Withholding tax on salaries in Japan
I will get a work visa in Japan and will be employed and work as a full-time employee. Do I have to pay income tax on my salary And how should I pay the tax
Yes, when the salary is paid, the company has to withhold income tax from the salary and pay it on behalf of the employer. In Japan, there is a withholding system to pay income tax on employment income.
Withholding at Source in Japan
Under Japanese tax law, employers are obliged to deduct a certain amount of their employer’s withholding income tax on the payday and then pay it directly to the tax office on behalf of the employer.
Taxable and non-taxable items on your salary pay slip:
If you have allowances (benefits) from employer, you may notice that they are classified into taxable and non-taxable on your pay slip. Some commonly encountered items are explained in the following paragraphs.
- Transport allowance
Amounts under the legal limit will be non-taxable*
*Only in cases of using the train/bus to commute:
By using the most economical and reasonable route/method, even if the amount of transport JPY 150,000 will be the limit. Therefore any amount over JPY 150,000 will be taxable.
- Travel allowance for relocation of work place and/or business trip
Any amount which can be recognized as needed normal expenses is non-taxable.
- Night/day shift allowance
Amounts below the legal limit will be non-taxable.
*Remarks: Company may determines the maximum amount of allowance by internal regulations. You have to confirm the terms in employment contract and/or company policy.
- Overtime/holiday allowance
- Family/dependent allowance
- Housing allowance* paid by CASH.
*1- Only in cases where the housing contract is in the tenant (employee) name and the employee pays the rent.
*2- Lending of company housing does not quality. However, if the rental contract is in the employer’s name and the employer pays a certain, legally-decided amount of the rent it will be considered non-taxable income.