Japan: Living There - Tax Issues
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Living There
INDIVIDUAL TAXATION
Individual income tax in Japan consists of national income tax and local inhabitant tax. Inhabitant tax is assessed by the prefectural and municipal governments. Residents are classified into two categories: permanent and non-permanent residents.
- A permanent resident, someone who has stayed in Japan for more than 5 years, or has the intention to live in Japan permanently, is subject to Japanese income tax and inhabitant tax on worldwide income at progressive tax rates shown below.
- A non-permanent resident of Japan is subject to tax on Japanese-sourced income and foreign source income paid or remitted in Japan, at similar rates. A non-permanent resident is generally someone who has been present in Japan for 5 years or less.
INCOME TAX
The following are the tax rates for a resident’s net taxable income:
INCOME TAX |
|
| TAXABLE INCOME, JPY (US$) | MARGINAL TAX RATES |
| Up to 3,300,000 (US$30,925) | 10% |
| 3,300,001 - 9,000,000 (US$84,340) | 20% on band over US$30,925 |
| 9,000,001 - 18,000,000 (US$168,680) | 30% on band over US$84,340 |
| Over 18,000,000 (US$168,680) | 37% on all income over US$168,680 |
| Source: Gobal Property Guide | |
Moreover, residents are further subject to municipal and prefectural taxes with the rates ranging from 3%-10% and 2%-3%, respectively.
INCOME TAX |
||
| TAXABLE INCOME JPY (US$) | MARGINAL PREFECTURAL TAX RATES | MARGINAL MUNICIPAL TAX RATES |
| Up to 2,000,000 (US$18,742) | 2% | 3% |
| 2,000,000 - 7,000,000 (US$65,598) | 2% on band over US$ 18,742 | 8% on band over US$18,742 |
| Over 7,000,000 (US$65,598) | 3% on all income over US$65,598 | 10% on all income over US$65,598 |
| Source: Gobal Property Guide | ||
The following allowable deductions can be deducted from taxable income to reduce income tax and inhabitant tax liability. Reliefs are separately applied to each individual taxpayer.
INCOME TAX |
||
| RELIEF | TAXABLE INCOME JPY (US$) |
INHABITANT TAX JPY (US$) |
| Physically handicapped person | 270,000 (US$2,530) | 260,000 (US$2,437) |
| Severely physically handicapped person | 400,000 (US$3,748) | 300,000 (US$2,811) |
| -Person is living with taxpayer | 750,000 (US$7,028) | 530,000 (US$4,967) |
| Widow (or widower), divorcee or working student | 270,000 (US$2,530) | 260,000 (US$2,437) |
| Spouse | 380,000 (US$3,561) | 330,000 (US$3,093) |
| Spouse, 70 years or older | 480,000 (US$4168) | 380,000 (US$3,561) |
| Dependent | ||
| - 16-22 years of age | 630,000 (US$5,904) | 450,000 (US$4,217) |
| - 70 years or older | 480,000 (US$4,498) | 380,000 (US$3,561) |
| - Parent, 70 years old or older, of the taxpayer or his or her spouse living under the same roof | 580,000 (US$5,435) | 450,000 (US$4,217) |
| - Dependent other than the above | 380,000 (US$3,561) | 330,000 (US$3,093) |
| Basic deduction | 380,000 (US$3,561) | 330,000 (US$3,093) |
| Source: Gobal Property Guide | ||
Capital Gains Tax
Gains realized from selling short-term real properties (i.e., properties held for less than five years) are taxed at 30% of the net gains. If the property is the taxpayer’s personal residence, JPY30,000,000 (US$281,133) is deducted from the gross sales price.
The taxable gain is computed by deducting the acquisition costs and related expenses, improvement costs, and transfer costs from the gross sales price.
Net gains from the sale of properties held for more than five years will be taxed at 15%.
Gains realized from selling real property used by the taxpayer as his private residence is taxed at special rates if that property is held by him for at least ten years. After the basic deductions, the first JPY60,000,000 (US$562,266) of the net taxable gains is taxed at 10%, and any excess is taxed at 15%.
PROPERTY TAX
Property Tax
A municipal tax is levied at 1.4% of the assessed value of the land or building. For land used for a residential purpose, one third of the assessed value is excluded from taxation. For residential land up to 200 square meters, one sixth of the assessed value is deducted from the taxable amount.
To be excluded from property tax, the assessed value of the land must be not more than JPY300,000 (US$2,811), whereas for a house, the threshold is JPY200,000 (US$1,874).
City Planning Tax
City planning tax is levied at a flat rate of 0.3% on the assessed value of the land or building. The property is exempt if its value is less than certain thresholds. City planning tax is levied together with the property tax. For both taxes, the owner of the land or building is liable.
Japan - more data and information
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