Income Tax
There are two kinds of income tax in Japan:
- National Income Tax - charged at a progressive rate up to 45% (45.945% including the 2.1% surcharge for the Special Income Tax for Reconstruction).
- Residence Tax - charged at a flat 10%
Both of these taxes are applied to taxable income, which is total income after applying various income deductions. Tax deductions to the final amount of tax due are also available.
Aggregate vs Separate Taxation
In general, income is aggregated together and taxed as a single sum (総合課税, sougou kazei), however some income can be taxed separately at pre-determined rates (分離課税, bunri kazei). For example, income from dividends when taxed separately are taxed at a rate of 15.315% for National, and 5% for Residence taxes, instead of the rates listed above.
The total amount of income for aggregate taxation is calculated annually in the end of year tax adjustment or via a tax return.
Separately-taxed income can be automatically withheld at source (源泉分離課税, gensen bunri kazei), for example tax on dividends in a tax withholding account, or declared on the tax return (申告分離課税, shinkoku bunri kazei). For some income eligible for separate taxation, it is possible to choose aggregate or separate taxation. Which one is more beneficial depends on individual circumstances. See the Types of Income and Taxation Methods, National Tax Agency (PDF) (part of the 2023 Income Tax and Special Income Tax for Reconstruction Guide) for a complete list.
Available Deductions
There are two kinds of deductions:
- Income deductions, which reduce the amount of income that is taxable.
- Tax deductions, which directly reduce the amount of tax due.
See Also
- Learn about "Income Tax", Ministry of Finance (PDF) (from Learning More About Taxes(July, 2023))
- Material on Individual Income Taxation, Ministry of Finance
Footnotes
- ↑ Furusato Nozei donations can be handled without a tax return under certain conditions, see Furusato Nozei for details.
- ↑ There are three types: Donations to political parties, donations to certified NPOs, donations to public interest corporations.
- ↑ 政党等寄附金特別控除・認定NPO法人等寄附金特別控除・公益社団法人等寄附金特別控除