What is Residence Tax?

1) What is Residence Tax?

Resident tax is a tax levied on individuals residing in a municipality and is also called a "Local Tax".

These Local, Resident taxes consist of prefectural and municipal resident tax.

For more information on income tax, which is a national tax, see also

⇒About income tax

Resident tax is used to pay for public services provided by local authorities, such as education, welfare and waste disposal.

It is levied on individuals regardless of nationality.

Foreign workers who are classified as "residents" are required to pay resident tax in the same way as Japanese citizens. (1)

Resident tax is payable by those who are domiciled in Japan on January 1st and receive a salary above a certain amount.

The tax is payable only by those who have an address in the municipality on January 1st of the same year.

Foreigners who are "non-residents" and those who had no income or income below a certain amount between 1 January and 31 December of the previous year are not required to pay resident tax. (2)

1- "Residents": Those who are domiciled in Japan or have been domiciled in Japan continuously for at least one year.

2- "Non-resident": A person who is not a resident.

2)Formula for calculating the amount of resident tax

The resident tax amount is calculated according to the following formula

Resident tax amount = Income tax rate + Per capita tax rate

【Income tax rate】

The income tax surcharge is an amount based on income.

The amount of per capita income tax is calculated as follows

Per capita income amount = (gross income - income tax credit) x tax rate - tax credit

◆Gross income

The amount of income minus necessary expenses, etc.

Income tax credit

The following deductions from income are also allowed in the calculation of the housing tax:

Miscellaneous deductions, deduction for medical expenses, deduction for social security contributions, deduction for disabled persons, basic deduction, deduction for dependents, deduction for spouse, deduction for single parents, deduction for earthquake insurance premiums, etc.

◆Tax rates

Tax rates for residents are uniformly as follows

◆Tax credits

The following income tax deductions are also allowed in the calculation of resident tax

The following income tax deductions are also allowed in the calculation of the inhabitant tax: dividend deduction, foreign tax credit, tax credit for donations, special tax credit for housing loans, etc.

【Per capita tax】

The per capita tax is a flat rate tax levied on all residents subject to the tax, regardless of their income.

It is usually set at ¥4000, consisting of ¥3000 for the ward and prefectural resident tax and ¥1000 for the municipal and prefectural resident tax.

For the 10 years from 2014 to 2023, due to the effects of the Great East Japan Earthquake, both municipal and prefectural resident taxes will be increased by 500 yen each, bringing the total to 5000 yen.

3) How to Pay Residence Tax

When paying residence tax, taxpayers must pay both municipal and prefectural taxes to the municipality in one lump sum. The prefectural residence tax is paid by the municipality to the prefecture.

There are two ways of paying the residence tax: ordinary collection and special collection.

Ordinary collection (self-payment)：Around June each year, the municipality sends out a tax notice stating the amount of tax due. The taxpayer pays the amount of tax stated in the notice at a financial institution or similar.

Special collection (payroll deduction)：A person other than the taxpayer collects and pays the tax on behalf of the taxpayer. This applies to companies that pay salaries. The company deducts the tax from your salary in advance and pays it to the municipality. In the case of special collection, you do not have to pay the tax yourself to the municipality.

4)  Points to note when leaving or returning home

If you leave your company

If a person who has paid residence tax by the special collection method leaves the company and has unpaid residence tax, he or she must (i) pay it by the normal collection method or (ii) have the unpaid amount deducted from his or her salary or pension and paid by the company to the municipality (lump sum collection).

If you leave a company between 1 January and 31 May, the tax is automatically collected in a lump sum.

If the period is between 1 June and 31 December, you must choose how to pay the tax after you leave the company. If you wish to receive the tax in a lump sum, you must inform your company. If you do not wish to have the tax collected in a lump sum, the tax will automatically be collected in the normal way.

If you leave Japan

If you are unable to pay your taxes before you leave Japan, you must appoint a person living in Japan to receive tax notices and pay taxes on your behalf (tax manager) and notify the municipality where you live before you leave Japan.

The range of people who can be appointed as tax managers and the documents to be submitted vary from municipality to municipality, so check with the municipality where you live.