Now, that's too much taxes! Every country has its own income tax system and all tax systems (and rates) are not created (or applied) equal. Having gone through a small research on Japanese income taxes recently, I have put down everything I have learned, including:

Principles of the Japanese Income Tax System, detailing who needs to do what in terms of taxes,

Japanese Income Tax Rates, for the 2001-2002 fiscal years,

Japanese Social Contributions, giving an overview of what they are without going into the complicated details,

Examples, showing what the taxes would be like in different situations,

Glossary of Japanese income and tax related terms,

References, to learn more on the subject.

This page details Japanese income taxes () and resident taxes (). I only gives the basics on social insurance contributions () because these vary depending on the employment contract, type of industry and company.

Note that Japanese tax returns must be filed by March 15th 2002.

Principles of the Japanese Tax System

Is that a taxpayer too? A taxpayer in Japan is defined as anyone spending more than 6 months in the fiscal year on Japanese soil, regardless of nationality, residence status, employment status, source of income and current location (bank) of income. If you have spent less than 6 months (cumulated) in Japan, you need to declare your taxes in the country where you have spent 6 months in the fiscal year.

Taxpayers in Japan are divided in 3 different groups for which taxes are applied differently.

	Resident: A person who has an address (domicile) in Japan and has resided continuously in Japan for one year or more is regarded as a resident. Note that if a person enters Japan as an employment income earner with the intention to reside in Japan, he/she is presumed to be a resident immediately after the entry into Japan unless his/her stay in Japan is obviously recognized as being for not more than one year.
	Non Permanent Resident: A person who has no intention of living permanently in Japan and who has had an address (domicile) or residence in Japan continuously for not more than five years is regarded as a non permanent resident.
	Permanent resident: All resident other than non-permanent residents are permanent residents.
	Non resident: All individuals who are not residents are non residents.

The way Japanese income taxes are applied depend on the taxpayer situation given in the table below.

	Source of Taxable Income
	Income from Sources in Japan		Income from Sources abroad
	Paid in Japan	Paid Abroad	Paid in Japan	Paid Abroad
Non Permanent Resident	Taxable	Taxable	Taxable	Only the portion deemed remitted to Japan is taxable. (this means that the remainder retained abroad is not taxable.)
Permanent Resident	Taxable	Taxable	Taxable	Taxable
Non resident	In principle taxable		Not taxable

This guy better change job... Employees in Japan (Japanese nationals and foreigners) have their taxes automatically taken out (by law) of their monthly paycheck by their employer (that is referred as the withholding income tax), and the amount of these taxes are usually a bit higher than the real income tax rates. At the end of the year, the real income taxes are calculated (referred as assessment income tax) and the difference between the withholding tax and the assessment tax is returned to the taxpayer.

Taxpayers who are employed (subject to the withholding income tax) and who have a gross income of less than 20,000,000 yens in the fiscal year do not need to to file any tax return or anything, as these are automatically done by the employer. For those lucky ones making more than 20 million yens in the year, just go to the tax office near you, often next to your Kuyakusho, and ask to get help to fill the forms. With help, it's trivial to fill these forms; without help however, it's a real pain.

Japanese Income Tax Rates (2001-2002)

How much do they want? Japanese income taxes are in 2 parts: national (or Income Tax) and local (or Resident Tax, which includes both prefectural taxes and municipal taxes). I am leaving out inheritance taxes, consumption taxes (5%) and gift taxes here, as they are quite complicated. I am also simplifying the deduction section because it also complicated. One specific aspect in which I won't get into here is that the deductions used to calculate the taxable income are (a tiny little bit) different for national income taxes and prefectural/municipal income taxes. These simplification result in an error in the total amount of taxes of less than +/-0.5%.

All numbers are given in millions of yens (0.38m means 380,000 yens and 2.2m means 2,200,000 yens).

