Japan’s tax year runs from January 1 to December 31, and income tax is payable at the national, prefectural, and municipal levels.
Tax Status
Foreign taxpayers fall into one of three possible categories:
- Non-permanent resident: Individuals who have lived in Japan for five years or less within the last ten years. You are taxed on all income except foreign-sourced income that is not remitted to Japan.
- Permanent resident (for tax purposes): Individuals who have lived in Japan for more than five years out of the last ten years. You are taxed on your global income regardless of where it is earned. Note that this is a tax classification and is separate from the “Permanent Resident” immigration status.
- Non-resident: Individuals who do not meet the criteria for residency. You are generally taxed only on income derived from sources within Japan.
Your status determines the extent to which income from abroad is taxable in Japan. Your total taxes paid (both in your home country and Japan) are governed by bilateral tax treaties to avoid double taxation.
Income Tax (National)
Japan operates a progressive tax system where your tax rate increases with your income. As of 2026, the national tax brackets range from 5% to 45%. Additionally, a Special Reconstruction Income Tax surcharge of 2.1% is applied to the calculated national tax amount (scheduled to remain in effect until 2037).
| Taxable income | Tax rate | Deduction |
|---|---|---|
| <ÂĄ1.95 million | 5% | Zero |
| ÂĄ1.95-3.3 million | 10% | ÂĄ97,500 |
| ÂĄ3.3-6.95 million | 20% | ÂĄ427,500 |
| ÂĄ6.95-9 million | 23% | ÂĄ636,000 |
| ÂĄ9-18 million | 33% | ÂĄ1,536,000 |
| >ÂĄ18 million | 40% | ÂĄ2,760,000 |
For example, a single taxpayer with a taxable income of ÂĄ5.6 million would fall into the 20% tax bracket. Their base national tax would be calculated as (ÂĄ5.6 million x 20%) – ÂĄ427,500 = ÂĄ692,500. After adding the 2.1% reconstruction surcharge (ÂĄ14,542), the total national tax is ÂĄ707,042.
What is “taxable income” and what deductions are allowed?
Taxable income is your gross salary minus various legal deductions. The primary deduction for employees is the Employment Income Deduction, which serves as a standardized “expense” allowance. Furthermore, as of 2026, all taxpayers are entitled to a Basic Deduction of ÂĄ430,000 (provided their income is under ÂĄ24 million).
One of the most significant deductions often overlooked is Social Insurance. All premiums paid for health insurance, nursing care insurance, and the national or employee pension are 100% tax-deductible. These premiums typically amount to roughly 15% of your gross income, significantly lowering your taxable base.
What if I have dependents?
If your spouse earns less than ÂĄ1.03 million annually, they are considered a dependent for tax purposes, and you can claim a Spousal Deduction of ÂĄ380,000. However, since 2018, there is an income cap for the main earner. If your annual income exceeds ÂĄ9 million, the deduction begins to taper off; if it exceeds ÂĄ10 million, you are ineligible for this deduction entirely.
Following changes to simplify child support, children under the age of 16 no longer qualify for a tax deduction, as they are covered by child benefit payments. For children aged 16 to 22, the deduction ranges from ÂĄ380,000 to ÂĄ630,000, depending on their age and student status.
Hometown Tax (Furusato Nozei)
The Furusato Nozei system is perhaps the most popular tax-saving strategy in Japan. It allows you to “donate” a portion of your residence tax to a municipality of your choice. In return, the municipality sends you a “thank you gift” (such as local produce, meat, or travel vouchers). In practice, you pay ÂĄ2,000 out of pocket, and the rest of your donation is credited back to you as a reduction in your residence tax the following year.
Residence Tax (Prefectural & Municipal)
Residence tax (jĹ«min-zei, 住民税) is calculated at a flat rate of 10% (6% prefectural; 4% municipal) of your prior year’s taxable income. Because this tax is billed based on the previous year’s earnings, residents often face a significant financial shock in their second year in Japan when the bills for their first year of income arrive.
Tax Filing Procedures
Most salaried employees have their taxes managed by their employer through a Year-End Adjustment (Nenmatsu Chosei) in December. However, you must file a Final Tax Return (Kakutei Shinkoku) at your local tax office between February 16 and March 15 if:
- Your annual income exceeds ÂĄ20 million.
- You have more than one source of income.
- You wish to claim deductions for medical expenses, Furusato Nozei (if not using the “One-Stop” system), or the first year of a mortgage.
