A Deep Dive into Japanese Inhabitant Tax

Inhabitant Tax (住民税 - Juminzei) is a local tax levied in Japan, comprising both prefectural and municipal taxes. It's assessed on individuals based on their income from the previous year.

Who Pays Inhabitant Tax?

Individuals who are registered as residents in a particular municipality as of January 1st of the tax year are liable for inhabitant tax for that entire year, even if they move out of Japan later in the year. Non-residents are generally not subject to inhabitant tax.

Components of Inhabitant Tax:

Inhabitant tax consists of two main parts:

1. Income-based Levy (所得割 - Shotoku-wari): This is the larger portion and is calculated as a percentage of your taxable income from the previous calendar year, after certain inhabitant tax-specific deductions are applied. The standard combined rate is typically 10% (e.g., 4% for prefectural and 6% for municipal tax), but this can vary slightly by locality.
2. Per-Capita Levy (均等割 - Kinto-wari): This is a small, flat annual fee charged to all residents who meet certain minimum income thresholds. The standard amount is around ¥5,000 per year (including a portion for forest environment tax), but this can also vary slightly by municipality.

Calculation and Payment:

• Basis of Calculation: Inhabitant tax for a given fiscal year (e.g., June 2024 to May 2025) is calculated based on your income earned during the previous calendar year (e.g., January 1, 2023, to December 31, 2023).
• Notification: Your local municipal office calculates your inhabitant tax based on information from your national income tax return (if filed), your employer's salary payment report, or an inhabitant tax return (if you didn't file a national return but had income). You will receive a tax notice (納税通知書 - Nozei Tsuchisho) around June, detailing the amount due.
• Payment Methods:
  • Company Employees (Special Collection - 特別徴収 Tokubetsu Choshu): For most salaried employees, inhabitant tax is withheld from their monthly salary by their employer from June to May of the following year.
  • Self-Employed and Others (Ordinary Collection - 普通徴収 Futsu Choshu): If not collected via payroll, you'll typically pay in four installments (e.g., end of June, August, October, and January of the following year) using the payment slips provided with your tax notice. Lump-sum payment is also an option.

Deductions for Inhabitant Tax:

While many deductions are similar to national income tax, the amounts for inhabitant tax deductions are often lower. For example, the basic deduction, spouse deduction, and dependent deductions have different (lower) values for inhabitant tax purposes compared to national income tax.

Leaving Japan:

If you leave Japan, you are still liable for inhabitant tax for the year if you were a registered resident on January 1st. You'll need to make arrangements to pay any outstanding amounts, often by appointing a tax agent or paying in full before departure if notification is received.

Understanding inhabitant tax is important as it's a significant component of your overall tax burden in Japan, separate from the national income tax.