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Taxes In Japan & Living Comfortably

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Solong

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Over the years, I've had numerous discussions about taxes and cost of living with several other expats or newbies to Japan. I tell people that you can expect to pay 40% or more in taxes and pay deductions, and the consumption tax is another added 8% (soon to be 10%). Basically half your money will be taken in taxes, so factor that in and decide if that is enough money for you to want to work and live in Japan.

Let's say you make 10,000,000 yen (100,000 dollars in a 1 to 1 yen to dollar exchange) a year:

20% will be taken as income tax
5% to 10% will be taken as inhabitant or local taxes (equal to city and state taxes, depends where you live)
5% will be taken for national health insurance (can be more in some cases)
9% (approximately) will be taken for pension insurance (equal to social security taxes)

That will usually be 40% or more of your money, usually taken directly from your pay by your company. In Japan, if you officially work for a company, they usually snatch all that directly and not that you pay it (as with various other countries). Out of 10,000,000 you have more like only 6,000,000 yen (60,000 dollars) left.

Japan, especially cities like Tokyo, have one of the highest cost of living. 8% consumption tax (soon to be 10%) and prices for many goods and food being higher than many other places. Then there is rent, electricity, gas, water, phone, Internet, etc...

In some cases and even here, people reacted strangely about how expensive Japan is or living in the city can be, particularly for foreigners or those considering working here. Some people are a special case or doing something illegal, that doesn't apply to what is normally done. A person new to Japan should be wary of taking advice from those in situations much different from their own. I can divide some of these by groups:

1) Foreigners working here for a short time or illegally on tourist visas, then going home soon after their visa expires.

Work visas are tied to you paying all required TAXES. If a foreigner thinks he will be slick and dodge Japanese taxes or required insurance, he can find himself in a lot of trouble. Like the city office locating them years later, then suddenly dumping a huge tax bill on them and demanding immediate payment (seen or heard of this numerous times), or the visa not being renewed.

Working illegally in Japan is like playing a very dangerous game of Russian roulette. When you least expect it, you can be done or caught. And they can ban you from returning to Japan for 5 years, which is forever in many cases, as they won't ever issue you a work visa or give you absolute hell with a marriage visa.

2) Married and/or have multiple kids.

These types can take off numerous deductions, so taxes have a lower burden to them. However, if you are single, you can't. And most people that I met who are planning or have just come to Japan to work are often single.

3) U.S. military base worker types, who's wife is Japanese or are only working part time

The U.S. military or civilian base worker types are paid and subject to U.S. tax codes, given a COLA (Cost Of Living Allowance), and depending on the case paid housing allowances (including government payment of utilities like gas, water, electricity, etc..). So, their taxes are lower (U.S. ones), and are given extra money by their government to live in Japanese apartments/houses.

If they have a Japanese wife who is working, her money can be like extra icing on the cake. Therefore, whatever she is paying in Japanese taxes is partially ignored or they don't care.

4) Young English teachers or low pay workers

In many cases, they pay lower taxes, because their pay is low to very low. Often below 3,300,000 (33,000 dollars) a year. Therefore the amount of disposable income they have is very limited, and often it's their intention to only be in Japan for a long vacation (a year or few years) or find a better paying job later.

In many cases they were hyper focused on just getting the chance to be in Japan as a type of long exotic vacation, so didn't pay too much attention to taxes or even money. Then, only later, did they realize how expensive everything is.

In some cases, the English teacher supplements with illegal side jobs or teaching extra English lessons for undocumented pay. Either putting themselves in danger of getting kicked out the country or overwork and exhaustion from 2 jobs and limited time.
 
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Not totally sure what your point is but my salary in Japanese goes mikes further than itwould do in the uk (where I'm from). I earn about 8million yen a year I think, which, as far as I am concerned is a crap salary. But in Japan it is enough to live off; in the uk I would be on the breadline! In the uk the taxes are higher, the cost of food is higher, and holy ajit the cost of transport is about five times higher AND you have to pay your own commute (whereas in Japan, in general, your company pays).

If I think about how much it would take to live comfortably in Japan I reckon you could earn about 60% of your uk salary and have the same quality of life (better in some ways - the women, food, and tv are all better! - worse in others - the working hours are stupid!).
 
