Despite Japan’s fiscal year beginning on April 1 and ending on March 31, income tax is paid annually on income that is earned during the calendar year (January 1 to December 31). There are three categories of income tax payers in Japan.
1) a person who has lived in Japan for less than a year and is not a resident of Japan (i.e. Japan is not their primary home). These people are required to pay taxes on income earned in Japan and are not required to pay taxes on overseas income, or resident tax as this tax is assessed based on the previous year’s Japanese income.
2) a person who has lived in Japan for less than five years. These people are required to pay taxes on income earned in Japan and are not required to pay taxes on overseas income, unless the income earned abroad is transferred to Japan.
3) a person who has lived in Japan for more than five years. These people are required to pay income tax on all income regardless of where it is earned.
A total of 45 treaties with 56 countries exist at present for non-residents (i.e. those that have lived in Japan for less than a year and do not maintain a home here). For a list of applicable nations, please review page 65 of the English version of the 2009 Income Tax Guide at: http://www.nta.go.jp/tetsuzuki/shinkoku/shotoku/tebiki2009/pdf/01_44.pdf.
The national income tax rate is naturally determined based on earned taxable income (income after a basic exemption and assorted deductions). The tax rate in 2009 was basically calculated as follows:
- Taxable Income of 1,000 yen to 1,949,000 yen = Tax rate of 5%
- Taxable Income of 1,950,000 yen to 3,299,000 yen = Tax rate of 10% – 97,500 yen
- Taxable Income of 3,300,000 yen to 6,949,000 yen = Tax rate of 20% – 427,500 yen
- Taxable Income of 6,950,000 yen to 8,999,000 yen = Tax rate of 23% – 636,000 yen
- Taxable Income of 9,000,000 yen to 17,999,000 yen = Tax rate of 33% – 1,536,000 yen
- Taxable Income of 18,000,000 yen or more = Tax rate of 40% – 2, 796,000 yen
Japanese resident tax (prefectural and municipal tax) is charged at a combined total of 10% of taxable income which is either deducted monthly (along with national income tax), or you can elect to pay it separately (in quarterly amounts) once a bill is received in the mail. For that matter, if taxes are not withheld by your employer, they are due in full on March 15 in the year following the tax year in question, along with your tax return. See page 9 of the 2009 Income Tax Guide (see the NTA site above) to pick up the relevant forms.
Taxes that are due and are not withheld by your employer can be paid at your district’s respective tax office which can be found here: http://www.nta.go.jp/tokyo/guide/zeimusho/tokyo.htm or any financial institution that is a “Bank of Japan annual revenue agency” (most Japanese banks would classify) with a tax payment slip, which is available at these banks.