Individual Income Tax

I. Kinds of taxes in Japan

Taxes on Income and Profit

The taxes that are levied on an individual’s income are income tax, inhabitant tax, and, to a certain degree, enterprise tax.

Individual Income Tax

Income refers to the total amount of earnings minus the necessary deductible expenses to get those earnings during a year. Income is categorized into 10 types: income from interest, income from dividends, income from real estate, business income, employment income, retirement income, income from forestry, capital gains, occasional income, and miscellaneous income. Under the self-assessment system, taxpayers who have taxable income must calculate the whole income earned for the year from January 1 to December 31 and their tax liability (amount), and pay the amount of tax that is due. However, salary earners are not required to file tax returns, because their employers withhold taxes from employee salaries and wages and then make year-end adjustments to the amounts paid. Those who must file final returns are:

- those whose annual income from one source exceeds ¥20 million,

- those whose income from sources other than salary and retirement income exceeds ¥200,000,

- those who earn salaries from two or more sources. The period for filing final returns for income earned during a year is from February 16 to March 15 of the following year.

Classifications of taxpayers. Taxes are levied on an individual in accordance with the residential status of the individual. Residential statuses are classified into the following categories.

Individuals:

1. Residents ( those who have a domicile in Japan and have resided continuously in Japan for one year or more )

1.1. Non-permanent residents ( non-Japanese nationals who have not had a domicile or residence in Japan continuously for more than five years in the past ten years )

1.2. Permanent residents ( all residents other than non-permanent residents )

2. Non-residents ( all individuals other than residents )

Scope of taxable income

Income tax rates

Inhabitants’ Tax Prefectural inhabitants’ tax and municipal inhabitants’ tax are generically called inhabitants’ tax. The inhabitants’ taxes are levied on a per-income base and a per-capita basis on those who have a domicile as of January 1. For those who have an office or a house, even if they do not live there, the inhabitants’ taxes are levied on a per-capita basis.

The amount of inhabitants’ tax is calculated on the basis of the income earned in the previous year. The tax rate is 10% of income, regardless of the amount of income. The standard amount of per capita tax levied in a year is ¥4,000, regardless of the amount of income. However, during the years from 2014 to 2023, ¥1,000 will be added to the standard amount of per capita tax as a Special Reconstruction Tax.

Date: 2015-12-11; view: 1046