No matter if you are working part-time in Japan as an international student or a Dependent visa holder, you may have wondered that "Is tax imposed on my monthly wage? If it is, then how much?"
Actually almost all income should be reported to the tax offices and be taxed except for some exemptions. However as Japan has a progressive taxation system called "累進課税制度", that tax rates and tax deductions differ based on income, here is a good news: if your income doesn't reach a predefined amount, the tax you need to pay will be zero yen.
Another good news: in most cases, you don't need to do tax by yourself. Japan has a tax payment system called Withholding, "源泉徴収", which means that your employer will deduct tax from your salary every month and do all tax jobs on your behalf. While in some cases, like quitting a job, you may still need to do this on your own, which we will talk about later.
There are two kinds of taxes that a part-time worker should be imposed: Income Tax (plus Special Income Tax for Reconstruction), and Resident Tax.
Special Income Tax for Reconstruction, which was started in 2011 in order to secure the necessary sources of revenue to reconstruct from the Great East Japan Earthquake, will end in 2037. As it is paid along with income tax, we will categorize them two together.
Income tax is paid to the nation.
Income tax will be calculated based on the taxpayer's estimated annual income at the beginning of a fiscal year. Then taxes will be withheld from the taxpayer's monthly salary. What if the actual annual income is found to be different from the estimated amount at the end of the year? Was my tax overpaid?
Yes, this is a real problem. So Japan has a tax procedure called Tax Return, "確定申告", that taxpayers file to tax offices about their real annual income and all deductions at the end of the year, to recalculate income taxes need to pay.
Then tax officers will do Year-End Adjustments, called "年末調整", to compare with the tax amount already paid, and determine refund for overpaid or additional pay for shortfall.
For part-time workers, your employer will do all the Withholding, Tax Return and Year-End Adjustments on your behalf.
Taxable Gross Income = annual salary income - Deductions.
Income Tax = Taxable Gross Income x Income Tax Rate.
Special Income Tax for Reconstruction = Taxable Gross Income x 2.1%.
It means that:
Total Income Tax = Income Tax + Special Income Tax for Reconstruction
= Taxable Gross Income x (Income Tax Rate + 2.1%).
Deductions = Salary Income Deduction (650,000 yen) +
Basic Personal Exemption (380,000 yen) +
Other deductions, such as medical expenses deduction, social insurance premium deduction, working student deduction (270,000 yen), spousal deduction, dependency exemption, etc.
A part-time worker, whose annual income is less than 1,030,000 yen, will get income tax calculated to 0 and have no need to pay tax (but Tax Return still needs to be filed by the employer or oneself).
A part-time working student will have no need to pay for income tax if he or she earns less than 1,300,000 yen annually.
Tax Rate ranges from 5% to 45% increasing with Taxable Gross Income, which means that more earning more income tax. For example, the tax rate will be 5% for Taxable Gross Income under 1.95 million yen, while 10% for 1.95 ~ 3.30 million yen.
Withholding will happen on your salary day every month, while Tax Return and Year-End Adjustments will be done from February 16 to March 15 of each year.
Tax Return should be filed to the tax office. Nowadays filing can also be done by mail or online (e-Tax).
Resident Tax is paid to the prefecture and municipality where the taxpayer is living, so the tax rates may slightly differ depending on prefectures and municipalities.
Different from Income Tax imposed for the current fiscal year, Resident Tax is imposed for the previous year. Tax amount will be calculated based on your previous year's annual income, which will be a certain number when calculating.
For example, income tax amount for 2019 will be calculated on the basis of your income in 2019, while resident tax amount for 2019 will be based on your income in 2018.
For a part-time worker, Resident Tax will be deducted from his or her monthly salary by the employer automatically after the total due amount divided in 12 months.
Resident Tax = Per Income Levy (所得割) + Per Capita Rate (均等割).
Per Capita Rate = municipal locality tax (3,500 yen) + prefectural locality tax (1,500 yen)
= 5,000 yen.
Per Income Levy = (annual salary income - Deductions) x Resident Tax Rate.
Deductions = Salary Income Deduction (650,000 yen) +
Basic Personal Exemption (350,000 yen) +
Other deductions, such as medical expenses deduction, social insurance premium deduction, working student deduction (260,000 yen), spousal deduction, dependency exemption, etc.
Though the kind of deductions are similar to Income Tax, the amount is slightly different.
Part-time workers with annual income less than 1,000,000 yen don't need to pay for Resident Tax, while part-time working students can get an upper line as 1,260,000 yen.
The rate is about 10% for all taxpayers.
For example, the payment period for 2018 will start from June 2019 to May 2020.
Resident tax should be filed (about annual income to calculate resident tax) and paid to the tax office of the municipality where the taxpayer was living on the previous year's January 1.
For part-time workers who have their employers to do tax jobs instead, there is no need to file for Resident tax, as the company will submit the Salary Payment Report to municipalities.
In the case that you need to do tax jobs on your own, filing for Resident tax will also be unnecessary if you filed for an Income Tax Return, as your income can be known from that.
The only case that you need to file for Resident Tax on your own will be that no company will do it for you, and your annual income is not high enough to file for Income Tax Return.
If you find a new job during the same fiscal year, the new employer is supposed to do all the tax jobs for you. So all you need to do is to submit necessary documents like Withholding Receipts received from the past employer to your new employer.
If else, you should do Tax Return and Year-End Adjustments by yourself.
Even if you get no income now, you still have to pay Resident Tax for the previous year's income.
So after you quit, you should pay the left tax amount for the whole year (from the current month to May) in a lump sum or installments. Note that if you quit between January and May, you will be asked to pay in a lump sum.
As the past employer won't do Year-End Adjustments for you, you have to do it on your own. Calculate the actual income tax amount according to the Withholding Receipts and go to the tax office for a Tax Return filing.