*What*	How much (examples are given in following)
Income: This is the number that includes all salaries, bonuses, fees... Values are the ones on your contract, not on your paycheck (since taxes are automatically withheld at the source).	A
Tax Breaks: One typical tax break is pre-paid housing by the company (deducted from your salary). If the company is paying your 2,000,000 a year apartment (but these 2,000,000 is taken out of your monthly salary), you basically get a tax free apartment, and enter the 2,000,000 number here as a tax break.	B
Gross Income	C = A-B
Standard Deduction: What the government thinks you (only yourself, as an individual) should be spending to live and work.	D is calculated as follow: - If C < 6.6m then D = 20% of C + 0.54m - If C < 10.0m then D = 10% of C + 1.20m - If C > 10.0m then D = 5% of C + 1.70m
Personal Deduction: Why is this ridiculous number here and not in the previous section? I don't know.	E = 0.38m
Dependants Deductions: If you have kids, a non-working wife/husband, a mother in law...	F can include the following (but all rates are not detailed here): - allowance for spouse (0.38m for non-working spouse), - allowance for dependants aged < 16 (0.38m per dependant) - allowance for dependants aged 16 to 23 (0.63m per dependant) - allowance for dependants aged > 70 (0.58m per dependant) - allowance for handicapped dependants - allowance for widow or widower - allowance for working students
Other Deductions: mainly insurance and medical stuff. Note that if your insurance contracts are not with Japanese insurance companies, you cannot deduct your premiums!!	G can include the following (but rates are not detailed here): - accidental loss, - medical expenses, - (Japanese) social insurance premiums, - (Japanese) life insurance premiums, - (Japanese) fire and other accident insurance premiums, - contributions (charity...).
Taxable Income: The magic number on which tax rates are applied.	H = C-D-E-F-G
National Tax: That part goes to the government for them to pay the roads, public school teachers, official receptions and parties, the Emperor family...	I is calculated as follow: - If H < 9m then I = 20% of H - 0.33m - If H < 18m then I = 30% of H - 1.23m - If H > 18m then I = 37% of H - 2.49m
Prefectural Tax: That part goes to the prefecture (whether it is a To, a Ken, a Do or a FU).	J is calculated as the sum of each of the following: - 2% of the part of H which is < 7m - 3% of the part of H which is > 7m
Municipal Tax: That part goes to the city (the Ku) for you to enjoy 300 yens entrance fee to the public swimming pool, the public library and so on...	K is calculated as the sum of each of the following: - 3% of the part of H which is < 2m - 8% of the part of H which is in [2m, 7m] - 12% of the part of H which is > 7m
Total Taxes: This is it, your taxes!	L = I+J+K

Japanese Social Insurance

All employees locally hired in Japan must contribute to the Japanese social system, including:

	Japan Health Insurance System (), which covers all employees and their dependants for medical and dental expenses, at hospitals and clinics which operate under the system. It does not cover any expense outside Japan. The rate is officially 8.5% of the taxable income. However, it seems that each foreign employee I know is paying a lot less than that (about 2%), so I don't know exactly how it is calculated.
	Worker's Compensation Insurance (), which protects employees and their families from hardships brought about by injury, sickness, disability or fatality suffered on the job, or while commuting to and from the workplace. The company usually pays all of it.
	Unemployment Insurance (), which provides assistance to employees who lose their job as a result of involuntary or voluntary dismissal, corporate restructuring or bankruptcy. The rate is 1.15% of the taxable income, including 0.4% paid by the employee and 0.75% paid by the company.
	National Pension Insurance (), which prepares ones retirement. Although most foreigners don't care about that one, it is mandatory. However, upon leaving Japan for good, you may claim back part of your premiums to the government. The rate is 17.35% of the taxable income, including 8.675% paid by the employee and 8.675% paid by the company.

Example1

All foreigners are equal before the law Here is your typical gaijin, working in Japan to make some yens. Employed in a foreign firm as a global employee, he is single, no dependants (but his 2 or 3 girlfriends, but the government doesn't want to know about it), makes 8,000,000 yens a year and all insurance plans are in foreign insurance companies; premiums are therefore not deductible. Let's see... All numbers are given in yens.

What	How much
Income	8,000,000
Tax Breaks	0
Gross Income	8,000,000
Standard Deduction	2,000,000 = 1,200,000 + 10% of 8,000,000
Personal Deduction	380,000
Dependants Deductions	0
Other Deductions	0
Taxable Income	5,620,000 = 8,000,000 - 2,000,000 - 380,000
National Tax	794,000 = 20% of 5,620,000 - 330,000
Prefectural Tax	112,400 = 5,600,000*2/100
Municipal Tax	349,600 = 2.000,0003/100 + (5,620,000-2,000,000)8/100
Total Taxes	1,256,000 or 15.70% of the Income

Example2

I agree, this is not my best portrait! Same type of guy as in example 1 (different girlfriends), except that the company advances the money for the 2,000,000 per year apartment rent. This example shows how cool a simple help from a company can result in a very cool tax reduction (a 6.5% total tax reduction if you compare the results of example 1 and 2). All numbers are given in yens.