I earn about 8million yen a year I think, which, as far as I am concerned is a crap salary.

Depends on your age i suppose... mid-20's to early 30's that ain't too bad i think (if you're an expat)...
 
Not totally sure what your point is but my salary in Japanese goes mikes further than itwould do in the uk (where I'm from). I earn about 8million yen a year I think, which, as far as I am concerned is a crap salary. But in Japan it is enough to live off; in the uk I would be on the breadline! In the uk the taxes are higher, the cost of food is higher, and holy ajit the cost of transport is about five times higher AND you have to pay your own commute (whereas in Japan, in general, your company pays).

If I think about how much it would take to live comfortably in Japan I reckon you could earn about 60% of your uk salary and have the same quality of life (better in some ways - the women, food, and tv are all better! - worse in others - the working hours are stupid!).

Most of my diet is fruit and vegetables. I spend more here than I did in the UK, even when I bought mostly organic before!

I also wouldn't quite agree that the television here is better... However, transport is definitely less expensive.
 
If a foreigner thinks he will be slick and dodge Japanese taxes or required insurance, he can find himself in a lot of trouble. Like the city office locating them years later, then suddenly dumping a huge tax bill on them and demanding immediate payment (seen or heard of this numerous times), or the visa not being renewed.

The connection of work visa and paying the insurance has been challenged in court and in effect the law was changed so that someone who hasn't paid their insurance won't have their visa negatively affected upon renewal.
 
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Most of my diet is fruit and vegetables. I spend more here than I did in the UK, even when I bought mostly organic before!

I also wouldn't quite agree that the television here is better... However, transport is definitely less expensive.

Fruits (especially) and vegetables are almost a topic in itself. Fruits can be very expensive, hard to find (or a particular type is), or lots of issues with; rot, white molds, and fungus on them. In fact, some stores in Tokyo being a master at wrapping the fruit to hide the rotten part or mold, or completely ignoring the obvious dangerous mold on it and selling them anyway. There been more times than I can count, where I had to tell store clerks they might want to remove the fruit with white mold/fungus all over it, before making somebody severely sick.
 
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The connection of work visa and paying the insurance has been challenged in court and in effect the law was changed so that someone who hasn't paid their insurance won't have their visa revoked anymore.

1) If you don't pay Japanese income tax, inhabitant (local) taxes, or enroll into a national pension plan then your work visa can be revoked or not renewed. Fact!

So, what you are talking about is trying to dodge health insurance pay deductions. The pension plan being a bit more gray area, because it's usually tied to the company you work for making those pay deductions, thus immigration may overlook it. Usually focusing more on your taxes.

2) If you work for a company, usually health and pension are automatically taken out, as part of company plan

There is usually no debate. Companies will usually not allow a foreigner to opt out. The exceptions are if you are self employed or a student, and in this case you are expected to enroll in the National Health Insurance plan.

3) You are playing Russian roulette by not paying health insurance if you get sick and go to the hospital

Japanese hospitals usually don't accept foreign based plans. You could end up with a massive hospital bill. Which is why immigration would be very mindful of such people being a burden to society.

4) Officially and technically, your visa can't be revoked or not renewed for failure to join the nation health insurance programs, however....

The circumstances of not joining the health insurance program can be reviewed, particularly the company you work for and if you don't make enough money. Remember, a company that doesn't offer employees health insurance or sufficient pay that they can't buy it, would likely not get approval for work visas.

The minimum pay requirement to obtain a work visa or permanent residency in Japan is usually stated as 3,000,000 yen (30,000 dollars) a year. Below this, unless under special or temporary work circumstances, a visa won't usually be issued.

People more likely to attempt "avoidance" or get away with avoiding such payments are married or permanent residents, thus they have more leeway, particularly because they are counting on somebody else's income, use their spouse's insurance, counting on money from a side job or business, or immigration doesn't bother them much (permanent residency).
 
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1) If you don't pay Japanese income tax, inhabitant (local) taxes, or enroll into a national pension plan then your work visa can be revoked or not renewed. Fact!

So, what you are talking about is trying to dodge health insurance pay deductions. The pension plan being a bit more gray area, because it's usually tied to the company you work for making those pay deductions, thus immigration may overlook it. Usually focusing more on your taxes.

