Answer ... (a) What taxes are levied and what are the applicable rates?
Income tax is calculated by dividing income into 10 categories:
- interest income;
- dividend income;
- real estate income;
- business income;
- employment income;
- retirement income;
- forestry income;
- capital gains income;
- temporary income; and
- miscellaneous income.
The tax is calculated by subtracting each income deduction from the gross income and then multiplying the remaining balance, which is the taxable amount, by the progressive tax rates, ranging from 5% (for amounts of JPY 1.95 million or less) to 45% (for amounts over JPY 40 million). For further details, please see question 2.3(b).
A special restoration income surtax due to the Great East Japan Earthquake of 2.1% applies to income earned through 31 December 2037 on the amount of income tax each year. An inhabitant tax of 10% is also imposed, which is divided into municipal income and prefectural income taxes.
(b) How is the taxable base determined?
Income tax is calculated by multiplying the gross income – which is the sum of various types of income (eg, employment income and real estate income) that are subject to the aggregate taxation method – by the applicable tax rate, according to the following progressive tax rates:
Amount of taxable income (amount rounded down to the nearest JPY 1,000) |
Rates |
Deduction |
JPY 1,000 to 1,949,000 |
5% |
JPY 0 |
JPY 1,950,000 to 3,299,000 |
10% |
JPY 97,500 |
JPY 3.3 million to 6,949,000 |
20% |
JPY 427,500 |
JPY 6,950,000 to 8,999,000 |
23% |
JPY 636,000 |
JPY 9 million to 17,999,000 |
33% |
JPY 1,536,000 |
JPY 18 million to 39,999,000 |
40% |
JPY 2,796,000 |
JPY 40 million+ |
45% |
JPY 4,796,000 |
Separately from income that is subject to the aggregate taxation method, some income – such as interest and capital gains income – will be calculated separately from gross income (ie, not added to gross income). This calculation is called ‘separate taxation’. In turn, separate taxation can be further classified into:
- separate withholding taxation; and
- separate declaration taxation.
(c) What are the relevant tax return requirements?
For individuals, tax returns and income tax payments are due on 15 March of the following year.
(d) What exemptions, deductions and other forms of relief are available?
Available deductions and exemptions include, among others:
- deductions for social security premiums;
- deductions for small business mutual aid premiums;
- deductions for life insurance premiums;
- exemptions for widows or single parents;
- exemptions for working students;
- exemptions for persons with disabilities;
- exemptions for dependants;
- the basic deduction;
- deductions for casualty losses;
- deductions for medical expenses; and
- deductions for donations
Tax credits include, among others:
- credit for dividends:
- special credit for housing loans, exc. etc.
- special credit for contributions to political parties;
- special credit for donations to public interest incorporated associations; and
- credit for foreign taxes.
For non-residents, the available deductions and tax credits are limited.