Paying tax is the duty of everyone, including trainees and international students who are working and studying in Japan. However, the tax regulations and methods of calculating personal income tax in Japan are quite complicated for foreigners. Therefore, in the article, we will summarize for you everything related to income tax in Japan in the clearest and most accurate way.

What is income tax?

Personal income tax is a type of income tax that is levied on an individual’s wages, salaries, and other types of income. For trainees, tax will be automatically deducted from salary by the company. When paying tax, the company will notify you.

Do foreigners in Japan need to pay income tax?

For tax purposes, people living in Japan are classified into three categories. This categorization is not related to visa types: 

• Non-Resident 

A person who has lived in Japan for less than one year and does not have his primary base of living in Japan. Non-residents pay taxes only on income from sources in Japan, but not on income from abroad.

• Temporary Resident (Persons living in Japan for 01 – 05 years)

A person who has lived in Japan for less than five years, but has no intention of living in Japan permanently. Non-permanent residents pay taxes on all income except on income from abroad that does not get sent to Japan.

• Permanent Resident

A person who has lived in Japan for at least five years or has the intention of staying in Japan permanently. Permanent residents pay taxes on all income from Japan and abroad.

Note: People earning less than 87,500 yen/month or 1,030,000 yen/year do not have to pay income tax.

Tax rates

The tax rate is determined based on the taxable income. Like in other countries, taxable income is the total earnings minus a basic exemption, exemptions for dependents and various types of deductions, such as deductions for insurance premiums, medical expenses and business expenses of the self-employed.

Calculate your income before deduction by year (including allowances, bonuses, etc.) based on the Taxable income column on the left as well as the Tax rate column on the right as the table shows below. 

Taxable income Tax rate
Under 1,950,000 yen 5%
From 1,950,001 to 3,300,000 yen 10%
From 3,300,001 to 6,950,000 yen 20%
From 6,950,001 to 9,000,000 yen 23%
From 9,000,001 to 18,000,000 yen 33%
From 18,000,001 to 40,000,000 yen 40%
From 40,000,001 yen or more 43%

For example: A trainee has a base salary of 165,000 yen/month, fixed overtime allowance of 50,000 yen/month, total bonus of 430,000 yen/year. Therefore, the total annual income of this trainee will be calculated as follows:

(165,000 + 50,000) x 12 + 430,000 = 3,010,000 yen

By comparing the table above you can see that your tax rate will be around 10%.

Have you grasped all the important points of the income tax in Japan after reading this article? Hoping to see you again in other articles!