Filing Taxes in Japan
Moving to Japan? You might need to know a thing or two about the tax system. Filing taxes in Japan is based on self-assessment. This means the person himself will determine how much tax he or she has to pay according to his or her income tax. This is done in combination with a withholding tax system. The taxes will be subtracted from the salaries and wages of the employees and it will be the employers who will be submitting it.
Most employees in Japan do not need to file taxes because of the withholding tax system. Employees only need to file tax return if:
- They leave the country before the tax year ends.
- Their employer does not withhold taxes. An example of this is if their employer is not from Japan.
- They have more than one employer.
- Their annual income reaches 20,000,000 yen and more.
- They have an extra income from other sources that reaches 200,000 yen.
Taxes in Japan are paid according to income, property and consumption. Taxes will be paid on the national, prefectural and municipal levels.
For employees who do not need to file an income tax return, their employers from their salaries will withhold their income taxes. Eventually, for the final salary of the year, adjustments are made. Employees have to pay the prefectural and municipal payments separately. This will be upon the notification of the municipality.
Self-employed people have to file tax return. For those who are required to file tax returns, they must do so during February 16 to March 15 of the following year.
Here are some of the most relevant kinds of taxes that individual in Japan pay:
Income tax. This tax is paid on the national, prefectural and municipal levels. On the prefectural and municipal levels, this is also known as the “residential tax.” The amount of tax to be paid is based on the net income of the taxpayer.
Enterprise Tax. This is the tax that a self-employed individuals who have businesses pay on the prefectural level. The amount to pay is based on the type of business and its net income.
Property Tax. This is tax paid by people who own lands, housing and other depreciable assets on the municipal level.
Consumption Tax. This is tax paid by consumers when they buy goods and other services. 5% is the current rate divided into 4% for the national level and 1% for the prefectural level. The consumption tax should be placed in the prices shown. This is a requirement that the shops and service providers should comply to.
Vehicle related taxes. For individuals who own a car and other vehicles they should pay taxes in the prefectural level. Passenger cars owners pay taxes based on the engine displacement. Motorbike owners pay light vehicle tax on the municipal level. When an individual buys a car, he or she will pay an automobile acquisition tax on the prefectural level.
Liquor, Tobacco and Gasoline Taxes. When individuals buy alcohol and beverages, they will pay taxes on the national level. When they buy tobacco, they will pay taxes on the three levels. For those who bug gasoline, they will be paying a gasoline tax on the national level. The taxes are shown in the prices of these products.