Taxes in Japan

Please note that we are not tax accountants and this section is not an official tax site, just a starting point for you to get an overview of the tax system in Japan. Please read our disclaimer.

Categories

Taxes in Japan are broken up into two major categories: National Tax and Local Tax. After that, it gets very complicated! There are more than 25 additional taxes on "consumption", including everything from "bathing tax", "golf course utilization" (no, this isn't a joke!) to "gasoline tax" (part of the reason prices are 2 to 3 times higher than in the US).

Mainly Included

This may sound alarming, but the vast majority of these taxes are already included in the price. An overview of the various tax types follows...

Consumption Tax

Consumption Tax: Currently 5% (was 3% until June 2000).

Income Tax

Resident Status

Japan bases income tax obligations on resident status: Permanent Residents or a Non-Permanent Residents.

Responsibilities

In most cases, you will be responsible for income tax generated outside of Japan if you are a resident of Japan. Conversely, you may be responsible for income generated in Japan even if you are a non-resident, depending on: 1) Whether the actual transfer of funds takes place inside or outside of the country and 2) On the type of tax treaty that your country has with Japan. Both residents and non-residents must file income tax returns if they received any monies generated in Japan during the year.

It might be Complicated

Your income tax obligations as a foreigner in Japan can be quite complicated - it's highly recommended that you talk to a tax advisor before coming to Japan!

Resident Tax (SHINMINZEI)

What is it?

This tax is comprised of the Metropolitan Tax and Special City Resident Tax, and they are usually lumped together and called SHINMINZEI.

First Year free?

As the tax is based on the previous year's income, foreigners are not required to pay this tax during their first year in the country.

Capital Gains Tax

Japan has two types of capital gains tax applying to the sale of shares and, get this: You can take your pick!

Type A

The first type, Withholding Tax (GENSEN) requires you to pay 1.05% of proceeds, regardless of whether or not you made a profit on the transaction.

Type B

The second type, traditional Capital Gains Tax (SHINKOKU) requires you to declare 26% of net profits on the transaction on your income tax return. Many traders use the "GENSEN" system when they sell shares at a profit, and the "SHINKOKU" one when they sell at a loss (because the loss then appears on their tax return).

Property Tax

Both national and local taxes apply (see MOF link below for details)

Inheritance Tax

If you're rich and you die in Japan, be prepared to pay! Max rate is currently 70%. According to the Ministry of Finance, "In additional to its function in providing the redistribution of wealth, the Inheritance tax also plays a role as a supplemental tax to the Income tax". Mmmmm...

Forums

Questions/comments? Go to the Taxes Forum

Taxes in Japan: Other Sources

Links

• Ministry of Finance. Information on everything financial in Japan, including details on Japan's tax system.
• National Tax Agency. In-depth data and statistics on Japan's income tax system. English PDF documents available for download.
• National Tax Bureau, regional offices:
  • Tokyo: Income tax counseling in English: 03-3821-9070
  • Osaka
  • Nagoya