This column and next two or three columns will serve non-Japanese national employees an overview of the following Japanese taxations and social insurances.
(A)National income tax
(B)Local inhabitant tax
(C)Social insurance tax (premium)
(D)Health insurance tax (premium)
(E)Labor insurance tax (premium)
Individual taxpayers are classified as follows;
(a)Resident (who has domicile in Japan or has resided in Japan for continuous period of 1 year or more)
(b)Non-resident (who is other than a resident mentioned above)
There are two types of resident, i.e. Non-Permanent Resident (NPR) and Permanent Resident (PR).
NPR is a non-Japanese national and has lived in Japan for 5 years or less in the last 10 years. NPR is subject to National income tax on Japanese source income plus non-Japanese source income paid in or remitted into Japan.
PR is a resident other than NPR and is subject to National income tax on worldwide income.
Employment income typically consist of the followings;
(a) Basic salary
(c) Cost of living allowance
(d) Overseas allowance
(e) Housing allowance
(f) Children’s tuition allowance
(g) Tax equalization
(h) Foreign exchange allowance
(i) Other benefits
Actual commutation expenses reimbursed by an employer company is non-taxable.
Employer companies are required to withhold National income tax from employees’ monthly remuneration payment.
Tax return is required to file if annual taxable remuneration is more than 20 million yen or there is income (other than the remuneration) amounting to more than 200,000 yen in a taxable year. For those who have no tax return filing requirement, the monthly payroll withholding taxes are their final tax payments.
Personal expenditures are not deductible but there are Employment Income Deduction, Dependent Deduction and Basic Deduction among others defined under the Japanese Individual Income Tax Law.
Progressive tax rates, from 5% to 45%, are applied.
Taxable year is the calendar year and filing and final tax payment due date is March 15. Depending on the amount of last year’ final tax payment, there will be estimated tax payment requirement in the following year.