As the calendar year ends in Japan, so does the tax year, bringing the time for year-end tax adjustments. These adjustments help balance the tax withheld by your employer with the actual amount you owe, often resulting in a refund due to allowances and tax-free earnings. While the process can be confusing with unfamiliar terms, it’s an important part of the tax system. First, check out GaijinPot’s kanji cheat sheet for filing taxes. Then, read this simple guide to understanding how year-end taxes work in Japan.
Key Dates For Taxes in Japan
It is always worth remembering the key dates for doing your taxes early. The deadline for the submission of tax returns and necessary documents for year-end adjustments (年末調整, Nenmatsu Chosei) typically falls between February 16 and March 15 of the following year. Generally, it is better to do it earlier rather than later as you can visit your local tax office and get help to fill out the forms if you apply early enough. The taxable period is the full year, starting on Jan. 1 and finishing on New Year’s Eve.
- Taxable period: January 1 to December 31
- Submission deadline for tax returns and documents for year-end adjustments (年末調整, Nenmatsu Chosei): February 16 to March 15 of the following year
- It’s better to file earlier, as you can visit your local tax office for help with the forms if you submit them in advance.
Important Documents
Each month, your paycheck will show that your employer has withheld a portion of your income for tax purposes (typically 10.21%, though it can range from 5% for low-income earners to over 20% for non-residents). This is an estimate of your tax burden, usually slightly higher, to minimize the risk of underpayment. However, if you’ve overpaid—like most people—you’ll need to complete a final calculation to ensure you receive the correct amount, taking into account deductions, exemptions, and credits.
At the end of the year, you’ll receive a Gensen Choshu-hyo (源泉徴収票), or Certificate of Withholding Tax, which outlines the income earned and the tax withheld throughout the year. Most workers will get this directly or by mail from their employer, so be sure to keep it safe, as it may be difficult to reissue.
This certificate is essential for filling out the Nenji Shotoku Kakutei Shinkoku (年次所得確定申告), or Annual Income Review form, which provides all the financial details needed for accurate tax assessment. This form reconciles the taxes paid with the actual liabilities during the year-end adjustment. Year-end adjustments in Japan take into account various deductions and exemptions, such as those for dependents, medical expenses, and social insurance premiums. Special payments like bonuses are also subject to taxation and must be included in the final calculation.
Declare Deductions
Japan offers various deductions and exemptions that can significantly reduce taxable income. Common ones to consider are expenses for dependents, medical costs, pensions, home buyer loans and charitable donations. Of course, keeping good records is important to get the most back by keeping track of income sources, receipts for deductible expenses, and other financial documents.
Filling in the dependents is especially important if you are married and/or have kids. The relevant pages list spouses, children, and people classified as dependents.
Be Aware of Common Mistakes
In today’s “hustle economy,” many workers earn income from various sources, which can make taxes more complicated, especially for part-time or gig economy jobs. All income must be reported for tax purposes, and failing to do so accurately can result in penalties. For example, when I worked in the gig economy, my monthly income could vary by as much as ¥200,000. If your income fluctuates, it’s important to keep accurate records and estimate your average monthly earnings. Additionally, Japan has strict rules about reporting foreign income and assets. Failing to declare income from abroad can lead to serious penalties.
For example, let’s say someone works part-time in the gig economy, earning ¥150,000 from their regular job and an extra ¥50,000 from freelance work. If they only report the ¥150,000 from their regular job and omit the ¥50,000 from freelancing, this would be considered underreporting. The tax authorities may view this as non-compliance.
Keep Up to Date
Finally, it is worth being aware that Japan’s tax laws are subject to revisions and updates. It is useful to keep track of these updates, as changes can result in unintentional non-compliance or missed opportunities for tax optimization. Avoid these pitfalls by seeking guidance from tax professionals familiar with Japanese tax laws. Moreover, staying updated on regulations can ensure that you comply with the latest rules and maximize your returns. Contact or search the National Tax Agency for specific assistance or if you have complex tax situations.
Have any tips for year-end adjustments in Japan? Let us know in the comments!
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For those hiding money at home, supposedly the government is planning to revise bank notes far more frequently than in order to ferret out such hidden income. (My guess is that a clear majority if foreign language, tea ceremony, flower arrangement and calligraphy teachers do not report their income.) if new currency is issued it is difficult to “exchange” for the new one. Recently, after they released the new currency, I needed to move money from 1 bank account to another. I opted to physically move the money but the 2nd bank stated that they were required to see proof of where the money came from. I could of course do that simply by showing them my passbook from the 1st bank which showed the withdrawal in the same amount.
If you have realized earnings from overseas stock investments, the tax office requires proof of those earnings (including the date of each sale and realized earnings, along with proof of your having paid taxes on those earnings in that country. However, this is dependent on whether there is a tax treaty between Japan and that country and the details of that treaty. A fellow professor was caught for not filing. The Japanese tax office computer makes a connection between how much you have in your bank account(s) and you’re declared income. She had to explain why she had so much more in her bank (after selling the stocks and wiring the money to Japan). PS The tax office makes the connection via your “My number” with your bank account and reported earnings.
If you have realized earnings from overseas stock investments, the tax office requires proof of those earnings (including the date of each sale and realized earnings, along with proof of your having paid taxes on those earnings in that country. However, this is dependent on whether there is a tax treaty between Japan and that country and the details of that treaty. A fellow professor was caught for not filing. The Japanese tax office computer makes a connection between how much you have in your bank account(s) and you’re declared income. She had to explain why she had so much more in her bank (after selling the stocks and wiring the money to Japan). PS The tax office makes the connection via your “My number” with your bank account and reported earnings.
Excellent article! Was helpful to learn about year end taxes in Japan.