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Taxes and Tax Identification

Introduction to Japan's tax system, including the need for a My Number card for tax purposes.

Sections

Key Types of Taxes:

  1. Income Tax (ๆ‰€ๅพ—็จŽ, Shotokuzei): Paid by individuals on their income.
    • Progressive tax rates ranging from 5% to 45% (depending on income level).
  2. Resident Tax (ไฝๆฐ‘็จŽ, Juminzei): Paid to local governments (municipalities and prefectures).
    • Flat rate of approximately 10% of income.
  3. Consumption Tax (ๆถˆ่ฒป็จŽ, Shouhizei): Japanโ€™s version of VAT or sales tax.
    • Current rate: 10% (8% for certain food and beverages).
  4. Corporate Tax (ๆณ•ไบบ็จŽ, Houjinzei): Paid by businesses on their profits.
    • Standard rate: 23.2% (may vary for small businesses).
  5. Inheritance Tax (็›ธ็ถš็จŽ, Souzokuzei) and Gift Tax (่ดˆไธŽ็จŽ, Zouyozei): Levied on inherited or gifted assets.

2. Tax Identification in Japan

What is a Tax Identification Number?

Japan uses the My Number System (ใƒžใ‚คใƒŠใƒณใƒใƒผๅˆถๅบฆ, Mai Nanbaa Seido) as its tax identification system. Introduced in 2016, the My Number system assigns a unique 12-digit number to all residents (both Japanese nationals and foreign residents) for tax, social security, and administrative purposes.

Who Needs a My Number?

  • Residents: All individuals residing in Japan for more than 3 months, including foreign nationals, are required to have a My Number.
  • Non-Residents: Visitors staying in Japan for less than 3 months (e.g., tourists) are not issued a My Number and are generally not subject to Japanese taxes.

3. How to Obtain a My Number

Step-by-Step Process:

  1. Register Your Address:

    • Upon arrival in Japan, foreign residents must register their address at the local city/ward office (ๅธ‚ๅŒบ็”บๆ‘ๅฝนๆ‰€, Shikuchouson Yakusho) within 14 days of moving in.
    • Required documents:
      • Residence Card (ๅœจ็•™ใ‚ซใƒผใƒ‰, Zairyu Kaado)
      • Passport
      • Completed address registration form (available at the city office).

  2. Receive Your My Number Notification:

    • After registering your address, you will receive a My Number Notification Card (้€š็Ÿฅใ‚ซใƒผใƒ‰, Tsuuchi Kaado) by mail within 1-2 weeks.
    • This card contains your 12-digit My Number.

  3. Optional: Apply for a My Number Card:

    • The My Number Card (ใƒžใ‚คใƒŠใƒณใƒใƒผใ‚ซใƒผใƒ‰, Mai Nanbaa Kaado) is a plastic card with your photo and My Number. It serves as an official ID and can be used for various administrative tasks.
    • To apply, submit the application form included with your notification card or apply online.

4. Using Your My Number for Taxes

Your My Number is required for:

  • Filing income tax returns (็ขบๅฎš็”ณๅ‘Š, Kakutei Shinkoku).
  • Receiving employment income (your employer will request your My Number for tax withholding purposes).
  • Applying for social security benefits.
  • Opening a bank account (in some cases).

5. Filing Taxes in Japan

Who Needs to File Taxes?

  1. Employees:

    • Most salaried workers do not need to file taxes individually because their employer withholds income tax and resident tax from their salary (referred to as ๆบๆณ‰ๅพดๅŽ, Gensen Choushuu).
    • However, you must file a tax return if:
      • You have multiple sources of income.
      • You earn over ยฅ200,000 in additional income (e.g., freelance work, investments).
      • You are leaving Japan permanently before the end of the tax year.

  2. Self-Employed Individuals:

    • Freelancers and business owners must file an annual tax return.

  3. Non-Residents:

    • Non-residents are taxed only on income earned in Japan.

Tax Filing Process:

  1. Determine Your Tax Residency:

    • Residents (living in Japan for over 1 year) are taxed on worldwide income.
    • Non-residents (living in Japan for less than 1 year) are taxed only on Japan-sourced income.

  2. Prepare Necessary Documents:

    • My Number.
    • Income statements (ๆบๆณ‰ๅพดๅŽ็ฅจ, Gensen Choushuu Hyou) from your employer.
    • Receipts for deductible expenses (e.g., medical expenses, donations).
    • Bank account details for refunds.

  3. File Your Tax Return:

    • Filing period: February 16 to March 15 (for the previous calendar year).
    • Methods:
      • Online via the NTAโ€™s e-Tax system (requires a My Number Card and card reader).
      • In person at your local tax office (็จŽๅ‹™็ฝฒ, Zeimusho).
      • By mail.

  4. Pay Taxes:

    • Taxes owed can be paid via bank transfer, credit card, or at convenience stores.

6. Tax Costs and Deductions

Tax Rates:

  • Income Tax: Progressive rates (5% to 45%).
  • Resident Tax: Flat 10%.

Common Deductions:

  • Basic Deduction: ยฅ480,000 for all taxpayers.
  • Dependent Deduction: For supporting dependents (e.g., children, elderly parents).
  • Social Insurance Premiums: Contributions to health insurance, pension, and unemployment insurance.
  • Medical Expenses: Deductible if expenses exceed a certain threshold.
  • Charitable Donations: Eligible for tax deductions.

7. Cultural Considerations

  1. Punctuality and Accuracy:

    • Japan places a high value on punctuality and accuracy. Ensure all tax filings are submitted on time and with correct information to avoid penalties.

  2. Employer-Employee Relationship:

    • Employers are responsible for withholding taxes for their employees. It is customary to trust your employer to handle tax matters unless you have additional income sources.

  3. Privacy Concerns:

    • The My Number system has faced some public skepticism due to privacy concerns. However, it is widely accepted as a necessary part of Japanโ€™s administrative system.

  4. Language Barrier:

    • Most tax documents and procedures are in Japanese. Consider seeking assistance from a tax consultant or interpreter if you are not fluent in Japanese.

8. Practical Tips for Visitors and Immigrants

  • Keep Your My Number Secure: Do not share your My Number unnecessarily to prevent identity theft.
  • Seek Professional Help: Tax consultants (็จŽ็†ๅฃซ, Zeirishi) can assist with complex filings, especially for self-employed individuals or those with international income.
  • Understand Double Taxation Treaties: Japan has tax treaties with many countries to avoid double taxation. Check if your home country has an agreement with Japan.
  • Plan for Resident Tax: Resident tax is calculated based on the previous yearโ€™s income and is billed separately from income tax. Budget accordingly.

9. Resources

  • National Tax Agency (NTA): https://www.nta.go.jp/ (Japanese only; some English resources available).
  • Local Tax Office: Visit your nearest tax office for assistance.
  • Multilingual Support: Some city offices and tax consultants offer services in English, Chinese, and other languages.

By understanding Japanโ€™s tax system and following the procedures outlined above, visitors and immigrants can confidently manage their tax obligations and avoid common pitfalls.