municipal Taxation Desk. In addition, Income Tax Return is not required with nonresidents (Those without a domicile whose period of earning is less than a year up to the present time) whose only income is their salary, as tax is paid at a tax rate of 20% from the salary.

Moving Out of Japan

(To return to one's own country or to be away from Japan for over a year)

When a person who is supposed to be filing an income tax has to exit the country before the date of filing the tax return, one could either 1) designate a tax agent, notify the Director of Tax Office, and request the tax agent to file the return, or 2) file a temporary tax return before exiting the country.