How To Calculate Your Tax Bill in Japan

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Calculating how much you owe in taxes is challenging enough when you’re living at home. When you’re living abroad in Japan, it can feel pretty well impossible. The good news is that Japan uses a similar tax process as most Western countries. We’ve put together a straightforward guide that should help you figure out approximately how much you’ll owe in Japanese taxes as a resident of japan.

Japan’s Progressive Tax System

Japan uses a progressive income tax system. This means that the more money you make, the more you’ll owe in taxes. It’s not an equal increase though. It’s not like for every 100 yen you earn, 10 yen will always go the government. Someone earning 2,000,000 yen a year will pay less in taxes per 100 yen than someone earning 20,000,000 yen.

Another important part of the Japanese tax system is that you get to earn 380,000 yen tax-free as a deduction for basic living expenses. If you’re married and have dependents, you could get an extra 380,000 yen deduction per dependent.

A good way to imagine this system is like a series of buckets. First, your money goes towards the 0% tax-free bucket created from your deductions. After you’ve earned 380,000 in a year, that tax-free bucket is full and then your money will start going into the next bucket, the 5% tax bracket. Up to 1,950,000 can go into this bucket and then it’ll be full as well.

If you earn more income past 1,950,000, that income will start filling up the 10% income bucket. This process will keep going until you’ve made more than 18,000,000 yen and are in the highest tax bracket of 40%. Any money you earn from that point on will go into this bucket.

For your reference, here are the Japanese tax brackets:

Taxable Income Tax Rate
Less than 1,950,000 yen 5%
1,950,000 to 3,300,000 yen 10%
3,300,000 to 6,950,000 yen 20%
6,950,000 to 9,000,000 yen 23%
9,000,000 to 18,000,000 yen 33%
More than 18,000,000 yen 40%

Example 1 – Single Taxpayer

Let’s say you’re a single taxpayer living in Japan and making 3,380,000 yen a year. Your taxable income after the basic deduction is 3,000,000 yen (3,380,000 – 380,000).

The next 1,950,000 yen of income will go into the 5% bucket and will cost 97,500 yen in taxes (1,950,000 x 5% = 97,500). This leaves 1,050,000 yen in taxable income (3,000,000 – 1,950,000 = 1,050,000). This money will go into the 10% bucket and cost you another 105,000 yen in taxes.

Altogether, your taxes for the year will be 97,500 + 105,000 = 202,500 yen.

Example 2 – Taxpayer with Dependents

The calculation is a little more complicated if you’re married and have dependents but not by much. Let’s say you’re married with one dependent and your income for the year is 7,140,000 yen.

You have 3 basic deductions of 380,000: one for yourself, one for your spouse, and one for your other dependent. Your total basic deduction is 1,140,000 yen (380,000 x 3 = 1,140,000). This means your remaining taxable income is 6,000,000 yen (7,140,000 – 1,140,000).

Going back to our bucket calculation, 1,950,000 will go into the 5% bucket and will cost 97,500 yen in taxes. This leaves you with 4,050,000 of taxable income.

3,300,000 yen of that income will fill up the 10% bucket and cost you 330,000 yen in taxes. The remaining 750,000 yen will go into the 20% bucket and cost you 150,000 yen in taxes.

Altogether, your tax bill for the year will be 97,500 + 330,000 + 150,000 = 577,500 yen.

Don’t let Japan’s foreign tax code get you down. The calculation is pretty straightforward and very similar to living at home. By using this guide, you should get a very good idea of how much you’ll owe in taxes.

Of course, this doesn’t substitute for professional advice. This also does not include Inhabitant taxes which is a different set of rules altogether. If you’re still concerned about how much you’ll owe or have some special circumstances (like you’re earning income back home) it would be a good idea to talk to a Japanese tax professional.

Hopefully, you can sort out your taxes without too much trouble so you can get back to enjoying the rest of your time in Japan.

Topics:    

Skier, traveler, tax strategist.
  • Igor says:

    How about social insurance? If I am on 8 mln. per year minus 23% income (some sources say 33%), then adding 16% social insurance, take home looks like 40% less. Correct?

