If you’re planning on relocating to Japan or working there as a freelancer for an extended period of time, you’ll need to learn about how taxes work in Japan. If you earn money as an individual or as part of an organization while you’re in Japan, you’ll need to pay income taxes.
As a freelancer, you need to register as self-employed and file your own tax returns each year. Failing to pay your taxes properly and on time could impact your residency status and work visa, so it’s important to do your research and get things right!
What You Should Know About Taxes in Japan
Since every country has a unique taxing system, it can be complicated to figure things out when you move to another country. You’ll need to spend plenty of time familiarising yourself with a completely different taxing system, and it’s easy to get caught up in the intricacies.
It’s often helpful to elicit the help of tax accountants in Sapporo or wherever you’re staying in the country. This way, you can make sure you never miss a tax payment or file your tax return incorrectly, and stay on the right side of the law while you’re working on a freelance basis in Japan.
Before you travel to Japan to work as a freelancer, you’ll need to know the following information about the country’s taxing system.
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Permanent residency vs. non-residency taxes
In Japan, permanent residents are required to pay taxes on their worldwide income. So, if they earn money through a global company that they work for, they need to pay income tax on these earnings. This applies even if they earn money while working abroad for an extended period of time as a permanent resident of Japan.
The rules are a little different for those who are not permanent residents of Japan but earn money while in the country. In this case, workers are only taxed on income that they earn in Japan itself. They do not need to pay income tax on their earnings sourced from foreign countries.
Thresholds for taxable income
When working in Japan, whether temporarily or permanently, you need to know the thresholds for taxable income and how much tax you’re expected to pay within certain thresholds. As a freelancer, your income might vary year by year, so knowing the different tax brackets can make your life easier when filing your tax returns.
Here is a brief overview of taxable income brackets and relevant tax rates in Japan:
- 0 to 1,950,000 JPY – 5%
- 1,950,000 to 3,300,000 JPY – 10%
- 3,300,001 to 6,950,000 JPY – 20%
- 6,950,001 to 9,000,000 JPY – 23%
- 9,000,001 to 18,000,000 JPY – 33%
- 18,000,001 to 40,000,000 JPY – 40%
- More than 40,000,000 JPY – 45%
A surtax of 2.1% was introduced in 2013 and is assessed based on your individual national income tax.