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Japan Individual - Other taxes

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Social security contributions

An employee whose salary or bonus, including fringe benefits, is paid in Japan by a local employer (including a Japanese branch of a foreign corporation) is generally liable to pay a share of social insurance premiums. The employee’s share consists of the following contributions:

Contribution Standard premiums on monthly salary Standard premiums on bonus
Health insurance for the Metropolis of Tokyo (each prefecture has its own health insurance rate, and rates are slightly higher for individuals between the ages of 40 and 65) 4.98% (on a maximum of JPY 1,390,000 of wages per month) 4.98% (on an annual cap of JPY 5.73 million of irregular annual total payments)
Welfare pension (1) 9.091% (on a maximum of JPY 620,000 of wages per month) 9.091% (on a maximum of JPY 1.5 million of irregular payments per month)
Unemployment insurance 0.85% 0.85%
Total 14.921% 14.921%

Note

  1. The rate of 9.091% for welfare pension will be applied from September 2016 to August 2017. Premiums on child allowance will be imposed separately at 0.2%.

Consumption taxes

A consumption tax is levied when a business enterprise transfers goods, provides services, or imports goods into Japan. As of 1 April 2014, the applicable rate is 8% (previously 5%). As of 1 October 2019, the rate will increase to 10%. Exports and certain services to non-residents are taxed at a zero rate. Specified transactions, such as sales or lease of land, sales of securities, and provision of public services, are not subject to taxation. Consumption tax paid by the business enterprise attributable to taxable revenue shall be refundable by filing the consumption tax return to the extent that such transaction is recorded in the books of account and relevant invoices are kept.

Net wealth/worth taxes

There are currently no wealth/worth taxes in Japan.

Inheritance, estate, and gift taxes

Inheritance tax is a national tax levied on the recipients of an inheritance. New rules that entered into force as of 1 April 2017 revised the scope of taxpayers subject to inheritance tax. These new rules apply to inheritances of people who died on or after 1 April 2017.

Prior to 1 April 2017, inheritance tax was levied on worldwide assets inherited if an individual inherited assets while one resided in Japan or if an individual not residing in Japan inherited assets when the deceased resided in Japan at the time of their death (unlimited taxpayer). For a non-Japanese national residing abroad, inheritance tax was only levied on those assets situated in Japan at the time of the decedent's death if the deceased did not reside in Japan at the time of death (limited taxpayer). However, recipients who are Japanese nationals may be unlimited taxpayers if either the recipients or the deceased resided in Japan within five years of the inheritance.

Under the new rules, the individual’s visa status and the time that they have resided inside or outside of Japan impacts the imposition of inheritance tax:

  • For an individual who has a Table 1 visa under the Visa Status Table of Immigration Control and Refugee Recognition Act and who has resided in Japan for less than ten years out of the past 15 years, generally, inheritance tax is only levied on Japan situs assets (these taxpayers are now treated as a limited taxpayer). However, inheritance tax will be levied on worldwide assets if this individual inherits assets from someone who has resided in Japan for more than ten years out of the last 15 years and/or if the individual inherits assets from a Japanese national who resided in Japan within ten years before their death. Note that a Table 1 visa under the Visa Status Table of Immigration Control and Refugee Recognition Act is essentially a work related visa and does not include the following visa types: permanent resident, spouse or child of Japanese national, spouse or child of permanent resident, and long-term resident.
  • For an individual who resides in Japan and who does not have a Table 1 visa, inheritance tax continues to be levied on worldwide assets (these taxpayers remain treated as unlimited taxpayers).
  • For an individual who has resided in Japan for more than ten years out of the last 15 years (regardless of whether they have a Table 1 visa), inheritance tax continues to be levied on worldwide assets (these taxpayers remain treated as unlimited taxpayers). Since the filing requirement is determined based on residency status (i.e. ten years out of last 15 years), these taxpayers also remain subject to Japanese inheritance tax on their worldwide assets for up to five years after their permanent departure from Japan.
  • For a Japanese national, if either the recipient or the deceased resided in Japan within ten years of the inheritance (previously five years), inheritance tax is levied on worldwide assets.

Assets subject to inheritance tax include tangible, intangible, real, or personal property, unless otherwise specifically exempt under the law. The asset is valued in accordance with the provisions of the Japanese tax rules. The same rules apply to the gift tax system.

The basic exemption is JPY 30 million plus JPY 6 million per statutory heir. If the gross estate is smaller than the total amount of the basic exemption, there is no filing requirement.

