Japan - Tax Guide for Freelance Contractors
Welcome to our guide to Japanese Taxation. You will find a wealth of information which will be useful if you plan to work in, or place consultants in, Japan.
Our tax guides give a general overview of the actual taxation rates and rules at the time of writing. There are of course many ways to legally reduce tax or social security burdens in Japan. Please contact us for more information or an actual breakdown of your situation, and to find out more about our range of payroll and contact management services in Japan.
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Japanese Income Tax
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In Japan, taxpayers can be permanent residents, non-permanent residents or non-residents.
Permanent tax residents in Japan: are taxed on their worldwide income,
Non-permanent tax residents in Japan: are taxed on their Japanese-source income and on income from other sources remitted to Japan,
Non residents for tax in Japan: are taxed on their Japanese-source income.
Foreign citizens can be considered to be non-residents for tax purposes:
- if they stay less than 1 year in Japan
Foreign citizens are considered to be non-permanent residents:
- if they stay over a year in Japan;
- if originally their intention was to stay for less than one year, but then changes and they stay for more than a year, then their status changes from non-resident to non-permanent resident as of that day.
Foreign citizens are considered to be permanent residents in Japan:
- if they have had their residence in Japan for more than 5 years in total in the last 10 years
Japanese citizens are considered to be permanent residents from:
- the day of their arrival in Japan
Married persons are taxed separately. The tax rates are uniform and are not dependent on marital or other status.
Certain deductions are permissible for permanent and non-permanent residents including:
- social insurance premiums paid to Japanese government,
- life insurance premiums,
- earthquake insurance premiums,
- charitable contributions,
- qualified medical expenses,
- personal deductions for the individual, a dependent spouse and children under the age of 23,
- exemptions for the disabled and elderly.
National income tax rates for 2010:
- 20.00% withholding tax for non-residents (no deductions applicable),
- 5.00% to 40% for permanent and non-permanent residents.
In addition, residents have to pay inhabitant tax of 10% (composed by prefectural and municipal of a per capita levy and an income levy) on their taxable income. This local tax may be waived if the individual leaves Japan before 31 December.
Filing date:
Income tax declarations must be submitted before 15 March every year.