Resident tax is a tax paid to maintain public services provided by prefectures and municipalities in Japan. It helps fund education, welfare, and other public services.
This post explains the basic rules about resident tax.
How Resident Tax is Calculated
Resident tax is based on your income from January to December of the previous year. It consists of two parts:
1 Income-based Tax
Calculated based on your income.
The tax rate is 10%.
2 Per Capita Tax
A flat amount for everyone.
The amount is 5,000 yen.
The exact rates and amounts can vary by municipality, so check your local government’s website or office for accurate information.
When to Pay Resident Tax
If you’re an employee, your company withholds resident tax from your salary and pays it on your behalf. The tax for the year is divided into 12 monthly payments from June of the current year to May of the next year.
Resident tax is based on the previous year’s income, so it starts being deducted from your salary in June of your second year in Japan.
If you’re self-employed, you will receive a tax payment notice around June each year. You can pay the specified amount at banks, local government offices, or convenience stores.
How to Check Your Resident Tax
Resident tax notifications are sent out in May or June. If you’re self-employed, the notice goes directly to you. If you’re an employee, it goes to your employer, who will then notify you.
The resident tax notice includes your total income from the previous year, the number of dependents, and the calculated tax amount. Make sure to check this notice to know how much will be deducted from your salary each month starting in June.
How to Report Resident Tax
Along with year-end tax adjustments, your company submits a payroll report to the municipality where you live. Year-end adjustments reconcile the tax withheld from your monthly salary with the actual income tax owed for the year.
Based on the payroll report, municipalities calculate your resident tax and issue a Tax Notice.
Summary
Resident tax is a local tax paid to your municipality based on your income from January 1 to December 31. While you are exempt in your first year in Japan, you will need to pay it from your second year based on your income. Understanding the system in advance helps you prepare for this obligation.
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