Income Tax Rates And Structure In Japan: A Guide For Residents And Foreigners

By Author: Ken Masaki
Total Articles: 11
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It is critical to understand the Income Tax Rates, and below is the Structureyard for anyone who is abiding in Japan and working. Understanding the system, no matter if you are an employee on salary, self-employed, or expatriate, determines the compliance and even reduces your tax liability.

On this page, we’ll be splitting up the progressive tax brackets, local taxation, and how the Income Tax Return in Japan is calculated, even if you’re a foreigner.

Progressive Tax Rates in Japan

Japan has a progressive income tax system, where higher incomes are taxed at a greater rate. The national income tax is bracketed from 5% to 45%. Details of the 2025 national tax brackets are as follows:

• Up to \u00a01,950,000: 5%
• \u00a01,950,001 – \u00a03,300,000: 10%
• \u00a03,300,001 – \u00a06,950,000: 20%
• \u00a06,950,001 – \u00a09,000,000: 23%
• \u00a09,000,001 \u2013 \u00a018,000,000: 33%
• \u00a018,000,001 -- \u00a040,000,000: 40%
• Over \u00a040,000,000: 45%

These rates refer to the income ...
... tax at the national level. Local taxes — assessed separately — must also be paid by taxpayers.

Local Inhabitant Tax

Anyone who lives in Japan also pays an inhabitant tax to their local municipality and prefecture in addition to the national income tax. This is often a flat 10% divided into:

• Municipal Inhabitant Tax: ~6%
• Prefectural Inhabitant Tax: ~4%

Local taxes are calculated based on your income from the previous year and are typically paid in four quarterly installments.

Example of Income Tax Calculation

Let’s consider a simplified scenario to illustrate how both national and local taxes might come into play.

Example:

• Your Annual Income: \u00a07,000,000
• Id. Deductions: \u00a01,000,000 (standard deduction and social insurance)
• Taxable Income: £6,000,000

National Tax:

• First \u00a01. 95M @ 5% = \u00a097,500
• Next \u00a01. 35M @ 10% = \u00a0135,000
• Next \u00a03. 65M @ 20% = \u00a0730,000
• Total National Tax = \u00a0962,500
• Inhabitant Tax (approx. 10%)
• 6,000,000 x 10% = 600,000
• Estimated Total Tax = \u00a01,562,500

(Note: These numbers are illustrative. Actual taxes will vary with deductions, exemptions, and other factors.)

Filing Taxes in Japan for Foreigners

Foreigners have a great dependency on residence status in Japan for Income tax. Long-term foreign residents (more than five years of stay in Japan) will be treated as permanent residents for taxation purposes and will be taxed on a worldwide income basis. Keywords: Non-permanent residents (under 5 years) are normally taxed only on income from Japan.

In addition, foreign nationals have the possibility to benefit from tax treaties if their home country has signed one with Japan. One of the most important pieces of information you are supposed to know when making your Income Tax Return in Japan is your status.

The Main Point!!

Japan's income tax system is both complex and hierarchical, consisting of national and local taxes. With progressive rates between 5% and 45% and an additional local tax of about 10%, it’s no wonder that income tax liabilities can accumulate.

Whether you’re a foreigner living in Japan or if you’re a Japanese-native, Consulting with an Income Tax in Japan for Foreigners professional will help you maximize your deductions and file your Income Tax Return in the best possible way.