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A local tax paid annually by residents of Japan, calculated based on the previous year's income.

Sections

1. Overview of Resident Tax in Japan

Resident Tax is a local tax levied by municipal (city, town, or village) and prefectural governments in Japan. It is used to fund local public services such as education, infrastructure, and welfare programs. Resident Tax is separate from Income Tax (所得税, Shotokuzei), which is collected by the national government.

Resident Tax is applicable to individuals who have lived in Japan for at least one year and have earned income during the previous calendar year. Both Japanese citizens and foreign residents are subject to this tax if they meet the residency and income criteria.

2. Who Needs to Pay Resident Tax?

Permanent Residents: Foreigners who have lived in Japan for more than one year and have a stable income are required to pay Resident Tax.
Non-Permanent Residents: Foreigners who have lived in Japan for less than five years but have income sourced in Japan are also subject to Resident Tax.
Short-Term Visitors: Those staying in Japan for less than one year are generally exempt from Resident Tax.

Resident Tax is based on your income from the previous year. If you move to Japan mid-year, you will not pay Resident Tax for that year but will be liable for it starting the following year if you meet the residency and income requirements.

3. How Resident Tax is Calculated

Resident Tax is calculated based on your income from the previous calendar year (January 1 to December 31). It consists of two components:

Per Capita Levy (均等割, Kintōwari): A flat fee charged to all residents, regardless of income.
Income-Based Levy (所得割, Shotokuwari): A percentage of your taxable income after deductions.

General Formula for Resident Tax

Resident Tax = Per Capita Levy + Income-Based Levy

Breakdown of the Tax Rates

Per Capita Levy: Typically around ¥5,000–¥6,000 annually (varies by municipality).
Income-Based Levy: Generally 10% of taxable income, split as follows:
- 6% for the municipal government.
- 4% for the prefectural government.

Example Calculation

Annual Income: ¥4,000,000
Deductions: ¥1,000,000 (e.g., basic deduction, social insurance premiums, etc.)
Taxable Income: ¥3,000,000
Income-Based Levy: ¥3,000,000 × 10% = ¥300,000
Per Capita Levy: ¥5,000
Total Resident Tax: ¥300,000 + ¥5,000 = ¥305,000

4. Payment Procedures

Resident Tax is typically paid in one of two ways:

A. Special Collection (特別徴収, Tokubetsu Chōshū)

For salaried employees, Resident Tax is deducted directly from your monthly salary by your employer.
Employers remit the tax to the local government on your behalf.
This is the most common method for full-time workers.

B. Ordinary Collection (普通徴収, Futsū Chōshū)

For self-employed individuals, freelancers, or those without an employer, the local government sends a tax bill directly to your registered address.
Payments are made in four installments (June, August, October, and January of the following year).
Payment can be made at banks, convenience stores, or online (depending on the municipality).

5. Important Deadlines

Tax Assessment: Resident Tax is assessed based on your income tax return (確定申告, Kakutei Shinkoku) or salary information submitted by your employer.
Payment Start: Tax bills are typically issued in June each year.
Installment Deadlines: Payments are due in June, August, October, and January.

6. Key Considerations for Visitors and Immigrants

A. Residency and Tax Liability

If you move to Japan mid-year, you will not pay Resident Tax for that year because it is based on the previous year’s income.
If you leave Japan permanently, you are still liable for Resident Tax for the year you leave, based on the previous year’s income. Ensure you settle your tax obligations before departure.

B. Deductions and Exemptions

Common deductions include:
- Basic Deduction: ¥430,000 (as of 2023).
- Social Insurance Premiums: Health insurance, pension, and unemployment insurance contributions.
- Dependent Deductions: For dependents such as children or a non-working spouse.
- Medical Expenses: If they exceed a certain threshold.
Some municipalities offer additional deductions or exemptions for low-income earners.

C. Filing Requirements

If you are a salaried employee, your employer typically handles the tax filing process.
If you are self-employed or have additional income (e.g., rental income, investments), you must file a tax return by March 15 each year.

D. Moving Between Municipalities

Resident Tax is paid to the municipality where you were registered as a resident on January 1 of the tax year. If you move mid-year, you will still pay Resident Tax to your previous municipality.

E. Language Barriers

Tax documents and procedures are often in Japanese. Consider seeking assistance from a tax consultant, your employer, or local government offices, many of which offer multilingual support.

7. Penalties for Non-Payment

Failure to pay Resident Tax on time can result in:

Late payment penalties.
Legal action by the local government to recover unpaid taxes.
Difficulty renewing your visa or residence status, as tax compliance is often checked during immigration procedures.

8. Resources for Assistance

Local Tax Office (市役所, Shiyakusho): Visit your municipal office for guidance on Resident Tax.
National Tax Agency (NTA): While the NTA primarily handles Income Tax, they can provide general tax information.
Multilingual Support: Many municipalities offer tax consultation services in English, Chinese, and other languages.

9. Summary

Resident Tax is a local tax based on your previous year’s income.
It consists of a flat fee (Per Capita Levy) and an income-based percentage (Income-Based Levy).
Payment is made via salary deductions (Special Collection) or direct payments (Ordinary Collection).
Ensure you understand your tax obligations, especially if you are moving to or leaving Japan.

By staying informed and proactive, you can manage your Resident Tax obligations smoothly and avoid any complications.