What	How much
Income	8,000,000
Tax Breaks	2,000,000
Gross Income	6,000,000 = 8,000,000 - 2,000,000
Standard Deduction	1,740,000 = 1,260,000 + 20% of 6,000,000
Personal Deduction	380,000
Dependants Deductions	0
Other Deductions	0
Taxable Income	3,880,000 = 6,000,000 - 1,740,000 - 380,000
National Tax	446,000 = 20% of 3,880,000 - 330,000
Prefectural Tax	77,600 = 3,880,000*2/100
Municipal Tax	210,400 = 2.000,0003/100 + (3,880,000-2,000,000)8/100
Total Taxes	734,000 or 9.17% of the Income

Example3

Look at this pimple, it's rilly rilly annoying Here, we have a married guy with 3 children (nobody else in the family is working, all children are under 16) with a 20,000,000 yens a year global income (pretty good) plus receiving dividends (from various investments) of 600,000 yens. The company advances the money for the 5,000,000 yens a year downtown Osaka duplex and insurance premiums (all in Japanese insurance companies) amount for the year to 900,000 yens. Let's see what the government does to him...All numbers are given in yens.

What	How much
Income	20,600,000 = 20,000,000 + 600,000
Tax Breaks	5,000,000
Gross Income	15,600,000 = 20,600,000 - 5,000,000
Standard Deduction	2,480,000 = 1,700,000 + 5% of 15,600,000
Personal Deduction	380,000
Dependants Deductions	1,520,000 = 4 * 380,000
Other Deductions	900,000
Taxable Income	10,320,000 = 15,600,000 - 2,480,000 - 380,000 - 1,520,000 - 900,000
National Tax	1,866,000 = 30% of 10,320,000 - 1,230,000
Prefectural Tax	239,600 = 7,000,0002/100 + (10,320,000-7,000,000)3/100
Municipal Tax	858,400 = 2.000,0003/100 + (7,000,000-2,000,000)8/100 + (10,320,000-7,000,000)*12/100
Total Taxes	2,964,000 or 14.38% of the Income

Glossary

The following gives several Japanese income, insurance and tax related terms, including their kanji writing, pronunciation and meaning. To learn more about kanji, please refer to my kanji learning pages.

General Terms

	Kyuuyo meisaisho	Salary slip
	Shikyuu	Income
	Koumoku	Item
	Kingaku	Amount
	Koujo	Deductions
	Zei	Tax
	Goukei	Total

Income Terms

	Soushikyuugaku	Gross salary
	Kihonkyuu	Base salary
	Kihon chouseikyuu	Adjustment to the base salary
	Tsuukin teate	Transportation payment
	Zangyou teate	Overtime payment
	Kazei shikyuugaku	Declarable income
	Kazei taishougaku	Taxable income

Insurance Terms

	Kennkou hoken	Health insurance
	Kosei nenkin	National Pension Insurance
	Kosei kikin	JSDA Pension Fund
	Koyou hoken	Unemployment Insurance
	Rousai hoken	Worker Compensation Insurance
	Shakai hoken	Health insurance for employees
	Kokumin hoken	Health insurance for self-employed

Tax Terms

	Shotokuzei	National income tax
	Juuminzei	Local (prefectural + municipal) income tax
	Shohizei	Consumption tax (VAT)

References

Tip Of The Day : Tax books are boring! Guide to Japanese Taxes 1998-99 by Yugi Gomi
Published by Zaikei Shogosha Tokyo
ISBN 4-88177-167-1. 400 pages. 7000

Yes, they speak English (kind of...) The Tax Councel Office of Tokyo Regional Bureau
(03) 3821 9070 (English) or http://www.taxanser.nta.go.jp.
Open 9:00AM ~ 5:00PM

This page was last updated by JP on 04/23/02.