Taxes In Japan & Living Comfortably

[Sudsy]

If you are an independent contractor, paying the tax yourself vs taken out by a company, or depending on where you live then you may not have to pay both the prefectural or municipal tax.

It isn't as cut and dry as some are making it out to be. Though for most purposes and guessing you can assume 10%. In fact, at JETRO, they said local taxes can be above 10% and towards 13%.

This is ludicrous. These taxes are paid as a set, and are calculated at flat 10% of your taxable income.

From the metro government's own tax office website: 税率は一律１０％（都民税４％、区市町村民税６％）です。 The only exception to this is Nagoya, but that makes no difference for a Kanto resident.

Further, failure to pay these taxes can have serious legal consequences ranging from bank account seizures to incarceration - the only people exempt from these taxes are people who have no taxable income.

There appears to be other "local" taxes that can get thrown in, depending on where you live.

No, there aren't, unless you are counting property and/or vehicle taxes, which are not affected by your income, or enterprise taxes, which only apply to sole proprietorship business operators in very specific businesses. I'm guessing that your misunderstanding of enterprise tax is where you pulled that 13% figure from.

Note- Which by the way, 10% local taxes only makes the amount of taxes that must be paid higher, not less, as some will also have you believe.

Wait - paying an additional tax makes your taxes go up? Who'd have thought that? Nobody has made the claim that your resident's tax reduces your tax burden - you're apparently confusing this with your social insurance contributions, which do make your taxable income go down.

Add national income tax is around 20% (JETRO stated it at 18%, while company accountant stated around 20%) on an unmarried 10,000,000 salary, and without filing any business expenses, etc.... And then there is the health (around 5%) and pension deductions (around 9%)...

That's not how it's calculated. Once again, you are failing to make the distinction between gross income and taxable income, and completely discounting the most basic of deductions.

I will try to explain it again.... the numbers will be a couple of percentage points out from my previous entry since I'm doing it entirely by hand and not using the software.

Your social insurance (health, employment, pension) is calculated based on your gross income. On a 10 million salary, assuming you are a company employee enrolled in shakai hoken, your social insurance totals come to about 12.9% of your annual salary, approximately 1,290,000 yen.

On a gross income of 10,000 million yen, you are entitled to an employment income deduction of 2,200,000 yen, and a basic personal allowance of 380,000 yen.

Your taxable income is your gross income minus your basic deductions and your social insurance contributions, so:

10,000,000
-1,290,000
-2,200,000
-380,000
= 6,130,000

So, your taxable income is 6,130,000 yen.

From this you will pay your resident's tax at 10% of your taxable income, 613,000 yen.

And finally, your national tax is calculated as 20% of taxable income exceeding 3.3 million yen, plus 232,500 yen, as per the tables here on the National Tax Agency's website.
So, that's 20% of 2,830,000 which comes to 566,000, plus 232, 500, for a total of 798,500 yen.

So, totals:

Gross income: 10.000.000
Social insurance: 1,290,000
Resident's tax: 613,000
National tax: 798,500
Net income: 7,298,000

 

[Sudsy]

the "I'm right and you are wrong" dynamic is getting old.

I do not disagree. Unfortunately, some of the erroneous information that's being handed out, such as intimating that people don't need to pay their resident's tax or pension, is the kind of thing that can have severe financial and/or legal repercussions.

 

[Solong]

Social Insurance combined can be higher than 12.9%

And social insurance often is higher than the 12.9% that you put. 5% + 9% (around that). Half of each often paid by the company. More like around 14%

Also, how an independent contractor does their taxes isn't the same as a company employee. Consequently, the type of health insurance, pension plan, or what local taxes they are paying/subject to pay can be different. It's not cookie cutter same for all people.

 

[Solong]

I do not disagree. Unfortunately, some of the erroneous information that's being handed out, such as intimating that people don't need to pay their resident's tax or pension, is the kind of thing that can have severe financial and/or legal repercussions.

