Resident Tax, What is it? How is it calculated? How do I read it? When do I pay it?
Updated on 17 May 2021
Have you recently received your Resident Tax Notice? If so, read on.
WHAT IS IT? Resident tax (jumin zei) and also sometimes referred to as inhabitant tax or local income tax in Japan. Resident tax is levied on Japan residents who earn more than 1,000,000 JPY per calendar year. This tax covers the cost of public services such as education, infrastructure, police departments, fire stations, and welfare for senior citizens, etc.
HOW IS IT CALCULATED? Your ward office (kuyakusho/shiyakusho) receives a copy of your wage and tax statement from your employer in January every year. If you file a personal income tax return in March, your tax office forwards your tax return to your ward office. You have income in 2020 and have a registered address in Japan as of 1 January 2021, then you will be obligated to pay this tax.
You will receive R3 (2021) resident tax notice from your employer or payroll provider. Please see the example below:
HOW DO I READ IT? Your Resident Tax notice above shows:
- Adjusted Income is the adjusted total of all your earnings from the previous year (2020).
- Total Deductions. Most salaried employees have social insurance deductions which show the total contributions you made through monthly withholding of your Health and Pension in addition to a standard deduction of 330,000 JPY. If you have any dependents, private insurance, or a housing loan, you may qualify for additional deductions.
- Taxable Income = Adjusted Income – Total Deductions (rounded down to the nearest 1000 JPY)
- Resident Tax amount due. This equates to approximately 10% of your taxable income. Some cities have additional taxes. For example, Yokohama City charges a “green tax” on their residents to plant more trees and to cover the cost of landscape maintenance.
WHEN DO I PAY IT? Based on the above example, if your payday is on the 25th, your employer will withhold 32,300 yen from your 2021 June 25th paycheck. From 2021 July through 2022 May 31,400 yen will be withheld from your paycheck each month.
Please also note for those who are planning to leave Japan that your final official day of residence in Japan can have a major effect on your Resident Tax obligations. Don’t forget to inform your Ward/City office before your departure that you are giving up your residency.
If you leave Japan on or after 1 January 2020, you will be obligated to pay the resident tax based on your 2020 income.
If you leave Japan on or before 31 December 2021, you will not be obligated to pay residence tax based on your 2021 income.
If you are not sure about your particular situation and would like further clarification please feel free to contact us. We will be happy to put you in contact with the appropriate professionals.