Explaining Japanese resident tax rates, calculation methods, and ways to reduce taxes for foreigners!
Even foreigners must pay resident tax when they work and earn money in Japan. In this article, we will explain Japan's resident tax, including tax rates, calculation methods, and ways to reduce tax, for foreigners.
What is Japanese resident tax?
Resident tax is a “resident tax” and is a tax paid to the prefecture or city, ward, town or village. It is used for infrastructure development and public services in prefectures and municipalities. Foreigners are also required to pay resident tax in the prefecture or city where they live.
People who need to pay Japanese resident tax
For foreigners, the range of income subject to resident tax changes depending on conditions such as the length of time you have lived in Japan . First, figure out whether all of your income is subject to resident tax, or only a portion of it.
Resident tax paid by non-residents
A person who has an address in Japan or who has lived in a fixed place for more than a year even without an official address is called a "resident," and a person who does not have an official address is called a "non-resident." Non-residents pay resident tax through withholding on the income they earn from working in Japan.
Resident tax paid by non-permanent residents
Residents are further divided into two categories: "non-permanent residents" and "residents other than non-permanent residents." A non-permanent resident is a resident who does not have Japanese nationality and has lived in Japan for less than 5 years in the past 10 years.
In addition to income earned in Japan, non-permanent residents pay resident tax when income earned overseas is remitted to Japan and received. If you receive income earned overseas overseas, you will not pay Japanese resident tax and will be subject to the tax system of that country.
Resident tax paid by residents other than non-permanent residents
Roughly speaking, residents other than non-permanent residents are people who have lived in Japan for a long time and whose living conditions are almost the same as Japanese people. Residents other than non-permanent residents are subject to resident tax on all income earned in Japan and overseas.
Japanese resident tax rate and calculation method
The resident tax rate is 10% , and it is levied on the amount of income minus expenses and deductions. there is 5,000 yen called the "per capita rate."
For example, if your annual income is 3 million yen and your expenses and deductions are 500,000 yen, your resident tax will be 250,000 yen, which is 2,500,000 yen, which is 3 million yen minus 500,000 yen, multiplied by 10%. There is also a 5,000 yen per capita tax, so the total resident tax will be 255,000 yen.
How to pay resident tax
Resident tax is paid withholding from your salary if you are a company employee, and you must pay it yourself if you are self-employed. If you choose to pay by yourself, pay in 4 installments: June, August, October, and January of the following year. Payment methods include debiting your bank account or paying by credit card.
What happens if I don't pay resident tax?
You must pay resident tax, but you may not be able to pay it due to lack of money, or you may accidentally forget to pay it. Here we will explain what will happen if you do not pay resident tax. However, if you are a company employee, it will be automatically deducted from your salary, so we assume that if you are self-employed, you will be paying it yourself.
You will receive a notification asking for payment
If you do not pay your resident tax, you will receive a notice asking you to pay it early. The notice also includes a payment slip for payment, so use that to pay.
A late fee will be charged depending on the number of days the payment is late.
If your payment is late, a penalty fee will be charged depending on the number of days you are late, and your resident tax will be higher than if you paid normally.
Your property may eventually be seized.
If you receive a notification and ignore it, you will receive a second and third notification several times. If you ignore all of that, your property may eventually be seized.
If you cannot pay, please consult the government office.
If you are unable to pay your resident tax, do not ignore the notice, but consult your local government office. There are systems that allow residents to pay their resident tax in installments for those who cannot pay it all at once, or to defer the payment to next year.
How to reduce resident tax?
If you want to pay your resident tax as cheaply as possible, we recommend taking advantage of deductions and exemptions.
Take advantage of deductions
A deduction is a “deduction” that reduces the amount of your income that is subject to tax. For example, a person who supports a family such as a wife or children can take advantage of the ``spousal deduction'' and ``dependent deduction.'' Additionally, if you are injured or sick and pay medical expenses, you may be eligible for a medical expense deduction.
There are many other types of deductions, so be sure to check them out and find one that you can take advantage of.
Take advantage of exemptions
Reduction of taxes and exemptions stands for “reduction of and exemption,” and it is a system that reduces resident tax or eliminates the need to pay it for people who are struggling to make ends meet. It can be used by people who have quit their jobs and become unemployed, or whose income has decreased significantly from the previous year.
The amount that can be reduced depends on the conditions, and you may not have to pay the entire amount, or you may only have to pay a portion. Also, the system may differ slightly depending on the city, ward, town or village, so be sure to check the exemption system of the city, ward, town or village where you live.
Japan's resident tax rate is 10%, and the range of payment varies depending on whether you are a resident or a non-permanent resident. Please note that if you do not pay, you will be charged a late fee and end up paying more. The key is to take advantage of systems that can lower your resident tax, such as deductions and reductions.