Japan: Net Income Calculator and Taxes
When you apply for a job in Japan or change jobs here, like anywhere else, the employer will offer you a gross salary package. However, though the gross salary package can give you a feel-good factor, would that be enough for your financial planning?
Wouldn’t you wonder how much your net income or take-home salary will be?
To help you out, here is an easy-to-use net income calculator that you can use to calculate your net pay. This calculator will calculate the taxes payable and other deductions for social security, etc., to give you the net take-home pay.
Net Salary Calculator
Results:
Please note that taxes and deductions are subject to change; some taxes also depend on your regional location. Therefore, this net-pay calculator is meant to give you an idea of your potential net income and not to carry out the exact complex tax calculation.
Once you have a fair idea of your potential net salary, please ask the employer for the exact breakdown of applicable taxes and salary deductions.
Taxes and Salary Deductions in Japan
Like most of the countries, the salary deductions and taxes in Japan are for the following heads:
- Social security, including health insurance, pension, unemployment insurance, and accident insurance
- Income tax
Income Tax
Like everywhere else, the income tax percentage varies with your income in Japan. You also get a deduction in the income tax for any people who are dependent on you for financial support.
However, before discussing the income tax slabs, we should know whether your earnings in foreign countries, including your home country, are taxable in Japan.
The taxability of your income outside Japan depends on your residency or visa status. You can live and work in Japan with the following three residency statuses:
- Permanent Resident
- Non-Permanent Resident
- Non-Resident
It’s common confusion to relate the permanent resident status for tax purposes with your visa status. i.e., if you are a Japanese PR. To clarify this, please check the following distinctions of the categories mentioned above:
Non-permanent Residents in Japan
People who have had a residential address in Japan continuously for one year or more or who have lived in Japan for up to five years, and not more, during the past ten years.
Permanent Residents
Foreigners with Japanese PR or those who have lived in Japan for more than five years during the past ten years are considered permanent residents. If you are a Japanese passport holder, you are considered a permanent resident irrespective of how many years you have lived in Japan during the past ten years.
Non-Residents
Foreigners who are in Japan who have neither had a residential address for one year to date nor have lived in Japan for 5 years during the past 10 years and have an overseas residential address.
The following table shows the tax applicability of your income in Japan according to your visa or residency status:
| Residency Status | Taxable Income |
|---|---|
| Non-Resident | Only money earned in Japan is taxable |
| Non-Permanent Resident | Only income in Japan or paid from overseas in Japan is taxable. |
| Permanent Resident (PR) | All income from any source worldwide is taxable* |
*Note: If a permanent resident is paying tax in their home country for the income earned there, one has to check the tax treaties between the two countries to avoid double taxation. If no tax treaty exists, then you can use Japan’s Foreign Tax Credit system (FTC) to offset your Japanese tax liability for the income tax paid in other countries for your income there.
Income Tax Slabs in Japan
| Salary Brackets | Income Tax Slabs (%) |
|---|---|
| Up to ¥1,950,000 | 5% |
| ¥1,950,001 to ¥3,300,000 | 10% |
| ¥3,300,001 to ¥6,950,000 | 20% |
| ¥6,950,001 to ¥9,000,000 | 23% |
| ¥9,000,001 to ¥18,000,000 | 33% |
| ¥18,000,001 to ¥40,000,000 | 40% |
| Over ¥40,000,000 | 45% |
Please note that these tax brackets are progressive, and the income tax percentage is not a fixed percentage of the overall income. For example, if the income is ¥5,000,000, then the income tax will be calculated as follows:
- 5% on the first ¥1,950,000.
- 10% on income between ¥1,950,001 and ¥3,300,000.
- 20% on income between ¥3,300,001 and ¥5,000,000.
Please also note the following:
- In Japan, it is standard practice for companies to pay the commutation cost between home and office. This amount is non-taxable.
- Dependents reduce your taxable income by ¥380,000 per dependent
- The medical costs (excluding health insurance benefits) between January and December are deductible from taxable income. However, there is a cap of JPY 100,000, or 5% of total income, whichever is lower. Moreover, the total deductions cannot exceed JPY 2 million.
- The income tax deducted from the monthly salary is not the final income tax but a tax withheld. At yearend, you must file the income tax return to get a refund of any extra tax paid.
For more information, please check the National Tax Agency of Japan website.
Social Security Deductions in Japan
The deduction for social security in Japan includes employees’ contributions to pensions, health insurance, unemployment insurance, and workers’ accident compensation. Please note that the employer also contributes to these benefits.
The deductions for the above-mentioned social security benefits are based on percentages of the salary based on different slabs. However, there are following caps on the maximum salary to calculate the deduction for pension and health insurance:
- Pension: JPY 650,000 per month
- Health Insurance: JPY 1,390,000 per month
Unlike pension and health insurance, for which the deductions are based on a percentage of standard salary, the calculations for unemployment and accident insurance are based on actual earnings.
Please also note that the percentage for health insurance premiums also depends on the prefecture/city.
If a non-Japanese national is leaving Japan for good and hence will not be entitled to a pension post-retirement, they can claim the pension premium paid. However, certain conditions apply for this refund.
Resident Tax
Apart from the above, there is one additional tax in Japan, called “Resident Tax.
Resident tax in Japan is a local tax that funds services at the municipal and prefectural levels.
This tax is based on income from the previous year, meaning your current year’s income determines next year’s resident tax.
Typically, resident tax is around 10% of your previous year’s income, divided into municipal tax (6%) and prefectural tax (4%). However, the amount varies depending on the municipalities or ward offices.
Previously, the payment had to be made in four quarterly installments, but according to the latest rules, one can opt for a monthly payroll deduction to pay for it.
To Summarize
The net income calculator in this article is programmed to consider all the above deductions for taxes and social security. These deductions are subtracted from the gross salary each month.
However, please note that while your net salary or income is vital to budget planning, ultimately, gross pay is the financial factor in making a decision, especially if the competitive offers are cross-border with differing deductions.
The reason is that though taxes paid are money gone forever, the deductions for social security benefits also attract additional money from the employer as the employer’s contribution. What it means that indirectly it is an additional income, which comes back to you as indirect or direct financial benefits, apart from your net inclome.
A long-term ex-pat in Japan, Himanshu comes with an IT background in SAP consulting, IT Business Development, and then running the country operations of an IT consulting multinational. Himanshu is the co-founder and Managing Director of ReachExt K.K. and EJable.com. He is also an Advisory Board Member of a Silicon Valley AI/IoT startup.