Japan Tax Rate and Income Tax Brackets: What Foreigners Actually Pay (2026)

As a foreign resident in Japan, you're required to pay income tax on a progressive scale from 5% to 45%, plus a flat 10% resident tax charged by local government.

However, figuring out what you actually owe can be confusing, especially once your residency status, your deductions, and Japan's separate local tax all come into play. This guide is for foreign residents of every kind, from new arrivals on a work visa to long-term residents and freelancers.

Here are the key facts at a glance, before we break down what each one means for you.

What is Japan's tax rate at a glance?

What are Japan's income tax brackets and rates for 2026?

Japan uses seven tax brackets. Each bracket only taxes the part of your income that falls inside it, not your whole salary.

The "deduction on band" column is what actually applies the progressive rate.

For example, on a taxable income of ¥4,000,000, you multiply by the 20% bracket rate and subtract the ¥427,500 deduction, giving a tax of ¥372,500. That deduction exists because the first ¥3,300,000 of your income was already taxed at the lower 5% and 10% rates, so this step avoids taxing it twice at 20%.

A 2.1% surtax applies on top of whatever the table calculates, which pushes the real top rate to about 45.945%. You can see the full official breakdown in the National Tax Agency's Income Tax and Special Income Tax for Reconstruction Guide.

💡Did you know?

Japan's tax year always runs January 1 to December 31, no matter when your job started or when your employer's own fiscal year begins.

How much income tax do foreigners pay in Japan?

For tax purposes, the National Tax Agency sorts foreign residents into three groups, and the group you fall into decides what income Japan can actually tax.

These groups are based on time spent in Japan rather than your visa, which means a "permanent resident" for tax purposes is not the same thing as holding a Permanent Resident visa.

For example, someone who has lived in Japan for seven years on an ordinary work visa is already a permanent resident for tax purposes, even though they never applied for a Permanent Resident visa. The two statuses are tracked by two entirely separate systems.

Permanent residents and worldwide income

You become a permanent resident for tax purposes after living in Japan for more than 5 of the past 10 years. Japanese citizens count as permanent residents right away, no matter how long they've lived there.

Permanent residents pay Japanese tax on worldwide income, meaning your Japan salary plus anything you earn overseas. For example, if you still own a rental property back home, that rental income becomes taxable in Japan too, even though the property itself never left your home country.

Non-permanent residents and Japan-sourced income

You're a non-permanent resident if you've lived in Japan for fewer than 5 of the past 10 years, and that applies no matter what visa you hold, whether it's a work visa, a spouse visa, or a student visa.

Non-permanent residents pay tax on Japan-sourced income, plus any foreign income they bring into Japan. Foreign income that stays in an overseas account usually isn't taxed.

For example, savings sitting untouched in a US bank account generally fall outside Japan's reach. But wire even part of that money into a Japanese account, and it can count as remitted income and become taxable, so talk to a tax professional before moving large sums.

Non-resident taxpayers and the flat rate

Non-resident taxpayers have no registered address in Japan. They pay a flat 20.42% on Japan-sourced income only, with no brackets and no exemptions.

For example, a consultant based overseas who gets paid for a two-week project in Tokyo has that 20.42% withheld directly from the payment, usually with no tax return required afterward.

In practice, this means:

• A work visa makes you a non-permanent resident from day one
• After 5 years, your worldwide income becomes taxable
• Leaving Japan doesn't end your tax duties. Income you earned while a resident is still taxable

What is resident tax, and how is it different from income tax?

Income tax isn't the only tax you pay. Local government also charges a resident tax, called juminzei (住民税), through the Ministry of Internal Affairs and Communications' Local Tax Bureau.

Resident tax has two parts.

• Income-based portion. A flat 10% of your net income (4% prefectural, 6% municipal)
• Per capita levy. A small fixed fee, often called the capita tax, around ¥5,000 a year

Resident tax also has its own basic exemption of ¥430,000, separate from the ¥620,000 exemption used for national income tax.

Resident tax works differently from income tax in one more important way. It's based on last year's income rather than this year's, so if you move to Japan in 2026, you won't see a resident tax bill until 2027. Because of that lag, new arrivals pay nothing in their first year, and the first bill only arrives by post the following June.

See MailMate's guide to Japan resident tax for a full breakdown of how the bill is calculated and when it arrives.

How is income tax calculated in Japan?

Everyone follows the same four steps.

Step 1. Add up your income.

Salary, side income, dividends, property income, anything you earned during the calendar year.

Step 2. Subtract the employment income deduction.

This happens automatically for salaried workers, based on how much you earn. Freelancers and sole proprietors don't get this deduction. Instead, they subtract their actual business expenses from gross income to arrive at net income, which is covered in more detail in the self-employed section below.

