Tax Declaration In Japan: Step-By-Step Guide

Navigating the serene yet complex landscape of Japan extends beyond its physical beauty into the intricacies of its tax system. Looking for help to file tax declaration in Japan? Worry Not! Your’e at right place!

The ritual of tax declaration in Japan is a critical passage for every resident, blending obligation with the meticulous order that defines the nation. This guide demystifies the process, making the daunting task of tax declaration as harmonious as a traditional Japanese tea ceremony.

Let’s dive in!

Is It Mandatory To File A Tax Declaration In Japan?

There are three categories for compulsory taxpayers:

Residents
Non-Residents
Temporary Residents.

The people in these categories who need to pay taxes consist of:

Employees and Salary Earners
Self-Employed Individuals: Such as freelancers, business owners, and professionals
Investors and Capital Gains
Real Estate Owners
Foreign Nationals
High-Income Earners: High-income earners may have additional reporting requirements.
Other Income Sources: Such as royalties, pensions, and other forms of compensation.

Mostly, wage earners do not need to file a final tax return due to the year-end adjustment by the person paying the salary.

However, wage earners (except if they receive a tax refund after filing a tax return) are required to file a final tax return in the following scenarios:

1	Your total income from employment exceeds 20 million yen.
2	You receive a salary from only one source, and your total income (excluding employment and retirement income) exceeds 200,000 yen.
3	You receive salaries from two or more sources adjusted by tax withholding, and the sum of total earnings from employment (excluding primary salaries) and total income (excluding employment income and retirement income) exceeds 200,000 yen. However, you need not file a final tax return if your total earnings from employment after subtracting all the tax allowances (excluding the deductions for casualty losses, medical expenses, donations, and basic exemption) are at most 1.5 million yen. Your total income (excluding employment and retirement) is 200,000 yen or less.
4	You receive interest on loans or rent for properties from the company.
6	You receive salaries and wages from those not obliged to withhold income tax at source.

Furthermore, people with public pension benefits paid in Japan who satisfy all of the following conditions are not required to file a final tax return:

Public pension benefits paid in a year are four million yen or less.
All your public pension benefits are subject to withholding at source.
The total income (excluding miscellaneous income derived from public pension benefits) is 200,000 yen or less.

Can You Claim Taxes Back In Japan?

Yes, this is done by filing for a tax refund.

Even when you are not legally required to file the final tax return forms if the amount of taxes withheld from salaries and wages or estimated tax prepayment exceeds the income tax calculated according to your annual income.

You may claim a refund for income tax by filing the final tax return.

Non-residents staying in the country for less than 6 months are eligible for a tax refund on purchases that total 5,000 yen or more.

The tax refund items must have been exported within 6 months from entry to Japan. Keep in mind that the refund is only applicable to items that are exported from Japan.

The tax refund is processed at an airport, and you must show your passport to customs at departure.

Tourists traveling by cruise ship need to show their cruise ship tourist permit.

How To Get More Taxes Back From Japan?

This can be done by the following:

Japan offers tax exemptions on home appliances, accessories, shoes, alcohol, food, cosmetics, cigarettes, and medicines.
Foreign visitors staying in Japan for less than six months can apply for tax exemptions on purchases of 5,000 yen or more.
Plan your purchases, as tax exemptions only apply to items exported within this timeframe.
Keep receipts when making purchases, as you must present these receipts when applying for tax exemptions.
Keep note of ineligible items for tax exemption.
If you are a resident of a country with a tax treaty with Japan, you may be eligible for reduced tax rates or other benefits.

A reduction in taxation is possible on the following:

Home Loan Tax Deduction: It applies to people who purchased their residence in Japan. This deduction gives you 1% of the remaining home loan value (up to 40M JPY) per year as a tax credit for up to 10 years.
Employee Expenses: A permanent or non-permanent resident employee can take an earned income deduction. The minimum standard deduction is JPY 550,000 or gross employment income. The lower one will be chosen.
Spousal Tax Deduction: Under the spousal tax reduction laws in Japan, if the dependent spouse is making JPY 1.03M or less each year, the taxable annual income of the household’s primary earner is reduced by JPY 380,000. If the income is above 1.03 JPY, the taxpayer does not qualify for a deduction.
Charitable Contributions: It is important to note that, according to the Ministry of Finance in Japan, charitable contributions are eligible for tax deductions only if the charity organization is in Japan.

