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Income tax rates

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yotanf4i

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For those of you that work in Japan, what are your taxes like? I've done a little research on this topic but I get conflicting answers.

Talking to some of my friends who work in Japan, the effective tax rate is anywhere from 14% to 17%. This includes national, prefectural, local, social security, national health, etc.

Looking at one website, the tax rate would be around 30%.... I guess this would also depend on the income level as well.

My question is, in Japan, what tax rates are folks paying?

Is there a website that I can read to get the answer? I've always heard that, compared to USA, Japan's individual tax rates are lot lower.

Thanks in advance.
 
I lost the web link; but, I read the income tax rates for various countries on one of the articles. If my memory serves me correctly, Australia has the low tax rate and Japan and USA are neck-and-neck (Japan is about 1 to 2 percent lower than USA).
 
Thanks for the reply. Well, every couple of points helps I guess...

To add to my question, what deductions (from gross to AGI or itemized?) are allowed under the Japanese tax laws? Common ones in the US are 401K contributions, health insurance premiums, flexible spending plans, interest on primary residence.

TIA
 
Going from memory, I have income tax, residents tax, heath insurance, pension, employment insurance, and it works out to about 20%.
 
Ewok85 said:
Going from memory, I have income tax, residents tax, heath insurance, pension, employment insurance, and it works out to about 20%.
Click to expand...
Twenty percent is very good (compared to US rate). I am also interested in hearing from other people to chime in with their own tax rate. Twenty is very nice number as far as the tax burden on the income is concerned.
 
Basic income tax is 7-10%. Adding local taxes and such, and you could be paying 15% or a little more.

Depends on what visa you are on, too. Working holiday visa holders get taxed 20%.
 
Thanks for the replies. 20% is really good compared to the rates us single, non-itemzing folks pay here in the US.
 
Its also worth pointing out in the year I was here my salary "dropped" 15% because of exchange rates, in essence I was paid tens of thousands less than that I was told

The yen is weak and salaries are still low here.
 
Ewok85 said:
Its also worth pointing out in the year I was here my salary "dropped" 15% because of exchange rates, in essence I was paid tens of thousands less than that I was told

The yen is weak and salaries are still low here.
Click to expand...

Yeah, decrease in buying power simply due to currency fluctuation would suck. I do intend to maintain accounts in US Dollars to mitigate this risk somewhat.

But then again, it could go the other way and get an instant 15% raise!!!
 
True, its one of the risks of living in a foreign country To be fair, my buying power does not change - I live in Japan, get paid Japanese Yen, and shop in Japan.

I know some people who work at the Australian Embassy and get paid Aussie dollars, and its written into their contract that their wages changes depending on the exchange rate to stay at the same "level", so to speak.

But it was a bit of a shock going to Australia on holiday - when I went to Japan in 2001 I got about 65yen/AU$1. Now its almost one for one, a huge change, and not good for Japan or Australia.
 
Japan's tax system is extremely progressive though. The more you make, the higher percentage you will be paying. I don't have the cutoffs, but there's a decent sized jump just under 10 million yen a year. The good side is, if you get benefits w/ your job, a lot of them are tax-free. Housing, is a prime example (not tax free, but there is a tax break). Train passes, while cheap, is one that seemingly everyone enjoys.
 
Thanks for the info fellas. 10% jump from one tax bracket to another is huge.... Gaijinpunch, when you say housing allowance gets a tax break as opposed to tax free, what do you mean? Does this allowance get taken off of the gross earnings to arrive at the taxable earnings (AGI in the US)?

Thanks for the link JerseyBoy.
 
That sounds about right, JerseyBoy. Thanks for the link.

Gaijinpunch, when you say housing allowance gets a tax break as opposed to tax free, what do you mean?
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You cannot write off all of your housing, nor can your employer pay for all of your rent. If you're self-employed, you can write off over half of it, depending on how much of it you use for work... even if you have a laptop and have customers over for tea once in a while. They aren't strict on this like the States. In the states, the IRS wants an EXACT amount of the house you use for the deduction.

If you're employed, often your employer will rent the apartment, and you will be the hoshounin. Your employer allows you to live there. In this case, your rent is deducted from your gross (or it's just part of your package). However, there is a tax applied to it. Again, I'm not sure what it is, but it's considerably cheaper than your income tax bracket. My tax guy said the company covering 50-60% of an employee's rent is not uncommon.

So, for you guys that are going to make right at 9 million yen, you would definitely want to ask for maybe a reduced salary, but with benefits. The company paying for your rent is by far the best one, but often they don't want the risk, or more importantly, the 1 hour extra work a month it takes to do the paperwork.
 
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Maybe it would be better to focus on getting the higher salary without too much dwelling on the tax bracket issues. In my case, I decided not to ask my new employer to cut down my pay below 9 million yen as it is always good to start off with a higher salary (which also means higher bonus). I realized once the salary is well over 9 million yen you should be able to enjoy a relatively comfortable living.
 
The first year here, you will be withheld at a rate of 20%. That's just income tax. All the others come on top of that.
 
Mike Cash said:
The first year here, you will be withheld at a rate of 20%. That's just income tax. All the others come on top of that.
Click to expand...

This can be somewhat confusing though. To be honest, I forget exactly how it is, but aren't some, if not all of those taxes deferred? From what I understand, certain taxes (Kuminzei for one) are not only based on your previous years income, they basically are taxes for your previous year. They're simply taken out of each monthly paycheck the next year. In other words, when you leave, you will owe some taxes. When I left, I left in October, and owed up through March of the next year.


This is of course, a pretty good way to think, but as most people here are foreigners, many are not going to enjoy a good bonus, if one at all. They could probably calculate with a nice degree of accuracy where they're going to fall in the year.
 

Agreed. I ask the question not for negotiating my gross salary. I'm trying to figure out a budget for living there based on my after tax income.

I've noticed that bonuses are big part of how things are run in Japan. For example, paying home mortgages in lump sums with bonuses, credit card payments made with bonuses, etc. Interesting difference between Japan and the US.
 
Can someone tell me where I can find the comparison of the tax burden for each municipality or township in Japan? The link I showed seems too general and does not show the specific tax rates for each city in Japan. There are local taxes which may vary depending on where you live. Naturally I prefer not to pay more than I need to pay when it comes to taxes.
 
speaking of tax, is anyone paying tax in Japan as well as in the country they came from at the same time?
 
footboy,
Just tell us what country you are from.
 
footyboy said:
speaking of tax, is anyone paying tax in Japan as well as in the country they came from at the same time?
Click to expand...

Americans: Yes (or filing anyway)
Everyone else: Most likely not
 
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