Residence tax is charged at a rate of 10% income after allowances and deductions.
An individual with a domicile in Japan on 1st January is liable for residence tax that year.
If leaving Japan on or after 2nd January, a tax representative may need to be nominated to settle the tax liability. The tax representative needs to be resident in Japan.
Previous year's income, payable from June
Residence tax is calculated based on the previous (Jan-Dec) year's income. This can cause some surprising effects that are worth being aware of:
- If your income increases in a year, your residence tax will increase from June the following year.
- If your income increases part-way through a year, your residence tax will increase twice: Once the following June, based on the part-year of increased income, and again the following June, based on a full year of increased income.
- For people who recently moved to Japan or started working, the amount of tax they pay will likely increase greatly the first two Junes, as the previous year's income goes from 0, to a partial year, to a full year of earnings.
- For people whose income decreases, they will have to pay a year of residence tax on the previous year's higher income amount.
Residence tax is collected in one of two ways:
- Normal Collection (普通徴収) - billed directly to the taxpayer and paid in 4 instalments.
- Special Collection (特別徴収) - deducted monthly from salary/pension payments.
Normal Collection (普通徴収)
You will receive a notification from the municipality in June showing how much residence tax is due, and a payment schedule split into four periods (June, August, October, January).
Special Collection (特別徴収) from Salary
This applies to salaried employees.
Monthly payments are deducted from your salary/pension, and paid to the municipality on your behalf by your employer.
Your employer will receive a statement (特別徴収税額の決定・変更通知書) from your municipality in June, stating how much residence tax is due, and the amount to be paid each month from June until May the following year. There are two copies, including one for the taxpayer, which your employer should forward to you.
Special Collection (特別徴収) from Pension
Switching between Normal and Special collection
It is possible to divert a portion of residence tax payments to other municipalities in exchange for free gifts by using the Furusato Nozei system.
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