After the exemption(s) is applied, the total amount of inheritance tax is determined as follows. First, the assets are allocated to individuals (referred to as statutory heirs) in accordance with the statutory inheritance proportions. Then, the graduated inheritance tax rates are applied to each statutory heir’s portion. Each statutory heir’s portion is then added together to ascertain the total inheritance tax on the assets. Then, this tax is allocated based on the actual recipient(s) of the assets (this allocation is based on the deceased’s will). The actual recipient will be liable for the tax payment, and the tax credit (if any) will apply to the actual taxpayer’s liabilities. In summary, the will executed in the home country of the deceased will be respected; however, the total amount of tax is always calculated in accordance with the statutory inheritance proportions.

Gift tax is a national tax levied on the recipients of a gift. The scope of gift tax is similar to inheritance tax, i.e. a taxpayer’s visa type and the time they have resided inside and outside of Japan affects which gifts may be subject to gift tax. However, the gift tax regime is not unified with inheritance tax, with the exception of a gift that is made within three years from the time of inheritance.

The annual gift exemption per recipient is JPY 1.1 million. Any amount of gift(s) received above the exemption will potentially trigger Japan gift tax.

Additionally, there is a special system where the taxpayer can make an irrevocable election to integrate inheritance and gift tax when certain conditions are met.

Under the special system, referred to as 'settlement of taxes at the time of inheritance':

  • Qualified transfers are those from lineal ascendants who are aged 60 and older made to their lineal descendants who are aged 20 or older.
  • Gifts of up to a total of JPY 25 million will be exempt from gift tax. Several gifts can be made tax-free as long as the total gifts do not exceed the JPY 25 million threshold.
  • Gifts are taxed at a rate of 20% on the amount exceeding the accumulated threshold of JPY 25 million. The amount of gift tax, if any, will be treated as a prepayment of tax against a future inheritance tax liability.
  • Valuation of the gifted assets will freeze at the time of the gift for the inheritance tax calculation.
  • Those who made this election will automatically be subject to the inheritance tax filing regardless of the situation at the time of inheritance.

Recently, special exemptions for gifts made for designated funds have been introduced. These programs are to promote the transfer of wealth from older generations to the younger generation and allow a certain amount of gifts that are free from tax. The exemption is applicable only if the funds are used for qualified expenses. A special account based on the custody agreement must be set up to take the tax benefit. This account is usually maintained by a financial institution that has custody of the funds. Any amounts not used for qualified purposes will be subject to gift tax. Currently, JPY 15 million of educational expenses, as well as JPY 10 million of expenses for marriage and childcare, are qualified for tax-exempt gifting per recipient.

Inheritance tax rates

Taxable properties less exemption and various exclusions (JPY) New table (effective 1 January 2015)
Over Not over Tax rate (%) Deduction (JPY)
0 10,000,000 10 0
10,000,000 30,000,000 15 500,000
30,000,000 50,000,000 20 2,000,000
50,000,000 100,000,000 30 7,000,000
100,000,000 200,000,000 40 17,000,000
200,000,000 300,000,000 45 27,000,000
300,000,000 600,000,000 50 42,000,000
600,000,000 And above 55 72,000,000

Basic estate allowance for inheritance tax: JPY 30,000,000 + (JPY 6,000,000 X number of the legal heirs)

Gift tax rates

Taxable gifts less exemptions and other exclusions (JPY) New table (1 January 2015) on gifts except for the column to the right New table (1 January 2015) gift from lineal ascendants to their descendants who are at least 20 years old
Over Not over Tax rate (%) Deduction (JPY) Tax rate (%) Deduction (JPY)
0 2,000,000 10 0 10 0
2,000,000 3,000,000 15 100,000 15 100,000
3,000,000 4,000,000 20 250,000
4,000,000 6,000,000 30 650,000 20 300,000
6,000,000 10,000,000 40 1,250,000 30 900,000
10,000,000 15,000,000 45 1,750,000 40 1,900,000
15,000,000 30,000,000 50 2,500,000 45 2,650,000
30,000,000 45,000,000 55 4,000,000 50 4,150,000
45,000,000 And above 55 6,400,000

Annual basic exemption for gift tax *: JPY 1,100,000

* This basic exemption will not be applied to the irrevocable elective system mentioned above. 

Property taxes

The annual fixed assets tax is levied by the local tax authorities on real property. Real property is taxed at 1.7% (standard rate including city planning tax) of the value appraised by the local tax authorities. The depreciable fixed assets tax is assessed at 1.4% of cost after statutory depreciation.

Registration and license tax is levied where certain property is registered, at a rate from 0.1% to 2% of the taxable basis. The taxable basis depends upon the property being registered.

Luxury and excise taxes

Excise taxes were abolished by introduction of the consumption tax.


Last Reviewed - 15 August 2017

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