  • arip says:

    how about the resident tax? because i have to pay two tax and resident tax much more expensive than the income tax

  • Ingeborg Kraus says:

    how much tax i must pay when i dont work?
    my wife dont work she is foreigner …must she pay tax even she dont work and she is chronical and psycholocigal problems ?
    how we can get tax free in japan?
    many peopel in japan tax free like the comedians and otehr dummy volks

  • John Smith says:

    Hello,

    I am considering shifting jobs in Tokyo. The position I am looking at requires me to take care of my own tax (no deductions) and also health insurance. The annual salary is ¥8279000, I have 2 dependants (wife not working and 20 month daughter).
    I understand the tax bracket states 23% but the calculator is giving me a different figure. Would someone be able to help me get my head around what my take home figure would be?
    Thank you in advance

  • Rashid says:

    Hi sir I m working in Japan under specialist in humanities/ int. Services my monethly income Ian ¥220,000.00 and I have 5 people to depend on me (mum,dad,brother,sister,and wife)
    In that case how much will tax be?
    I appreciate your answer thanks in advance

  • Ingeborg Kraus says:

    180000Yen income wife dont work and we have kid do we still pay tax?

  • momo says:

    Isn’t the Employment income deductions and health insurance and pension deduction missing from the calculation?

  • Johann Beneth says:

    I would appreciate it if you could assist me with the issues below:

    1. How the “earned Income deduction” is calculated?

    2. How the “basic and dependent deduction” is calculated?

    3. If the employer grants its employee with a meal benefit (as voucher meal for example) on the amount of 3500 YEN (in addition to the basic salary), how this this extra wage should be calculated? How does this extra wage influence the social insurance cost for the company/employer?

    4. If the employee’s meal benefit contribution is 3500 YEN, how does it affect the employee’s salary? (considering the tax exemption related to meal benefit in Japan). Does the employee have to pay consumption tax (8%) on the above amount?

    Thanks in advance for your kind assistance.

    Best regards,

    Johann

    • Hiroki Kobayashi says:

      1.income deduction (from 2016)

      Annual gross income (deduction)

      >162.5million yen (650,000)

      162.5million – 1.8million (gross income*40%)

      1.8million – 3.6million (gross income*30%+180,000)

      3.6million – 6.6million (gross income*20%+540,000)

      6.6million – 10million (gross income*10%+1,200,000)

      10million – 12million (gross income*5%+1,700,000)

      12million< (2,300,000)

      2.Basic deduction 380,000

      Dependent deduction 380,000*number of dependent

      3.If nothing is deducted from employees'salary, 3500yen is taxable.

      (e.g.If monthly gross salary is 200,000, the amount should be 203,500)

      If employees pay more than 1,750 (half of 3500), no impact on gross salary (no additional income tax).

      3500 needs to be added to calculation of social insurance (like 203,500). If two-thirds of 3500 was paid by employees, no impact.

      4.If employees pay nothing, they do not pay consumption tax.

      This is just a general case, so some cases treatment is different.

      Thank you.

  • Pablo Sombrero says:

    For the sake of simplicity, the author didn’t mention the tax bracket deductions and manually calculates per bracket. If you’d like to incorporate this into your excel sheets, perhaps the following might be easier rather than calculating manually or using lots of nested IF-functions in Excel.

    Taxable income brackets
    < 1,950,000 5%
    < 3,300,000 10% -97,500 yen deduction
    < 6,950,000 20% -427,500 yen deduction
    < 9,000,000 23% -636,000 yen deduction
    18,000,000 40% -2,796,000 yen deduction

    Example calculation of income tax:

    Taxable income is 2,024,915 yen —> (2,024,915*0.1)-97,500=104,991.5
    Your income tax is 104,991.5 yen.

    This is also how the Japanese National Tax Agency officially calculates it. See p.46 of their 2012 Income Tax Guide (most recent I could find).
    In the end the author’s calculation and the one I outlined above give the same result. Just wanted to share a more straightforward method of calculating it.

  • I am wondering how you treat the deduction for employment wages, which isn’t mentioned.

  • Joe Peters says:

    Nice, but too basic. This leaves out any discussion of resident tax, which is in addition to national tax. It also leaves out anything about worldwide income for “residents” and what about the rule that doesn’t permit deductions for children under 16 as dependents.

    • Wakko Waru says:

      Don’t forget payroll tax. At least this article is a good first stop. Too many foreigners panic about taxes when really this is the hardest part to understand. After understanding this, the rest gets easier, but yes, should be done with a tax professional. Thankfully I have a friend who is one so I never had to look. Otherwise an article on how to find a tax professional would be really helpful.

      • Ghazanfar Khan says:

        Dear Wakko Waru,
        Can i get Japan taxation 2016 reference book (soft copy) from Your Friend? I am really confused right now and want to educate myself a little bit on the topic.

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