Any individual is subject to income tax liability in accordance with the following categories.
Any individual who has a domicile or owns a residence continuously for one year or more is classified as a resident. Residents, except for those classified as “non-permanent residents” have an obligation to pay the income tax for whole income prescribed by the Income Tax Law.
Among residents, any individual for none Japanese nationality having domestic or residence in Japan for an aggregate period of five years or less within the last ten years in classified as “a non-permanent resident”. Non-permanent residents are obliged to pay income tax with respect to any income which has its sources in Japan, any income which has its sources abroad and is paid in this country and remitted from abroad.
Any individual other than the residents mentioned in “(1) Residents” above is classified as a non-resident. Non-residents are obligated to pay the income tax for any income from domestic sources.
2. Final Return
As for the income tax, taxpayers shall calculate the income amount and income tax by themselves with respect to the whole income earned from January 1 through December 31 of the relevant year in accordance with their own residential status, file a return to the District Director of Tax Office during the period from February 16 through March 15 of the following year, and adjust any excess or shortage in tax payment withheld at the source or prepaid on the basis of estimated tax.
3. Types of Income and Taxation Methods
(1) Business income
a. Income derived from independent enterprises of commerce, industry, fisheries, agriculture, independent personal services, etc. ･･･ Aggregate taxation
b. Income relating to sale of shares or futures contract, conducted in a business scale
･･･ Separate taxation
(2) Income from real estate ･･･ Aggregate taxation
(3) Income from interest
a. Income derived from interests on bonds and debentures, and savings, etc. ･･･ Withholding tax at source
b. Income derived overseas from interest and other earnings paid on savings, etc.
･･･ Aggregate taxation
(4) Income from dividends
a. Income derived from dividends from surplus of corporations, or from distribution of profit, etc. from publicly-subscribed investment trusts (excluding income for which you choose to use separate taxation) ･･･ Aggregate taxation
b. Income such as proceeds from securities investment trusts sold by public offering (income from listed stocks and), for which you choose to use separate taxation.
･･･ Separate taxation
c. Income derived from divisions of earnings etc. from corporate bond-like privilege of special purpose trust ･･･ Withholding tax at source
* There is a system in place that removes the obligation to declare dividend income.
(5) Employment income ･･･ Aggregate taxation
(6) Miscellaneous income
a. Public pensions ･･･ Aggregate taxation
･ Other income including fees for manuscripts, lectures, annuities from life insurance policies, etc. which do not fall into other types of income. ･･･ Aggregate taxation
･ Income relating to sale of shares or futures contract, conducted as income activites (excluding those conducted in a business scale) ･･･ Separate taxation
･ Income derived from profits obtained on redemptions of certain discount bonds, etc. ･･･ Withholding tax at source
(7) Capital gains
a. Income derived from sales of golf club memberships, gold bullion, machinery, etc.
･･･ Aggregate taxation
b. Income derived from the sale of land, buildings, land-leasing rights, stocks and shares, etc. ･･･ Separate taxation
* In the case of the sale of stocks and shares, etc, income as business income or miscellaneous income is excluded.
(8) Occasional income
a. Income derived from lump-sum payments from life insurance policies, prize money, lottery winnings, etc. ･･･ Aggregate taxation
b. Income derived from certain lump-sum payments from endowment life insurance policies or lump-sum payments from casualty insurance policies where the term of insurance or mutual relief is 5 years or less. ･･･ Withholding tax at source
(9) Income from forestry ･･･ Separate taxation
(10) Retirement income ･･･ Separate taxation
* Aggregate Taxation: A system whereby income tax is calculated in combination with other types of income via the filing of a final tax return.
* Separate Taxation : A system whereby income tax is calculated separately from other types of income via the filing of a final tax return.
* Withholding Tax at Source: A system whereby, irrespective of other types of income, when income is received, a certain amount is withheld as tax; and this completes the payment of taxes.
4. Tax Rate (except for Revival special tax)
Appropriate tax rate is divided into 6 levels, from 5% through to 40%.
a. 1,000yen to 1,949,000yen ･･･ 5%
b. 1,950,000yen to 3,299,000yen ･･･ 10% - 97,500yen
c. 3,300,000yen to 6,949,000yen ･･･ 20% - 427,500yen
d. 6,950,000yen to 8,999,000yen ･･･ 23% - 636,000yen
e. 9,000,000yen to 17,999,000yen ･･･ 33% - 1,536,000yen
f. 18,000,000yen or more ･･･ 40% - 2,796,000yen