Residence Tax In Japan For Foreigners: An Easy 2024 Guide
As a foreigner living in Japan, you're legally required to pay residence tax (住民 税 = jumin zei).
However, filling in and filing tax documents can be daunting, especially if you're not sure where to begin.
We'll walk you through understanding the basics and the most important things to know about your residence tax in Japan as a foreigner.
What is residence tax in Japan?
Residence tax is a general term for the tax that residents of Japan must pay. Think of it as the local tax, which helps cover community-based public services such as education and welfare.
Residence tax consists of prefectural and municipal individual residence taxes, and taxpayers pay residence tax in both the municipality where they have filed a moving-in notification and the prefecture where that municipality is located.
Who needs to pay the residence tax?
Every resident in Japan must pay taxes. You must pay the residence tax if you reside in a Japanese prefecture and municipality as of January 1st.
You will not be taxed the year you arrive in Japan. However, you will be taxed for the previous year if you are still in Japan on January 1st of the following year. Even if you leave Japan before your bill arrives, you still have to pay it.
Image. Example of residence tax bill from Kamakura City, Japan
How is the residence tax calculated?
The tax is calculated based on your taxable income earned between January 1st and December 31st of the previous year.
The tax office examines your tax return (kakutei shinkoku) for this period and calculates the tax amount based on your per capita and income-based portions.
Residence tax breakdown
|
Income tax rate |
Per capita burden |
Prefectural and metropolitan resident taxes |
4% |
1,000 yen |
Municipal Resident Tax |
6% |
3,000 yen |
Forest Environment Tax* |
- |
1,000 yen |
total |
10% |
5,000 yen |
How to calculate residence tax in Japan
The tax office will calculate it for you. However, if you are curious about doing the math yourself, here are the equations:
Income Amount - Income Deductions = Taxable Income Amount
Taxable Income Amount × Tax Rate 10% - Tax Amount Deductions = Income Tax Amount
Income Tax Amount + Per Capita Burden 5,000 yen = Resident Tax Amount
When are residence taxes due in Japan?
There are two types of payment methods for the residence tax with differing due dates.
If you choose a lump sum payment, you need to make the payment in June.
However, if you want to make an installment payment, you can pay it four times in June, August, October, and January.
How to pay Japan's residence tax
There are two methods for paying residence tax in Japan.
1. The special collection method
Translation from MIC Ministry of Internal Affairs and Communications
Employees are normally eligible for the "special collection" payment, also known as the "salary deductions" method.
This collection type involves the municipality sending your employer or company the tax notice and paying it on the employee's behalf.
As an employee, the resident tax will be deducted from your salary in one payment or smaller deductions throughout the year.
2. The ordinary collection method
Translation from MIC Ministry of Internal Affairs and Communications
If you are a freelancer, self-employed, or currently unemployed, you must pay residency tax, depending on your previous year's annual income.
In June, the city office will send you a notice (tax payment slip) asking you to pay your residence tax if you earned any income in the previous year.
You can pay the taxes at the post office, a financial institution, or a convenience store for direct payment.
When do I have to pay my resident tax?
If you have started working in Japan or just moved here, you are not subject to residence tax because you do not meet the required income tax requirements.
If you work for a company in Japan, the tax amount will be deducted from your salary starting in June. As an employee, you do not have to do anything.
If you are self-employed, you will receive a tax notification with a due date for when the residence tax is due.
Two things to be aware of in paying residence tax
1. Make sure you know your due tax amount before leaving employment
If you pay the residence tax by "special collection" but then quit your job, the remaining amount is paid through the ordinary collection.
However, some employers deduct the outstanding amount from your last salary or severance money. Hence, if you're thinking about resigning from your job, make sure what your action items are regarding tax payment.
2. Pay your tax before leaving Japan
If you're going to leave Japan, you'll still need to pay the due residence tax. If you cannot pay the taxes in advance before your departure, appoint a tax representative who is authorized to pay your resident tax on your behalf with the local government office by submitting an authorization notice.
How can you reduce residence tax in Japan?
One way you can actively reduce your residence tax in Japan is through the Hometown Tax, which involves donating to the local government. The amount you donate is deducted from your income and residence taxes. You must file a tax return or use the One-Stop system for this reduction.
There is also the Fixed Tax Reduction For 2024, where both taxpayers and dependents will receive a 10,000 yen reduction in resident tax and a 30,000 yen reduction in income tax. This temporary measure alleviates household burdens due to rising prices for those with an annual income of 20 million yen or less in 2024.
Can you apply for a tax deduction for Japan’s resident tax?
In Japan, you will need to pay income tax for all your income earned globally. Nevertheless, if you're already paying taxes for income in another country, that amount cannot be taxed again. Hence, you can apply for the already-paid tax to be deducted from your residence tax.
1. Foreign tax credit
You can deduct an amount from your Japanese income tax if you earned money from foreign wages or dividends and paid all the appropriate income taxes and individual resident taxes.
2. Tax conventions
Nearly every other country has signed a tax treaty with Japan, and some of them cover the residence tax. You can file an Application Form for Income Tax Convention (租税条約に関する届出書, sozei jōyaku ni kansuru todokede-sho) at a tax office or your local government office if you're a trainee, apprentice, or satisfy certain conditions, which could result in a lower or even waived residence tax. The notification must be submitted by March 15th.
You can find more information on residence tax on the Ministry of Internal Affairs and Communications Website.
Frequently asked questions
What is residence tax in Japan?
Residence tax is a general term used to describe the tax that residents staying in Japan need to pay.
Who needs to pay Japan's residence tax?
Every Japanese resident must pay taxes. You must pay the residence tax if you reside in a Japanese prefecture and municipality as of January 1st. The year you arrive in Japan, you will not be taxed. But you will be taxed for the previous year if you are still in Japan on January 1st of the following year. Even if you leave Japan before your bill arrives, you still have to pay it.
How is Japan's residence tax calculated?
The tax is calculated based on your taxable income earned between January 1st and December 31st of the previous year.
How much is the residence tax in Japan?
Residence tax for foreigners and Japanese nationals is based on the previous year's taxable income. The tax office will examine and calculate the tax amount and notify you if you are self-employed/unemployed or your company if you are employed.
When are residence taxes due in Japan?
If you choose a lump sum payment, you need to make the payment in June. However, if you want to make an installment payment, you can pay it four times in June, August, October, and January.
👉 You may also be interested in: Nozei Shomeisho: Your Guide to Japan's Tax Certificate.
👉 Go to our Japanese business glossary to learn more about the various tax types in Japan.
In closing
Now you know everything that comes with residence tax in Japan for foreigners and Japanese residents.
If you're leaving Japan, either temporarily or permanently, and need help paying your resident tax bill—try MailMate. MailMate is a bilingual virtual mailbox that includes a bill-paying service!
👉 Check out our GPT tax guide for expats in Japan for all your answers.
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