In Japan, permanent resident taxpayers are taxed on their worldwide income. Non-resident taxpayers are taxed only on their Japan-sourced income. Non-permanent resident taxpayers are taxed on their income other than foreign-source income (in particular, potentially, on certain capital gains) that are not remitted into Japan plus potentially part of their foreign-sourced income that is paid in or remitted to Japan.
Personal income tax rates
The current national income tax rates are:
|Taxable income (JPY)||Tax rate
|Deduction||Tax on Column 1 (JPY)|
|Over (column 1)||Not over|
The tax liability is determined by multiplying the excess taxable income for each bracket by the percentage above and adding the cumulative tax figure (see the Sample personal income tax calculation section for more information).
A surtax took effect 1 January 2013. The surtax is comprised of a 2.1% tax that is assessed on an individual’s national income tax.
Local income taxes
Generally, in Japan, the local inhabitant’s tax is imposed at a flat rate of 10%. Japanese local governments (prefectural and municipal governments) levy local inhabitant’s tax on a taxpayer’s prior year income. This applies where the taxpayer is a resident of Japan as of January 1 of the current year. For local inhabitant’s tax purposes, an equalisation per capita tax is also assessed. The standard annual amount is JPY 5,000, while this may vary based on the prefecture/municipality in which the taxpayer resides. Local inhabitant’s tax is not deductible.
A non-resident taxpayer’s Japan-source compensation (employment income) is subject to a flat 20.42% national income tax on gross compensation with no deductions available. This rate includes 2.1% of the surtax described above (20% x 102.1% = 20.42%). A non-resident taxpayer may be subject to the local inhabitant’s tax at a rate of 10% if they are registered as a resident as of 1 January of the following year.