What you need to know about Japan’s resident tax
Japan's Resident Tax
Income tax, consumption tax, inheritance tax, alcohol tax and so on! If you have lived in Japan, you probably have heard about those types of taxations at least one time, I guess? (and the list is still incomplete for sure).
So today, let’s discuss about “Individual Resident Tax” （個人住民税 - kojinjuminzei）.
Resident tax（住民税 - juminzei） is a tax paid to the municipality where you live with the purposes of maintaining administrative services provided by the prefectures and municipalities, such as: education, welfare, disaster prevention activities and other governmental services.
Who has to pay resident tax?
・If you move to another municipality, for example, from Shinjuku ward to Meguro ward on or after January 2, your residents tax will be imposed by Shinjuku ward where you lived on January 1.
・If you leave Japan on or after January 2, you are still liable to pay resident tax.
You will be subjected to resident tax if you reside in your municipality (based on address on your certificate of residence) as of January 1. A lil bit confused, right? :) So, let’s look at the following two scenarios:
Resident tax calculator
In a nutshell, here is how your resident tax is calculated:
Municipal Tax Amount = Income Rate + Per Capita Rate
Resident tax consists of “per capita rate”（均等割 kintowari） which is borne equally by all residents in a municipality and “income rate”（所得割 - shotokuwari） which varies from individual annual income.
Here is the general breakdown of “per capita rate” and “income rate”:
・Per capita rate（均等割 - kintowari）: is borne equally by all residents in a municipality and consists of two smaller elements which are municipal tax and prefectural tax determined by municipalities and prefectures. The average per rate is 5,000 yen.
・Income rate（所得割 - shotokuwari）: is borne according to individual’s annual income and is calculated as 10% of previous year’s net income (from January to December).
Plus, if you are working for a company, the tax rate is calculated by subtracting the number of dependents, social insurance premiums, life insurance premiums and other income deductions based on your employment income from January to December of the previous year and multiplying it by the tax rate.
When to pay resident tax?
Resident tax payment is divided into 4 installments: June, August, October and January of the following year with different due dates. You can also pay resident tax at once in lieu of paying in installments.
Don’t try to delay or worse, avoid paying resident taxes (and any kind of other taxes) because the tax offices have the legal seizure of money from your bank account (and property if necessary) with late-payment interests to satisfy a tax debt.
How to pay resident tax?
There are 4 main ways to pay your resident tax:
・Salary deduction: this way is applicable to full-time employees for companies and organisations.
・Cash payment: you can pay at the counter of convenient stores or public tax offices.
・Bank transfer: you can carry out the payment via Internet banking, mobile transfer or ATM.
・Credit card: only some cities have this option, so make sure to check with your municipality’s tax office.
Alright! It's the end of June already and have you paid the resident tax? Check your mailbox (if you are freelancers, part-time workers and students) and ask your company's HR division.