Income tax and special income tax for reconstruction on salaries and wages, retirement allowance, interest, dividends, fees, etc. are withheld by the payers at the time of payment and are paid to National Tax Authority by required due dates.
Filing of Tax on Employment Income
An employee submits report of exemption of dependents to the employer by the day before first pay date of each calendar year. Employer withholds Income Tax and Special Income Tax at the time of payment and the taxes are due to the tax authority by the 10th of following month of the payment date. (Employers with employee count less than 9 are allowed to select to file for tax on semi-annual basis).
Employer then follows procedure called the “Year-End Adjustment.” After the final compensation of the calendar year is determined, the employer recalculates tax amount of each employee on the total compensation paid for the year, and makes payment and filing adjustments. If the compensation amount exceeds 20,000,000 yen, the employer will not make the year-end adjustment, it becomes the applicable employee’s responsibility, and the employee are required to file personal income tax return.
If the year-end adjustment is made, and the employee does not have any other income, filing of personal income tax is not required. If the employee earns other income such as income paid outside Japan, final return will be required.
Employment Income Earned by a Non-Resident
An employment income earned by a non-resident from payer who owns permanent establishment in Japan is categorized as domestic source income. The tax rate of income tax and special income tax for reconstruction on domestic source income is 20.42%, and the tax will be withheld at time of payment. If the non-resident resides in a country with tax treaty with Japan, tax amount may not be withheld, or tax rate may be reduced.
Filing of Personal Income Tax return on retirement income is not necessary in many cases, but if the income earners received other income in the same year, such as from dividend or business, or if final tax amount needs adjustments, then tax return will be required.
Exemption for Non-Resident Dependents
Starting January 1, 2016, if a resident files for an exemption for Non-Resident Dependents, “Documents concerning relates” and “Documents concerning remittances” will be required.