I assume this only applies to work visas and not spouse visas yes? I'm not working full time at one school, but part time at multiple schools, but most of them pay me legit via direct deposit into my Japanese account and although one school pays me cash, they provide receipts with each payment and I signed a contract with the school as well as with the others.

The schools I work at all told me that they will take care of the taxes for me and that what I owe will just be deducted from my salary? Does this sound alright or am I one of those guys that is going to get screwed when taxes are due?

I know a handful of foreigners that are in the same boat as me work wise and they told me that they have had no tax troubles...but some are on work visas and don't have the exact same legal status.

I would appreciate a break down on this or some clarification even.
 
1) If you don't pay Japanese income tax, inhabitant (local) taxes, or enroll into a national pension plan then your work visa can be revoked or not renewed. Fact!

So, what you are talking about is trying to dodge health insurance pay deductions. The pension plan being a bit more gray area, because it's usually tied to the company you work for making those pay deductions, thus immigration may overlook it. Usually focusing more on your taxes.

I assume this only applies to work visas and not spouse visas yes? I'm not working full time at one school, but part time at multiple schools, but most of them pay me legit via direct deposit into my Japanese account and although one school pays me cash, they provide receipts with each payment and I signed a contract with the school as well as with the others.

The schools I work at all told me that they will take care of the taxes for me and that what I owe will just be deducted from my salary? Does this sound alright or am I one of those guys that is going to get screwed when taxes are due?

I know a handful of foreigners that are in the same boat as me work wise and they told me that they have had no tax troubles...but some are on work visas and don't have the exact same legal status.

I would appreciate a break down on this or some clarification even.

You are not required to work under a marriage/spouse visa. Rather, they look at the total household income. This is said to be at least 4,000,000 yen. They also check your Japanese spouse out, that is if he or she is paying all the required taxes and insurance.

Consequently, married foreign people can often do all kinds of things and odd jobs that people under work visas can't. As long as those jobs are legal. And yes, usually the company takes all the taxes and required pay deductions out, so you don't have to worry.

It's when you switch to a work visa or APPLY for permanent residency that issues might come up. Particularly people tripping themselves up, or their spouse, by their own words. Doing socially unacceptable work, illegal, or work where they didn't pay taxes. That's where they get into trouble, where their visa can be revoked or denied.

A person on a work visa has to do the type of job stated on the visa. If they aren't, then they are at risk of getting the visa revoked or not renewed. The work visa person must have the ability to fully support themselves, and pay all required taxes and insurance, where a person on a spouse/marriage visa does not. Again, with married people, they are looking at your monetary situation combined.
 
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You are not required to work under a marriage/spouse visa. Rather, they look at the total household income. This is said to be at least 4,000,000 yen. They also check your Japanese spouse out, that is if he or she is paying all the required taxes and insurance.

Consequently, married foreign people can often do all kinds of things and odd jobs that people under work visas can't. As long as those jobs are legal. And yes, usually the company takes all the taxes and required pay deductions out, so you don't have to worry.

It's when you switch to a work visa or APPLY for permanent residency that issues might come up. Particularly people tripping themselves up, or their spouse, by their own words. Doing socially unacceptable work, illegal, or work where they didn't pay taxes. That's where they get into trouble, where their visa can be revoked or denied.

A person on a work visa has to do the type of job stated on the visa. If they aren't, then they are at risk of getting the visa revoked or not renewed. The work visa person must have the ability to fully support themselves, and pay all required taxes and insurance, where a person on a spouse/marriage visa does not. Again, with married people, they are looking at your monetary situation combined.

Thank you. A very informative post. So if I apply for permanent residency and have no trouble obtaining it...will my situation be the same since I'm still a spouse visa holder or will it be a different ball game?
 
Some comments and clarifications:

I tell people that you can expect to pay 40% or more in taxes and pay deductions, and the consumption tax is another added 8% (soon to be 10%). Basically half your money will be taken in taxes, so factor that in and decide if that is enough money for you to want to work and live in Japan.

The Japanese income tax system is progressive so these numbers vary drastically depending on your income and source of income. It's also important to note that if you want to live and work in Japan long term, even if you get paid in your home country after several years (5, I think) Japan requires that you pay tax on your income world-wide. This isn't always an issue depending on your home country, but in many cases you'll be paying taxes twice on the same income.


