Income Tax Rates and Structure in Japan: A Guide for Residents and Foreigners

1. Income Tax Rates and Structure in Japan: A Guide for Residents and Foreigners It is critical to understand the Income Tax Rates, and below is the Structureyard for anyonewho is abiding in Japan and working. Understanding the system, no matter if you are anemployee on salary, self-employed, or expatriate, determines the compliance and even reduces your tax liability. On this page, we’ll be splitting upthe progressive tax brackets, local taxation, and how the Income Tax Return in Japanis calculated, even if you’re a foreigner. Progressive Tax Rates in Japan Japan hasa progressive income tax system, where higher incomes are taxed at a greater rate. The national income tax is bracketedfrom 5% to 45%. Detailsof the 2025 national tax brackets are as follows: •Up to \u00a01,950,000: 5% •\u00a01,950,001– \u00a03,300,000: 10% •\u00a03,300,001 –\u00a06,950,000: 20% •\u00a06,950,001 – \u00a09,000,000:23% •\u00a09,000,001\u2013 \u00a018,000,000: 33% •\u00a018,000,001 --\u00a040,000,000: 40% •Over \u00a040,000,000: 45% These rates refer to theincome tax at the national level. Local taxes — assessed separately — must alsobe paid by taxpayers.

2. Local Inhabitant Tax Anyone who lives in Japan also pays aninhabitant tax to their local municipality and prefecture in addition to the national income tax. This is oftena flat 10% divided into: •Municipal Inhabitant Tax: ~6% •Prefectural InhabitantTax: ~4% Local taxes are calculated based on your income fromthe previous year and are typically paid in four quarterly installments. Exampleof Income Tax Calculation Let’s consider a simplified scenario to illustrate how both national and local taxes might come intoplay. Example: •Your AnnualIncome: \u00a07,000,000 •Id. Deductions: \u00a01,000,000(standard deduction and social insurance) •TaxableIncome: £6,000,000 National Tax: •First \u00a01. 95M @ 5% = \u00a097,500 •Next \u00a01. 35M @ 10% = \u00a0135,000 •Next \u00a03. 65M @ 20% = \u00a0730,000 •Total National Tax= \u00a0962,500 •Inhabitant Tax (approx. 10%) •6,000,000 x10% = 600,000 •Estimated TotalTax = \u00a01,562,500

3. (Note:These numbers are illustrative. Actual taxes will vary with deductions, exemptions, andother factors.) Filing Taxes in Japan forForeigners Foreigners have a great dependency on residence status in Japan for Income tax. Long-term foreign residents (more than five years of stay in Japan) will be treatedas permanent residents for taxation purposes and will be taxed on a worldwide income basis. Keywords: Non-permanent residents (under 5 years) are normally taxedonly on income from Japan. In addition, foreign nationals have the possibilityto benefit from tax treaties if their home country has signed one with Japan. One of the most important pieces of information you are supposed to know when making yourIncome Tax Return in Japanis your status. The Main Point!! Japan's income tax system is both complex and hierarchical, consistingof national and local taxes. With progressive rates between 5% and 45% and an additional localtax of about 10%, it’s no wonder that income tax liabilities can accumulate. Whetheryou’re a foreigner living in Japan or if you’re a Japanese-native, Consulting with an Income Tax in Japan for Foreigners professional will help you maximize your deductions and file your Income Tax Return in the best possible way. Contact Us Koshida Accounting and Tax Office 〒541-0054 3-1-2 Minamihonmachi, Chuo-ku, Osaka, Japan Tel: +81-6-6484-5470 Email : info@kotsicpafirm.com Website: https://kotsicpafirm.com/