Step 3. Subtract your exemptions and deductions.

• Basic exemption. ¥620,000 for most taxpayers under the 2026 rules
• Spouse exemption. Up to ¥380,000, or up to ¥480,000 if your spouse is 70 or older, but only if your spouse's own income stays below a set threshold. Above that, the exemption shrinks on a sliding scale and disappears once your spouse earns too much, or once your own income passes ¥10 million.
• Dependent exemption. ¥380,000 per dependent
• Medical expenses. Anything above ¥100,000, or 5% of net income, whichever is lower
• Social insurance premiums. Fully deductible
• Business expenses. For the self-employed only

Step 4. Apply the bracket rate.

What's left gets taxed using the table above, and adding the 2.1% surtax gives you the final bill.

How do employers withhold income tax in Japan?

Most salaried foreigners never file a tax return. Their employer does it for them.

If you have one employer, they calculate your tax and take it out of your paycheck automatically. This is called gensen chōshū (源泉徴収), withholding at source. You never see a bill, because you never owed one directly.

In December, your employer runs a check called nenmatsu chōsei (年末調整), the year-end adjustment, comparing what they withheld all year against what you actually owed. If they withheld too much, you get money back in your December paycheck. If they withheld too little, the difference comes out of that same paycheck instead.

This automatic system only works cleanly if you have one employer and no other income, so taking on a second job or freelance work usually means you need to file a return yourself.

You don't need to file a return in these cases:

• Income from a secondary employer is under ¥200,000 for the year
• Your only income is salary from one employer, and nothing else exceeds ¥200,000
• All applicable tax was correctly withheld at source

You must file a return in these cases:

• Your annual income exceeds ¥20 million
• You earned side income above ¥200,000
• You had more than one employer during the tax year
• You want to claim deductions your employer didn't apply, like medical expenses or home loan interest

What tax rates apply to the self-employed and business income?

Self-employed individuals, called kojin jigyō (個人事業) or "sole proprietor"in Japan, pay tax on net income. That's your business income minus your business expenses.

On top of income tax, self-employed people also owe enterprise tax, or jigyōzei (事業税), on the amount their income exceeds ¥2.9 million.

• Most businesses pay 3% to 5% on income above ¥2.9 million
• Professional services pay a flat 5%

For example, someone with ¥4,000,000 in net business income owes enterprise tax only on the ¥1,100,000 above the ¥2.9 million threshold, adding roughly ¥33,000 to ¥55,000 on top of their income tax bill.

These two taxes are billed separately. File your income tax return every year by March 15 for income earned the year before. Enterprise tax is assessed afterward by your prefecture, based on that same return, and billed separately in two installments, typically in August and November.

Deductible business expenses include the following:

• Office rent and utilities
• Equipment and supplies
• Business travel
• Business insurance
• A share of home expenses, if you work from home

Nobody withholds tax for you automatically as a freelancer, so the full amount comes due at once unless you plan ahead. Setting aside money as you get paid, rather than waiting until March, keeps the tax bill from catching you short.

In this guide, we're only covering individual income tax. If you own a foreign corporation with a permanent establishment in Japan, you'll pay corporate tax instead under separate rules.

What is the tax rate on capital gains and dividends?

Capital gains from listed stocks are taxed at a flat 20.315%, with no brackets involved.

• 15% national income tax
• 0.315% surtax
• 5% resident tax

Dividends from Japanese corporations get the same flat rate. However, a NISA account lets you skip this tax entirely, within yearly and lifetime limits, so it's worth opening one before you start investing.

Non-residents pay 20.42% on Japan-sourced dividends and capital gains by default, but a tax treaty can lower that rate. For example, the US-Japan treaty brings the withholding rate on dividends down to 10% for many American investors, covered in more detail below.

How does Japan's tax rate compare to other countries?

Japan's 55.9% top rate only hits income above ¥40 million a year, a level most people never earn.

On a ¥6 million to ¥8 million salary, the real combined rate is closer to 25% to 30%, about the same as Western Europe.

Social insurance, a separate deduction from income tax, is usually what foreigners notice most on their payslip.

What changed in Japan's 2026 income tax reform?

Japan's Diet passed a 2026 tax reform, effective from January 2026, meant to offset inflation. It builds on a similar reform passed the year before, which is why the basic exemption has moved twice in two years.

