Tax return in Japan 2022|Free tax consultation in Sapporo, please contact Kumagai Nobuyasu accountant office!
Period of tax return in Japan
The period of Income tax return in Japan is from February 16th to March 15th every year, neverthless it can be filed for 5 years from January 4th if it is to refund. The taxable period of Income tax is calendar year(January 1st to December 31st).
The tax return is submitted to the tax office that has jurisdiction over the place of residence of the taxpayer on January 1, the year following the tax year. The way of tax return submission is explained in detail later.
Type of income
At first, I explain what kind of income are defined in Japan income tax act.
- Interest income:
Received interests from bank account, lending, bond, trust that consists of only bonds etc. As a general rule, a 20.315%(income tax 15.315%+inhabitant tax 5.000%) tax withholding is applied when you receive interest in Japan and those cannot be included in tax return. In other words, taxation for interest is completed as you receive.
- Dividend income:
Received dividends from stock, trust etc. A 20.315%(income tax 15.315%+inhabitant tax 5.000%)tax withholding is applied when you receive dividends derived from listed stock in Japan and those dividends can exclude from tax return(if exclude, withholding from those cannot be return).
On the other hand,a 20.42% income tax withholding is applied when you receive dividends from other than listed stock in Japan and those dividends and withholiding have to include in tax return.
- Real estate income:
Rent income deducted related expenses(e.g. repairment,deperciation,real estate tax,agent fee)
If you have this income, you have to prepare income statement for real estate income and attatch it to tax return form.
- Business income:
Personal buisiness income other than rent deducted related expenses .
If you have this income, you have to prepare income statement for general business income and attatch it to tax return form.
- Employment income: income from salary, wage, bonus, annual leave payment, etc. In general rule in Japan, income tax and resident tax is withheld when receiving of salary, wage, bonus ,etc.
In December, employment income tax is finalized based on the annual payment. In other words, taxation for employment income is completed unless there are other types of income, deduction or credits not be able to include in year end finalization. When year end finalization, employer issues withholding form and you can use it for tax return.
- Retirement income:
One-time retirement allowance payment, purchased annual leave payment at retirement etc. Tax calculation of retirement income is separated from other income and is applied another method((income×1/5)×tax rate×5times).
- Forest income:
Income from logging or transfer of forests deducted related costs and expenses.
- Transfer income:
Income from asset transfer of other than business inventory, forests or personal gifts to resident in Japan deducted Purchase cost and transfer expenses.
Purchase cost and transfer expenses deduct from transfer income in income calculation. Tax calculation of real estate transfer income is separeted from other income;the tax rate is 20.315% (national tax 15.315% + inhabitant tax 5%), but if the period from purchase to transfer is within 5 years, the tax rate is 39.63% (national tax 30.63% + inhabitant tax 9%).
- Temporary income:
Tenporary income other than 1~8 above(e.g. rewards, prizes, insurance lump-sum) deducted related costs and expenses. There is an income deduction of up to ¥500,000 and half of deducted temporary income is taxable.
- Other income:
Income other than 1~9 above(e.g. pension, side business income, exchange gain, derivative margin) deducted related costs and expenses.
Income offset and Income deduction
After calculating any types of income, all type of income are added up except separated incomes explained above.
If there are losses due to rent, business or transfers other than real estate, they are offset against other types of income in the order listed on the left.
When it leaves losses due to rent or business after offseting, these losses are deffered to next taxable year if income statement is prepared by formal bookkeeping principles.On the other hand,when it leaves loss due to transfers, this loss is terminated.
After offsetting income, it deduct several type of income deduction. Main income deduction are below.
- Medical payment deduction: If annual medical expenses exceed 100,000 yen, or if you pay 5% of the total amount of offset income and separated income, whichever is smaller, You can deduct medical expenses the excess of 100,000 yen or 5% of your income.When you apply this deduction, it need to prepare medical expense statement and attach it to tax return form.
- Social insurance deduction: When you paid Japan medical insurance fee or Japan public pension premium in a taxable year, you can deduct all of those payment.This deduction can be applied in year-end finalization for employee in advance.
- Life insurance deduction:When you paid life insurance fee contracted with companies authorized by Japanese laws, you can deduct a part of life insurance fee. In general, deduction certificate is issued by life insurance company.This deduction can be applied in year-end finalization for employee in advance.
- Donate deduction: When you donated to public governments, certified public interest origanizations, you can deduct a part of those donations.
- Spousal deduction: When you have spouse whose income is less than \480,000, you can deduct \380,000(there is high your income limit.). it needs that both you and your spouse live together or same livelihood. If income of your spouse is more than \480,000 but less than \1,330,000, you can deduct amount according to income of your spouse(there is high your income limit.).This deduction can be applied in year-end finalization for employee in advance.
- Dependent deduction: When you have dependents who are more than 16 years old living together or on same livelihood and his/her income of a dependent is less than \480,000, you can deduct amount according to his/her age.This deduction can be applied in year-end finalization for employee in advance.
- Basic deduction: All resident in Japan can deduct \480,000 from offset income.This deduction is applied in year-end finalization when you are employee in advance.
Medical payment and insurance fee paid by your same livelihood familiy can be included to your income deduction.
Tax calculation and tax credit
After appling income dedction, it calculates your income tax. The tax amount calculation is a progressive tax rate calculation.After calculating, you can apply some of tax credits.
- Dividend tax credit: You can deduct 10%, 5% or 2.5% of dividend income to avoid double taxation.
- Foreign tax credit: When you are resident in Japan, you can deduct income tax paid to other than Japan in the taxable year. This credit is applied only to the foreign source income portion. If foreign tax credit left, this credit is deffered to next year.
- Withholdings: When you have withholding in the taxable year, you can deduct these withholdings from calculated income tax less of those tax credit deductions above. If withholiding left, this left withholiding is refund.
How to file
The ways of filing are 3 ways.
- Bringing to the tax office:
To avoid congestion, I recommond not to go bringing tax return form to the tax office. It can only be submitted to the tax office that has jurisdiction over the address.
- Mail to the tax office:
It takes 2~3 days to deliver to the tax office.It can only be submitted to the tax office that has jurisdiction over the address too.
- Use electronic filing system(e-Tax):
To be available to use, you have to register ID and passcode on electronic filing system and it is available only in Japanese. In electronic filing system, you can prepare tax return form electronically.
When you entrust a tax accountant to prepare tax return form, he/she can file prepared your tax return form instead.
For non-resident in Japan
Main taxable income in Japan for non-Japanese resident is as follows.
- Business income earned as Japanese business entity
- Transfer of asset existing in Japan
- Transfer of real estate in Japan
- Human services provided in Japan
- Interests from Japan government bond, Japan munincipal bond, savings to Japanese entity, trusts to Japanese entity, etc.
- Dividends from Japan domestic corporation, trusts to Japanese entity, etc.
- Salaries, wages and bonuses earned as compensation for labor in Japan
However, those taxations may differ due to the tax treaty between Japan and your resident country.
Income deduction and tax credit are not available for non-Japanese resident.
For resident in Japan for less than 5 years
If you are Japanese resindent who has lived for less than 5 years, your taxable income is limited to remittance from outside Japan.
Remittance above includes not only cash remittation, but also using credit card settled from foreign bank account.
However, that taxation may differ due to the tax treaty between Japan and the country which you have the nationality or citizenship.