Japan, especially cities like Tokyo, have one of the highest cost of living. 8% consumption tax (soon to be 10%) and prices for many goods and food being higher than many other places. Then there is rent, electricity, gas, water, phone, Internet, etc...

I don't think it's more expensive than really expensive cities in the US. It really depends on what you are used to. If you had a 3 bedroom ranch house in Arizona and expect to get something similar in Tokyo and want to eat and party like you did in the US, it's gonna be really expensive.


Foreigners working here for a short time or illegally on tourist visas, then going home soon after their visa expires.

Pedantic but somewhat important point: The 90 day visa waiver that most western countries' civilians get coming into Japan isn't a visa. People under visa waiver status have no residential status at all, and can't officially work, get an apartment, own a Japanese phone number, etc. But yes, @Solong is entirely correct that there's strict limitations on working even with a work visa. Beyond having to work in the field you are assigned, you can't work in various adult fields like the hobby or even working at most bars unless you are a permanent resident or citizen.

Work visas are tied to you paying all required TAXES. If a foreigner thinks he will be slick and dodge Japanese taxes or required insurance, he can find himself in a lot of trouble. Like the city office locating them years later, then suddenly dumping a huge tax bill on them and demanding immediate payment (seen or heard of this numerous times), or the visa not being renewed.

In some cases, the English teacher supplements with illegal side jobs or teaching extra English lessons for undocumented pay. Either putting themselves in danger of getting kicked out the country or overwork and exhaustion from 2 jobs and limited time.

As long as you claim the pay on your end of year taxes, it's perfectly legal to work inside your field in a second job. With permission from your sponsor (usually your employer) you can get approval from Japanese immigration to work outside your field too.

You are playing Russian roulette by not paying health insurance if you get sick and go to the hospital

Japanese hospitals usually don't accept foreign based plans. You could end up with a massive hospital bill.

True, but a) Japan is actually pretty decent at managing health care costs, so a minor emergency like a broken arm or dental surgery will probably only cost you ¥1 man or so, and even a major medical emergency won't bankrupt you. This isn't the United States. b) international health plans will reimburse you for health care costs, and people making ¥10M a year are likely to be liquid enough to pay for emergencies on a temporary basis (if they are smart). I know plenty of people that have an international plan, mainly because they want health care coverage when they go abroad as well.
 
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>> Japan requires that you pay tax on your income world-wide. This isn't always an issue depending on your home country, but in many cases you'll be paying taxes >> twice on the same income.
Note that for US citizen, the requirement on taxes due to the US is the complement that would bring them to the US taxes. I.E if you pais $xx taxes in Japan but you would have paid $yy in the US, you will have to pay z = xx - yy (and yes if z is negative you may claim a refund... better talk to your US tax accountant, get one if you do not have one).
In general people in the US do it for international mutual fund where tax on interests / dividend where foreign taxes were paid by the Fund. There are also provision in the US tax code to deduct a portion of the earned foreign income. For US citizen, get a tax accountant, what you pay them is tax deductible and the resulting taxes are many time much lower that the ones you would get using Quicken.

PS: I am not a tax accountant, so take my written words with a grain of salt.
 
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>> Note that for US citizen, the requirement on taxes due to the US is the complement that would bring them to the US taxes. I.E if you pais $xx taxes in Japan but you would have paid $yy in the US, you will have to pay z = xx - yy (and yes if z is negative you may claim a refund... better talk to your US tax accountant, get one if you do not have one).

Would that be z=$yy-$xx?

I second that you should get a tax accountant or at least consult with the tax office directly if you have a simple income structure. The US tax law is very complicated and the penalties for non-compliance are severe. If one is an expat though, the company they are working for may provide tax consultancy services automatically.

I do remember reading that some US residents who are living abroad long-term are just giving up their US citizenships due to the new tax requirements which came to effect with FATCA (Foreign Account Tax Compliance Act).
 
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I do remember reading that some US residents who are living abroad long-term are just giving up their US citizenships due to the new tax requirements which came to effect with FATCA (Foreign Account Tax Compliance Act).

IIRC those 'tax requirements' aren't anything new for the taxpayer. As a US citizen, you've always had to pay tax on your global income, it's just with FATCA, foreign banks and other financial institutions are required to report US taxpayer financial information to the IRS so it's not as easy to duck the taxman anymore. There has been problems with some financial institutions not wanting to give accounts to US citizens or making it a big hassle because of the additional reporting requirements.
 
