Types of taxes that must be paid in Japan

Hello, this is Yohji. I have never lived abroad, so I don’t know about foreign tax systems, but I received a request from a friend living in Japan saying, “I would be happy if I could learn about taxes.”
There are more than 50 types of taxes in Japan, but in this topic we will only discuss the taxes that everyone who lives in Japan must pay.

Consumption tax

Consumption tax(消費税 / しょうひぜい) is a tax levied on transactions such as the sale of goods and the provision of services. It is paid by consumers (when we shop, etc.) and paid by businesses (stores, companies, etc.) to the country to do.

Everyone living in Japan bears the same burden when receiving goods and services. The burden is 10% of the price of goods and services. * 8% for food and drink and newspapers (called   reduced tax rate : 軽減税率 / けいげんぜいりつ)

  • Example 1)
    If you buy a bicycle for 10,000 yen
    <Price> 10,000 yen
    <Consumption tax> 10,000 x 0.1(10%) = 1,000 yen
    <Total> 10,000 + 1,000 = 11,000 yen
  • Example 2)
    If you buy 5 apples for 100 yen
    <Price> 100 * 5 =500 yen
    <Consumption tax> 500 x 0.08(8%) = 40 yen
    <Total> 500 + 40 = 540 yen

Summary of Consumption tax

  • <When> When we purchase a goods or receive a service
  • <Who> Consumer
  • <Where> Store cashier, etc.
  • <How much> 8% or 10% of the price of goods and services

Resident tax

Resident tax(住民税 / じゅうみんぜい) consists of prefectural tax levied on residents by prefecture (Tokyo is metropolitan tax) and municipal tax levied by municipalities (ward tax).
Resident tax is levied on the salary income of the previous year, and in the case of office workers, it is deducted from the monthly salary from June of that year to May of the following year.  This is called special collection(特別徴収 / とくべつちょうしゅう)
Many foreigners pay taxes by ordinary collection(普通徴収 / ふつうちょうしゅう), which is not deducted from their salary.  It takes the payment slip to a convenience store etc. and pays for it.  (June, August, October, January, 4 times a year in total) In the case of normal collection, the payment slip will be mailed from the municipality in May.

Foreigners who do not have salary income in the previous year in Japan do not need to pay from the first year of living in Japan to May of the following year.  However, you have to pay the residence tax from June of the second year.

Resident tax will be paid to the municipality registered as a resident on January 1st of the year. For example, if you move to another municipality in April, you will pay the residence tax to the municipality you lived in in January and pay the tax to the municipality you live in next year.  Therefore, you will not be billed by two municipalities at the same time.
The calculation method of residence tax is very complicated, so I will omit the calculation method in this topic, but even a small number of people have to pay tens of thousands of yen, and many people have to pay hundreds of thousands of yen.  Therefore, in June, save money by reducing remittances and waste to your home country.

Summary of Residence tax

  • <When> Divided into multiple times from June to May of the following year.
    Office worker…Monthly salary deduction
    Non-office worker…4 times a year using payment slip
  • <Who> Salaried workers
  • <Where> Payroll is deducted or paid at a convenience store.
  • <How much> A fixed ratio to the salary of the previous year (January to December)

This article will help you find out how to reduce your residence tax.

How to reduce taxes paid in Japan

Income tax

Income tax(所得税 / しょとくぜい) is a tax calculated based on all income for the year from January 1st to December 31st each year.  If you have income, you must pay it.
Income tax rates increase in stages according to what is called the amount of taxable income(課税所得 / かぜいしょとく).  Simply put, people with higher incomes pay more taxes than those with lower incomes.

Income tax calculation is also complicated, so I will omit the calculation method in this topic, but it costs tens of thousands to hundreds of thousands of yen annually.
Income tax is deducted from your salary, so you do not have to calculate or pay the tax amount yourself.

Summary of  Income tax

  • <When> Monthly
  • <Who> Salaried person
  • <Where> Payroll deduction
  • <How much> A fixed percentage of the salary of the previous year (January-December)

Universal healthcare

Universal healthcare(国民皆保険制度 / こくみんかいほけんせいど) is a medical insurance premium paid by everyone living in Japan.  It can be roughly divided into three categories (Union Health Insurance, Japan Health Insurance Association Insurance, and National Health Insurance). Union Health Insurance and Japan Health Insurance Association insurance are also called social insurance. These insurances also consist of health insurance and pensions.
You can tell which medical insurance you have by looking at your insurance card.

Basically, the premium is deducted from the salary for union insurance and association insurance, but in the case of national health insurance, a payment slip will be sent from the local government in the middle of June, and the amount for one year from April to March of the following year will be deducted. Payment will be made in 10 installments from June to March of the following year at convenience stores.

Insurance premiums vary depending on various conditions, so please use them as a reference only.

Employment insurance

Employment insurance(雇用保険 / こようほけん) premiums are insurance that all salaried workers must pay in case of unemployment.  If you have employment insurance, you can receive unemployment benefits when you lose your job. See this topic for unemployment benefits.
Employment insurance premiums are borne by the employer and the worker respectively.  Insurance premiums are deducted from your monthly salary, which is 0.3% of your salary.

  • Example 1)
    When the salary is 200,000 yen
    200,000 yen x 0.3% = 600 yen
  • Example 2)
    When the salary is 400,000 yen
    400,000 x 0.3% = 1,200 yen

Summary of Employment insurance

  • <When> Monthly
  • <Who> Employers and workers
  • <Where> Workers are deducted from salary
  • <How much> 0.3% of salary

Approximate tax payment calculation method

Tax calculations are very complicated, but some people may want to know just the approximate amount of tax paid. If you like that, please visit the website below.

By selecting your annual income (income before tax is deducted), you can know the approximate amount of residence tax and income tax.

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