There are several types of taxes in Japan paid on the national, prefectural or municipal levels. These include income tax (national), resident and sales tax (prefectural and municipal levels). All residents in Japan, including alien residents, must pay taxes.
Income and resident taxes are automatically deducted from your monthly salary. All other income earners who do not participate in the withholding tax system must file their tax return at the tax office and pay their resident tax to the local government office.
Income tax is paid on all earnings between January and December of a given year. It is usually deducted from the employee's monthly salary (withholding tax system).
For foreign nationals, the taxation will differ based on the individual's status of residence (resident or non-resident). Residents are taxed at the same rate as Japanese citizens, whereas non-residents are taxed 20% of their income. For the latter, some exceptional cases of exemption are available through tax laws.
Income tax is calculated based on total annual income and paid insurance fees. Surplus or deficit in income tax calculations will be settled. Income tax returns are usually filed by employers.
For individuals with non-deducted taxes, multiple sources of income, or extra income (besides salary), income tax returns must be filed at the local tax office, from February 16th to May 15th of the following fiscal year.
A certificate of income and withholding tax will be issued from the Department of Revenue or issued through your employer. This certificate is necessary to renew your visa or alien registration as proof of tax payments and should be kept in a safe place.
The following items are required to file your income tax return:
- Certificates for income of the previous year (the withheld tax slip and payment certificate)
- Necessary items for tax exemption for dependents (birth certificate of dependents or a remittance certificate to dependent(s) living in her/his home country)
- Necessary items for insurance premium deduction (Deduction Certificate of Insurance)
- Alien Registration Card
- Hanko (Seal) or Signature
Individuals with large medical expenses or who have recently purchased a new home will receive a partial tax refund after filing their income tax return.
Based on personal income from the previous year, all individuals with a valid address are subject to pay a resident tax to the local government on January 1st, regardless of their nationality.
For salaried employees, tax payments are made in installments and will be deducted from your monthly paycheck from June to May. Individuals whose taxes have not been deducted will receive a payment notice from the government and must make the payment at a financial institution or at the post office.
Sales tax applies to most items purchased. The current tax rate is 5%. The listed price usually includes the sales tax.
Automobile tax applies to individuals who own a car before April 1st of a given year. The local government issues the tax payment notice and payment must be made at the bank by the due date.