Consumption Tax in Japan is 3%. It applies to all goods including food.
Income Tax (shotokuzei)
Everybody in Japan is required to pay taxes. This is true regardless of your nationality. Your income is calculated as your total yearly income minus expenses incurred to acquire that income. For salaried workers income tax is usually deducted automatically from your salary every month. When you go to a job interview it is a good idea to ask if the salary that you are told is before or after taxes are deducted. Your salary after insurance, taxes, and other deductions are taken out is called take-home pay (tedori).
The Japanese fiscal year goes from April 1 to March 31. But you will be taxed on your income from the previous calendar year; January 1 to December 31. Your income is calculated as your total yearly income minus expenses incurred to acquire that income. If your income is less than 350,000 yen per year you do not have to pay taxes. However, many employers will automatically withhold income tax. If this is the case, you are eligible for a refund at the end of the year.
Technically, taxpayers must declare his or her own income and tax in a final tax return and pay any necessary taxation, however, for most salaried workers income tax is automatically withheld from their salaries. In December employees do a year-end adjustment (nenmatsu chousei) to calculate excesses or shortfalls in taxation over the year. If their was an excess of taxes paid, the excess amount will be refunded. Salaried workers who earn more than 15 million yen or have an additional income amounting to more than 200,000 yen per year must submit a final tax return (shinkoku). Tax returns can be filled at your local tax office (zeimusho) between February 16 and March 16.
For the purposes of taxation, foreigners are divided
into three tax categories:
Taxpayers can claim the following deductions:
Items one and three do not apply to nonresidents. In addition to the above deductions taxpayers can claim a spouse deduction and spouse's special deduction can be claimed if the spouse's yearly income did not exceed a specified amount. To claim these deductions, the taxpayer must submit documents such as receipts for medical expenses and so on to the tax office or in the case of employees filing a year-end adjustment to the company's accounting office (keiri) or tax return preparer.
For a foreigner who earned more than 350,000 yen in
his or her last year of residence in Japan must either
designate a proxy to submit a final tax return (proxy:
someone to file your tax report for you) at the normal
time or file a return in person and square away any
deficiencies or excess in person before leaving the
country.
As a ballpark figure don't be surprised if you find
your salary about 20% less than what you expected.
A large portion of this will probably return to you
at the end of the year if you fill out a tax report.
Resident Taxes: City Tax (shiminzei) and Prefecture Tax (kenminzei,tominzei)
Resident taxes (City tax and Prefecture tax) are levied by your local municapality (ward or city) in which you lived on January 1 and are based on your previous year's annual income. Resident taxes consist of two parts: one is based on the amount of income received the previous year and the other is a flat fee which is the same regardless of how much you earned.
Your municipal government office will base it calculations on the amount of income reported by your employer if you are a salaried worker. The amount will be billed to you in 12 installments from June through May of the following year.
For nonsalaried workers, including many foreigners, who have filed a final return bills are based on the final return (shinkoku). Nonsalaried workers will be billed four times a year in June, August, October, and January. In either case you will be notified by your local ward or city office.
For those who have no previous record of income (newly arrived foreigners and Japanese working at their first job) your city and prefecture tax owed during your first year will be zero. It is likely that during your first year in Japan your annual income will not be very high. Proportionately, your resident tax for the first year which will be paid during your second year is very low.
The following is an example using hypothetical figures.
The resident tax you pay in any given year is based
on the previous year's annual income. Unlike income
tax (shotokuzei) no amount of city or prefecture taxes
will be refunded to you.
Payment of taxes
Income taxes will more than likely be deducted automatically
from salaried workers' annual pay. For nonsalaried
workers, you will be billed by the government after
you file your tax return. In that case, payment can
be made in installments at your bank or in one lump
sum. It can also be automatically withdrawn from your
bank account (jidou furikomi). City and prefecture
tax are billed quarterly or monthly and can be paid
at the bank in installments or in one lump sum. You
can pay in person at your bank or by direct withdrawal.
See Also