The deduction is restricted to 40% of the income less than JPY 2,000. However, you must first confirm if your chosen charitable organization is qualified.

What Are The Types Of Taxes In Japan?

The various taxes that individuals are obligated to pay are as follows:

Income Tax: The “resident tax” consists of your yearly obligatory national, prefectural, and municipal payments. This calculation is based on the individual’s net income.
Enterprise Tax: It is an annual prefectural tax applicable to self-employed individuals engaged in business activities. The tax amount is determined by the individual’s net income and business.
Property Tax: It is an annual municipal tax imposed on individuals with depreciable assets such as land and housing.
Consumption Tax: Levied on consumers on goods and services. Generally, the rate is 10 percent. However, for certain items like food, non-alcoholic beverages, and newspaper subscriptions, the rate is 8 percent.
Vehicle-Related Taxes: These taxes are levied on vehicle ownership, including a prefectural automobile tax for car, truck, or bus owners. The tax is calculated according to the engine displacement. This category includes an annual municipal light vehicle tax, a national motor vehicle tonnage tax, and a prefectural automobile acquisition tax.
Liquor, Tobacco, And Gasoline Taxes: You pay the national liquor tax when purchasing alcoholic beverages. Tobacco products incur national, prefectural, and municipal taxes. Consumers also pay a national gasoline tax when buying gasoline.

Remember, these taxes are generally added to the displayed prices at shops.

How To File A Tax Declaration In Japan?

You must file a tax return to file a tax declaration in Japan.

For example, if you are self-employed, you must do so at the local tax office, by mail, or online (e-Tax) between February 16 and March 15 of the following year.

The deadline for filing income tax returns is March 15 of the following year. It is important to note that employees only need to file a tax return if:

They leave Japan before the end of the tax year
Their employer does not withhold taxes
They have more than one employer
Their annual income is more than 20,000,000 yen
They have a side income of more than 200,000 yen

Individuals meeting these conditions must report their income and claim deductions using Form B, Form 16, Form 17, or Form 22.

The type of form used depends on their type of income.

Taxpayers must settle the excess or deficiency with the amount of tax withheld or estimated tax prepayment regarding the income earned from January 1 to December 31 of that year.

On top of that, the income tax in Japan is based on the self-assessment system. As such, you must calculate the amount of taxable income and the tax on the income by yourself and file proper returns on your responsibilities.

Documents Needed For Your Tax Return In Japan

To file a tax declaration in Japan, you must present various documents. These may include:

Final Return Form: This form reports income, deductions, and other relevant information for the tax year.
Copy of both sides of your My Number Card and Special Permanent Resident Certificate (Alien Registration Certificate)
Personal “Inkan” Seal
Confirmation Of Type Of Resident Status: Go to the tax office and fill out the form stating the period in which you have maintained domicile or residence in Japan within the preceding 10 years, type of resident status, etc.
Bank Account Number: Suppose the address, name, etc., in your bankbook differs from the one written on your Special Permanent Resident Certificate / Resident “Zairyu” Card (Alien Registration Certificate). In that case, the refund cannot be deposited until corrected.
A copy of the family registration
Worldwide Assets And Liabilities Report: This is separate from the income tax return and needs to be filed separately with the tax office. Remember that it is obligatory only if you meet certain conditions laid out by the embassy.

Those who have trouble or do not speak Japanese should be accompanied by someone who can speak Japanese.

What Is The Deadline And Processing Time For Your Tax Refund In Japan?

In Japan, the filing deadline for tax returns is March 15 of the following year. The time it takes to receive a tax refund in Japan may differ according to the situation.

For income tax returns, the processing time for your tax refund is two to four months. Additionally, for tax refunds by foreign visitors, the refund can be issued within a week.

It’s recommended to consult a tax consultant to maximize your tax refund and ease your filing process.

Conclusion

As the cherry blossoms mark renewal, completing your tax declaration in Japan can also signify a fresh start in your financial journey. With the insights from this guide, you’re now equipped to approach this annual ritual with confidence and precision.

Remember, in the realm of taxes, understanding and preparation are your allies, ensuring you navigate Japan’s tax waters as smoothly as a paper boat on a tranquil pond.

Declaration Harmony!

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