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In addition to other complications, my understanding is that Japan has "tax treaties" with a good number of other countries, and that their details vary. So, the tax obligations of two gaijin expats in Japan are not necessarily the same if they are citizens of different countries. It is all insanely complex as well as expensive. If I tried to do my own taxes, it would take so much of my time that I wouldn't be able to do any work and thus my income would be zero! This is why God gave us accountants, I suppose.

-Ww
 
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To make it simple:
FACTA is bank reporting of foreign accounts to the IRS. In fact, I think it's illegal not to disclose all foreign accounts even where FACTA doesn't apply.
Exemption for foreign income (up to 100k/year last time I checked) can be applied for under FEIE exemption. But it must be applied for each year (of course the monies can't originate or even indirectly deal with US firms.)

I believe you can reset the 5 year tax clock by staying back in your home country for at least xx continuous days.
They are not giving up their citizenship, but I believe it the possibility of having their passport canceled if tax evasion is suspected.
 
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No you won't have your passport cancelled, you will just have to pay a big fine and face jail time. Mostly, just a big fine, but you can keep your passport. Loss of nationality is unconstitutional. Most people can get out of trouble by just paying the fine if you are American. If you are Japanese, Japan has a similar law to America now. So what really happens is one would have to decided if renouncing is the best tax option. I think there was an American man who was making a ton of money in Japan as he was a CEO. He didn't pay his taxes and he was fined a huge sum. That story might be floating around on the J-news. He renounced his US passport. Will the US force you to do that, no. However, they US IRS will put your nuts in a vice grip and squeeze them like a python squeezes its prey.

Solong is right about what he says. In general, you should expect to lose a lot of money, expect to lose a lot of bullshit money, expect to retire and live on the streets, and expect to in general not enjoy your full monetary power.

As for second jobs, as long as you get permission from your company and make the addendum in March, there will be no worries.

As for working illegally, expect to get deported.

As for working more than 20 hours on a student visa or in the night business, expect to get kicked out of school and deported.

Black economies or underground economies are hard to enforce, even in Japan. I doubt that is what gets them in trouble. It is that if that is a business and you don't report your earnings that you will be knee deep and maybe waist deep in shit. If you are an American, then you would be neck deep in shit. You might have to run to Russia for asylum. Better have some type of skills.
 
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4) Young English teachers or low pay workers

Afaik the employer does not have to pay the employer's share of the social security fees by enrolling them into the pension system if the teachers do not work a certain amount of hours per week (Part-time employees must enter the pension system if their working hours and days exceed three-quarters of the working time of a full-time worker in the company). There is a minimum contribution of 15020 yen per month though, although I have no idea how the Kokumin Nenkin enforces that. From time to time the weeklies report that a tarento or politician has been slacking on his contributions, although I think that the My-number-system will change that.

It's possible for some nationals to receive a lump-sum payment of their fees when leaving Japan. After doing some paperwork it's also possible to add the contribution period in Japan to one's contribution period to the German national pension system, although I'm not familiar with the details. There may be similar bilateral treaties with other countries which also have a national pension insurance.
 
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It might not stand in court. I'm no expert at all, but I have a vague recollection the SCOTUS has tossed out some previous attempts to limit passport eligibility on grounds that had nothing to do with travel or citizenship.

-Ww
 
It might not stand in court. I'm no expert at all, but I have a vague recollection the SCOTUS has tossed out some previous attempts to limit passport eligibility on grounds that had nothing to do with travel or citizenship.

Wouldn't surprise me. And someone with $50K in tax debt probably has bigger concerns on their mind, or they have the dough to fight the case. I personally don't have a problem with the government refusing to renew a passport for someone living abroad if they aren't paying taxes, but revoking a passport should only happen for someone convicted of something like treason. It's kind of ironic in my opinion that they are willing to revoke passports for tax purposes, but the US government is willing to kill US citizens in the name of terrorism.
 
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Question:
When an employer here issues the salary in cash without an official pay summary record, is that considered an "off the books" salary (on the employer's side)? Would the employer still be reporting the salary to the tax agency?
 
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