- January 16, 2026
- BELONGING JAPAN
Understanding income tax is essential for anyone working and living in Japan. It affects everyday life, yet many people find it difficult to know which types of income are taxed, how tax rates are set, and how much they must pay. Because each person’s financial situation is different, the rules can feel complicated.
In this article, financial planner Masako Otake offers clear guidance on Japan’s income tax system. The explanation covers the basic structure of income tax, what happens when receiving a salary, when a tax return becomes necessary, and the deductions that may help reduce the overall tax burden. The goal is to provide reliable information that helps readers make informed decisions and manage their finances with confidence.
Table of Contents
About the Supervisor & Writer
Masako Otake
Certified Financial Planner® / 1st Grade Certified Skilled Professional of Financial Planning / Certified Inheritance Consultant
Founder of Yume Planning (est. 2015)
After gaining experience working at various financial institutions, including securities firms, banks, and insurance companies, Masako became an independent financial planner in 2015. She provides consultations, writing, and lectures based on the belief that understanding your finances is key to living a richer, more authentic life.
Chapter 1: What Is Income Tax in Japan?
Income tax is a tax imposed on an individual’s personal income.
In Japan, income earned between January 1 and December 31 is subject to taxation for that year.
How income tax is calculated depends heavily on the type of income you receive. The general framework is as follows:
1. For Company Employees
For company employees, income tax is deducted directly from monthly salary through a system called withholding (gensen chōshū). The total tax amount for the year is then adjusted and finalized through the year-end adjustment process.
The basic calculation works as follows:
Salary Income = Gross Salary − Employment Income Deduction
The employment income deduction is automatically determined based on the amount of salary you earn.
| Annual Salary Income | Employment Income Deduction |
|---|---|
|
Up to ¥1,900,000 |
¥650,000 |
|
¥1,900,001 – ¥3,600,000 |
Salary × 30% + ¥80,000 |
|
¥3,600,001 – ¥6,600,000 |
Salary × 20% + ¥440,000 |
|
¥6,600,001 – ¥8,500,000 |
Salary × 10% + ¥1,100,000 |
|
¥8,500,001 and above |
Maximum deduction: ¥1,950,000 |
Example: When Annual Salary Income Is ¥6,000,000
For an annual salary of ¥6,000,000, the employment income deduction is calculated as:
¥6,000,000 × 20% + ¥440,000 = ¥1,640,000
Your taxable employment income becomes:
¥6,000,000 − ¥1,640,000 = ¥4,360,000
This taxable amount is the basis for calculating your income tax.
Basic Calculation Steps
Step 1: Add up your total annual salary income.
Step 2: Subtract the employment income deduction to get your employment income.
Step 3: Subtract all applicable deductions to calculate your taxable income.
Step 4: Multiply your taxable income by the progressive income tax rate, then subtract any tax credits to determine your income tax amount.
Step 5: Add the Special Reconstruction Income Tax, which is 2.1% of your income tax amount.
2: For Freelancers and Self-Employed Individuals
Freelancers and self-employed individuals are not subject to automatic withholding, unlike company employees. This means they are responsible for filing their own tax return, calculating their income tax, and paying the correct amount each year. This process follows the guidelines established by the National Tax Agency (NTA), which oversees income tax administration in Japan.
The basic calculation for business income is:
Business Income = Total Revenue − Necessary Business Expenses
Basic Calculation Steps
Step 1: Add up your total annual business revenue.
Step 2: Subtract all necessary business expenses to determine your business income.
Step 3: Subtract all applicable income deductions from your business income to calculate your taxable income.
Step 4: Multiply your taxable income by the progressive income tax rate, then subtract any tax credits to find your income tax amount.
Step 5: Add the Special Reconstruction Income Tax, which is 2.1% of your income tax amount.
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This article is intended for general informational purposes only and does not constitute personal financial, tax, or legal advice. Although the content is supervised by a certified financial planner, readers should consult the National Tax Agency (NTA), local government offices, financial institutions, or licensed tax professionals for guidance tailored to their individual circumstances.
Belonging JAPAN is not affiliated with or endorsed by any government agency, tax authority, or financial institution mentioned in this article. Tax rules, deductions, procedures, and requirements are accurate as of December2025, but they are subject to change. Please confirm the latest information through official sources before making any tax-related decisions or filings.