What changed:

• Basic deduction rose from ¥580,000 to ¥620,000, following an earlier rise from ¥480,000 to ¥580,000 in the 2025 reform
• A temporary extra deduction, running through 2027, raises the tax-free threshold to ¥1.78 million for people earning ¥6.65 million or less
• Minimum employment deduction rose from ¥650,000 to ¥690,000, plus a temporary ¥50,000 for 2026 and 2027
• A new defense surtax starts in 2027, replacing part of the current 2.1% surtax. The combined burden stays about the same

For 2026, this mostly means a slightly higher tax-free starting point than in previous years. The surtax change doesn't begin until 2027, so the 2.1% figure used elsewhere in this guide still applies through the end of 2026.

How do tax treaties affect Americans and other Foreigners in Japan?

Japan has tax treaties with more than 80 countries. They stop the same income from being taxed twice.

Key points for US citizens under the treaty:

• Salary earned in Japan is usually taxed in Japan first
• The US Foreign Tax Credit offsets Japanese tax against US tax
• The Foreign Earned Income Exclusion may apply
• Dividend withholding drops from 20.315% to 10% for many US taxpayers

If you're a permanent resident for tax purposes, this gets more complex. Japan taxes your worldwide income, so a US citizen must report everything to Japan's National Tax Agency, and separately to the IRS. Filing in one country doesn't cover the other.

How do you pay income tax in Japan?

How you pay your income tax in Japan depends on your employment type.

Salaried employees

You don't do anything. Your employer withholds the tax and pays it for you. In January, you get a certificate called gensen chōshū hyō (源泉徴収票) as proof. Keep it. Visa renewals and loan applications often ask for it.

Self-employed and freelancers

File a final tax return, kakutei shinkoku (確定申告), by March 15. Calculate what you owe using the deductions above, then pay it, either in full or in two installments.

Non-resident taxpayers

Your Japanese payer withholds 20.42% automatically. That's usually the end of it, unless you have other Japan income that wasn't already taxed.

All official mail from the National Tax Agency arrives by post at your registered address in Japan. Miss it, and you could miss a deadline that affects your tax bill or your visa.

Frequently Asked Questions

How much is income tax in Japan?

Japan's income tax runs from 5% up to ¥1.95 million, to 45% above ¥40 million. Add the 2.1% surtax on top. Most foreign residents on a standard salary pay an effective national rate of 10% to 20%. Add the 10% resident tax, and most people pay 20% to 30% combined.

What is the tax rate in Japan?

Japan charges two taxes on income. National income tax runs 5% to 45% on a sliding scale. Local resident tax adds a flat 10%. Combined, the top rate hits about 55.9%, the highest in the G20, but only above ¥40 million a year.

Is Japan a high tax country?

At the top, yes. Japan's 55.9% top rate beats Germany, the UK, and the US. But most people never reach that bracket. On a ¥6 million to ¥8 million salary, the real rate is closer to 25% to 30%. Social insurance, a separate cost, is usually what foreigners notice most.

Does Japan have income tax?

Yes. Japan taxes residents and non-residents with Japan income. Residents pay 5% to 45%, plus a 10% resident tax from local government. Employers withhold both automatically for most salaried workers.

What income tax do foreigners pay in Japan?

It depends on how long you've lived in Japan, not your visa type. Non-permanent residents, meaning fewer than 5 of the past 10 years, pay tax on Japan income plus any foreign income they bring in. Permanent residents for tax purposes pay tax on worldwide income. Non-residents pay a flat 20.42% on Japan income only. Tax treaties can lower these rates for citizens of treaty countries like the US, UK, and most of the EU.

What is the difference between income tax and resident tax in Japan?

Income tax goes to the national government, on a 5% to 45% sliding scale, with a ¥620,000 basic exemption. Resident tax goes to your prefecture and city, at a flat 10% plus a small fixed fee, with its own separate ¥430,000 basic exemption. Resident tax bills also arrive a full year after income tax is withheld, usually by post in June.

Do I need to file an income tax return in Japan?

Not usually, if you have one employer and no other income. Your employer's year-end adjustment covers it. You do need to file if you earn over ¥20 million a year, have side income over ¥200,000, had more than one employer, or want to claim extra deductions like medical expenses.

What happens to my taxes if I leave Japan?

Income you earned while a tax resident stays taxable, even after you leave Japan. File a final return before you go, or name a tax representative to file for you. Skipping this can affect future visa applications and re-entry.

In closing

Japan's 55.9% top tax rate sounds scary. But it only applies above ¥40 million a year. Most foreign residents pay 20% to 30% combined, once resident tax and deductions are factored in.

The hard part isn't the math. It's knowing which residency group you're in, what your employer already handles, and which mail needs your attention.

MailMate handles that last part. It gives you a real Japanese address, and translates and forwards tax mail from the National Tax Agency, so nothing important gets missed.