You haven't even read the posts here. I didn't say you don't need to pay resident tax, but rather the amount owed can vary.

I argued here in this thread that a foreigner has to pay pension, against what others were saying. Check the posts. And that's so as a company employee, but JETRO advisors actually argued that for a foreign independent contractor, that might not be the case on pension. Foreigners and them getting a Japanese pension is complicated, so you should not make it appear so cut and dry.

I argued here for paying health, and other posters against. Check the posts. However, the law as it applies to foreigners appears ambiguous. If you work for a company, they will likely deduct health automatically. However, as a foreign married person or independent contractor, they might be able to avoid paying health and with no repercussions to their visa.

 

[Sudsy]

First off, you edited that first quote - those are not my words.

And social insurance often is higher than the 12.9% that you put.

Yes, or it can also be lower. Social insurance costs change slightly depending on your income level and number of dependents. What I posted above is applicable only to a company employee over 40 years old with no dependents making 10,000,000 yen per annum.

5% + 9% (around that).

Referring to shakai hoken, to calculate the employee's burden, the figure for health is precisely 5.415%. For pension, there are some deductions applied before calculation, then the figure is 7.675% of the remainder.

Half of each often paid by the company. More like around 14%

The employer pays an equal amount matching the employee contributions. For the health component, 5.415% from the employee, 5.415% from the company, 10.83% total.

Also, how an independent contractor does their taxes isn't the same as a company employee. Consequently, the type of health insurance, pension plan, or what local taxes they are subject to pay can be different. It's not cookie cutter same for all people.

I performed calculations for an independent contractor a page or so ago, and clearly outlined the difference in payment for independent contractors (NHI and Kokumin hoken).

Also, If you refer to the Metro Tax Agency site I linked above, it clearly states that resident taxes are flat rate and applied equally to all residents.

As I stated above, you may be confusing resident's tax, which applies to all residents equally, with enterprise tax, which applies only to sole proprietorship business operators.

You haven't even read the posts here. I didn't say you don't need to pay resident tax, but rather the amount owed can vary.

I argued here in this thread that a foreigner has to pay pension, against what others were saying. Check the posts. And that's is so as a company employee, but JETRO advisors actually argued that for a foreign independent contractor, that might not be the case on pension. Foreigners and them getting a Japanese pension is complicated, so you should not make it appear so cut and dry.

I argued here for paying health, and other posters against. Check the posts. However, the law as it applies to foreigners appears ambiguous. If you work for a company, they will likely deduct health automatically. However, as a foreign married person or independent contractor, they might be able to avoid paying health and with no repercussions to their visa.

I did not say that you were the person who said all of those things, just that they were said at various points in the thread. You have, however, just now said that paying into the pension scheme or NHI may not be necessary.

As to pension payments, it is quite cut and dried. If you have taxable income in Japan, you are legally required to contribute to the pension scheme. It may not be advantageous for you to do so, and you may be able to get away without doing it for a period, but it is illegal to fail to contribute, and the pension service does occasionally forcibly collect, up to two years of back premiums. They have been stepping up efforts in recent years, and with the new personal number system, this will become easier.

Edit: I should add: There are a handful of countries with pension treaties with Japan, whereby nationals of those countries do not have to enroll in the Japanese pension scheme provided they can prove they are still contributing to their home country's scheme, as long as they are in Japan for less than five years.

The law regarding health insurance is also not at all ambiguous. You are legally required to be enrolled in either shakai hoken or NHI. Again, if you fail to make those payments, they can forcibly collect what is owed, in the case of NHI up to five years back payments.

Failing to pay health or pension does not currently impact your visa status, failing to pay resident's tax does.

 

[Sudsy]

@Solong I have a question.

You have repeatedly tried to describe differences in tax treatment for independent contractors.

When you use this phrase, are you referring to 請負師, 請負業者, or 個人事業主?

 

[User#16452]

Hey, Einstein put the smack down on previous models of gravity only 100 years ago, so you never know.

But yes, the "I'm right and you are wrong" dynamic is getting old.

