The Japanese tax system has rules that foreign workers must understand in order to properly fulfill their financial obligations. Taxes include income tax, resident tax, and automatic deductions from salaries. In addition, eligible workers have the opportunity to receive tax refunds. Understanding Japanese tax policies not only helps in managing personal finances but also ensures compliance with applicable regulations.
Regardless of nationality or residency status, every individual who is Kerja di Jepang is required to pay income tax and resident tax. In this section, we will explain both types of taxes as well as the consumption tax that also applies.
What is income tax?
Japanese citizens and foreign workers, anyone who works and receives Gaji di Jepang is required to pay income tax. This tax is paid to the government and is calculated based on the income earned, multiplied by the applicable tax rate. The higher the income, the higher the tax rate. it means when you work as elderly nurse and receive Gaji Kaigo di Jepang which is relatively high, will also have to pay a higher tax. Income tax is deducted directly from the monthly salary, and the company is responsible for paying it on behalf of the employee.
Scope of Income Tax?
The following items are included in the payslip you receive when you work in Japan, and each is explained below. Here are the points based on the table in the image:
- Payout
- The total amount paid by the company, including basic salary and overtime pay.
- Also referred to as salary.
- Social Insurance
- Health Insurance
- Employees’ Pension Insurance
- Employment Insurance
- Worker’s Compensation Insurance
- Taxable Amount
- Calculated as: Total salary (Payout) – Social Insurance
- Income Tax
- Calculated by the formula: Taxable Income x Tax Rate
Tax on part-time work for foreign students
Foreign students are not eligible to register for Pension Insurance and Health Insurance, so their part-time work wages are not subject to deductions for these insurance costs. Instead, they are required to join the National Pension and National Health Insurance. In addition, Employment Insurance is generally not applicable to foreign students, so there are no deductions for this insurance.
Income tax is usually not levied on part-time wages of students from countries such as China, Korea, and Thailand, due to treaties between their countries and Japan. However, foreign students from countries without such treaties, such as Vietnam, are still subject to income tax on their part-time work earnings.
Resident Tax
The resident tax consists of two separate taxes: one paid to the municipal government and the other to the prefectural government. These taxes are collected together by the municipality where you were registered as a resident as of January 1.
This tax is based on income earned between January and December of the previous year and is deducted monthly from your salary starting in June of the current year until May of the following year. As a result, foreign workers who begin employment in Japan will only have income tax deducted in their first year, while both income tax and resident tax will be deducted starting in June of their second year.
Additionally, if you do not have family in Japan and your total income for the previous year was less than 1 million JPY, you are exempt from paying resident tax.
Consumption Tax
Consumption tax is a tax paid when purchasing goods or using services, as it is included in the price paid. The consumption tax rate is generally 10%. However, for food and non-alcoholic beverages taken home, the applicable tax rate is 8%, which is known as a reduced tax rate. This reduction applies to purchases of food or beverages consumed outside the restaurant, while the 10% rate remains applicable for consumption inside the restaurant.