Living in Japan

Japan Tax System Basics: Income Tax, Resident Tax and Filing

By JAPN Published · Updated

Japan Tax System Basics: Income Tax, Resident Tax and Filing

Income Tax Structure

Japan levies national income tax on a progressive scale from 5 percent on income up to 1.95 million yen to 45 percent on income exceeding 40 million yen, plus a 2.1 percent surtax for reconstruction from the 2011 earthquake. Resident tax (juminzei) is levied by your municipality at a flat rate of approximately 10 percent of the previous year’s income. Combined effective tax rates for typical foreign worker salaries of 3 to 5 million yen range from 15 to 25 percent including national and resident taxes.

Filing and Payment

Salaried employees have income tax withheld by their employer through the nenmatsu chosei (year-end adjustment) system that functions as automatic filing for most workers. Self-employed residents and those with income from multiple sources must file a kakutei shinkoku (final tax return) by March 15 at the local tax office or through the e-Tax online system. Resident tax bills arrive by mail in June for the previous calendar year’s income, payable in four installments or a single lump sum. The My Number Card enables online tax filing through the e-Tax portal.

Income Tax Basics

Japan’s income tax system uses progressive rates from 5 percent (up to 1.95 million yen) to 45 percent (above 40 million yen), plus a flat 10 percent residence tax (jumin-zei) assessed by your municipality. Employers withhold income tax and residence tax from monthly salary through the pay-as-you-earn system (gensen choshu). Most salaried employees do not need to file a tax return if they work for a single employer, as the year-end adjustment (nenmatsu chosei) handled by the employer finalizes their tax liability. Self-employed individuals and those with income from multiple sources must file a tax return (kakutei shinkoku) by March 15. Tax offices (zeimusho) provide free consultation and assistance, though English support is limited. Deductions include social insurance premiums, medical expenses above 100,000 yen, earthquake insurance, and dependents. The furusato nouzei (hometown tax) system allows taxpayers to redirect a portion of residence tax to municipalities of their choice in exchange for regional specialty gifts, effectively providing premium food products and local goods at a subsidized rate.

Foreign residents are classified as either resident taxpayers (those who have lived in Japan for one year or more, or intend to) or non-resident taxpayers, with different rules applying. Resident taxpayers are taxed on worldwide income, while non-residents are taxed only on Japan-sourced income. The fiscal year runs from January 1 to December 31. Employment income is taxed through withholding, but side income, rental income, and foreign-sourced income may require a self-filed tax return (kakutei shinkoku) due by March 15. Tax offices provide free assistance during filing season, and English-speaking tax accountants (zeirishi) charge 30,000 to 100,000 yen for return preparation.

Filing a Tax Return

Most employees in Japan never file a tax return because their employer handles income tax through gensen choushu (withholding at source) and performs nenmatsu chousei (year-end adjustment) in December to reconcile the annual tax bill. However, foreign residents must file their own kakutei shinkoku (final tax return) at the local tax office (zeimusho) between February 16 and March 15 if they: have income from multiple employers, earn freelance or business income, have foreign-source income, or want to claim deductions not covered by year-end adjustment (such as significant medical expenses exceeding 100,000 yen annually, or hometown tax donations through the furusato nouzei system).

The furusato nouzei (hometown tax) system allows residents to redirect a portion of their residence tax to municipalities of their choice in exchange for local specialty gifts (return gifts worth up to 30 percent of the donation amount). Effectively, you pay the same total tax but receive Hokkaido crab, Yamagata cherries, Miyazaki wagyu, or thousands of other regional products as a thank-you gift. The system is enormously popular, with platforms like Satofuru and Furusato Choice operating as online catalogs of municipal offerings. The one-stop exception (wansutoppu tokureisho) allows salaried employees with five or fewer donation municipalities to claim the deduction without filing a full tax return.

This content is for informational purposes only and reflects independent research. Details may change — verify current information before making travel plans.