Einstein had a new model to explain how gravity exists, not whether it exists or not. Pick up a pen then let it go. Boom. Gravity exists.

 

[split]

Well. My former employer hasn't sent my Gensen choshu-hyo which I'm reading is legally required to be sent by January 31st, if the employer is required to withhold taxes (and 100k he did). I requested it by email but I bet he ignores it and probably kept this money within the company. I'm gonna corner his ass legally in writing so he can't backtrack his actions (or lack of) later.

 

[Sudsy]

Well. My former employer hasn't sent my Gensen choshu-hyo which I'm reading is legally required to be sent by January 31st, if the employer is required to withhold taxes (and 100k he did). I requested it by email but I bet he ignores it and probably kept this money within the company. I'm gonna corner his ass legally in writing so he can't backtrack his actions later.

They're legally obliged to have it to you within 7 days of your last day, though in practice most companies will commonly include it with final pay. If you're filing your own taxes, bring all your payslips to the tax office, and they'll work it out - and give your old company a reaming.

 

[split]

They're legally obliged to have it to you within 7 days of your last day, though in practice most companies will commonly include it with final pay. If you're filing your own taxes, bring all your payslips to the tax office, and they'll work it out - and give your old company a reaming.

He never included it with my last paycheck. Also, he had 0 withholdings on the final (but very small paycheck). I found this page to request the amout of withholding directly from the tax office:

http://www.nta.go.jp/tetsuzuki/shinsei/annai/hotei/annai/23100017.htm

However, it requires me to declare what I earned from him. I'm wondering if he never paid that withholding to the tax office, will the tax office tell me I need to pay the tax anyway, and take him to court to get my money back (simply making it all my responsibility)?

 

[Sudsy]

However, it requires me to declare what I earned from him. I'm wondering if he never paid that withholding to the tax office, will the tax office tell me I need to pay the tax anyway, and take him to court to get my money back (simply making it all my responsibility)?

You'd have to take that one up with the tax office, I have simply never dealt with that situation, and there's a reason for it - employers who rip off the public coffers get serious grief from the tax agency. Like "you're going to jail" grief.

Hopefully you kept all your payslips - if you have those, I would expect they would "talk" to your former employer. And by talk I mean rake over some very hot coals.

 

[split]

Thanks. Yes I did keep all payslips.

 

[Sudsy]

Thanks. Yes I did keep all payslips.

I hope your former employer gets audited quarterly for the next ten years.

 

[just4fun]

The mind-blowing assertion to me in this thread is the claim that different cities or wards feature different local tax rates.

This is not Switzerland where you can cherry pick tax rates by canton.

Now.......you know how I just hate to jump into this sorta stuff since I don't know jack squat about this kinda stuff but............My city tax in Chiyoda ward and my friends City tax in the "Mitaka" area is like night and day. He's paying triple what I pay.
I hope this information helps a little.

 

[Sudsy]

Now.......you know how I just hate to jump into this sorta stuff since I don't know jack squat about this kinda stuff but............My city tax in Chiyoda ward and my friends City tax in the "Mitaka" area is like night and day. He's paying triple what I pay.
I hope this information helps a little.

That shouldn't be - unless he's making three times what you do

 

[Sudsy]

Mitaka-shi: 課税総所得金額（前年中の所得金額　－　所得控除金額）×税率10％（市民税6％：都民税4％）

Chiyoda-ku: See page 36 linked (in English).

Are you sure he's not counting NHI as part of it, or combining his city tax with a spouse or partner's?

 

[just4fun]

He told me he pays no health insurance. I'm married and he's single and makes maybe 1 million yen more than me a year so not a huge difference.

 

[Sudsy]

There's the differences. If you're paying into shakai hoken and have one (or more) dependents, and he's not paying into health insurance or pension and has no dependents, his taxable income will be significantly higher than yours, as he will have no dependent or social insurance deductions. His national income tax will be higher as well.

 

[TAG Manager]

This thread has run its course. Obviously, there are differing views...