Overview of withholding tax

What is withholding tax?

Under Japan tax rules, corporations (and some individuals) have to withhold tax from certain payments when they actually make the payments. And the tax has to be paid by them to Japan tax office by the 10th of the following month. The most common example is salary. Corporations withhold the tax from employees’ salary and pay it directly to Japan tax offices. Thus the employees neither need to calculate the withholding tax and nor pay it. In addition, the corporations are required to make an adjustment to the withheld taxes  in the year. This is because more taxes are generally taken (on a monthly basis) than the taxes that actually needed. Thus they give it back to their employees in December (or January). And the employees do not need to file an individual tax return.

When you pay withholding tax?

Basically this tax payment should be made every month as long as corporations pay salaries every month. But if the number of employees is less than nine or less, you are only required to make the payments twice a year (benefit for small corporations). You can pay the taxes withheld between January and June by 10th July and the taxes withheld between July and December by 20th January of the following year.  To take this advantage, you need to submit ‘Application for Special Provision for Extension of the Due Date for Filing a Final Return Form’ to the Japan tax office.

Withholding tax rate for monthly salary?

As monthly salary is the most basic payment subject to withholding tax, we have a withholding tax table for monthly salary in 2018.

You can download the table (Excel). Please remember you need to use different tax rate or table when making payments other than monthly salary.

What happens when I pay withholding tax late?

Unfortunately, you may pay penalties (5% to 10%)and interest for the late payment. But these do not necessarily happen so we recommend you pay immediately.