Calculation of National Income tax amount

The National Income Tax amount shall be calculated usually for every calendar year, except the case where the tax payer has passed away or leave abroad during the year.

Here, I introduce the outline of the processes to compute the National Income tax amount. You know, it is under the Self Assessment Principle so that you are supposed to be able to do it by yourself. Of course, most people, including Japanese, actually do not know well about it as they ask for a service by a Certified Tax Accountant or the Withholding Tax system relieve them of the bothering work.

The National Income tax amount is computed by the following 5 steps.

(1) Classification of your earnings and outgoings

At first, you have to classify your earnings during the relevant year. You have to distinguish between the taxable earnings and the non-taxable earnings. Then, you have to classify the taxable earnings into the certain types of income. Some 15 types of income is defined by the Laws. Employmen Income(KYUYO SHOTOKU), Business Income(JIGYO SHOTOKU), Capital Gains from listed stocks and shares(JOUJOU KABUSHIKI JOUTO SHOTOKU) are popular types among them.
At the same time, you have to sum up the outgoings related to the each type of income. For some types of income, the income amount shall be computed by subtracting a certain range of the outgoings from the total earnings amount. The work is a necessary preperation for it.
Here, you are required to arrange appropriate accouonting books and keep related documents about your business activities if you conduct any types of business which can generate Business income, Real Estate income or Miscellaneous income or such.

(2) Computation of Income amount of the each type of Income

Next, you have to compute the Income amount of the each type of income.
The computation methods are prescrived by the National Income Tax act. The fundamental concept of them is to subtract necessary expenses from the total revenues amount for the relevant year.

As to Employment Income, the amount of income is calculated by deducting a certain amount from the total amount of salaries/bonuses you have gained during the year.
This deduction amount is prescribed as "Deduction for Empolyment Income(KYUYO SHOTOKU KOHJO)". It is said to be the estimated amount of expenses which accompany the works for the salaries. The Miscellaneous Income derived from public pensions is calculated similarly.
As to Business Income, the deduction amount shall be the real expenses amount. That is why you are required to keep accurate records. If you are allowed to file the Blue return, you can deduct 650,000yen(100,000yen if your activitiy is small scale) additionally, as the Special Deduction for Blue Return.

Possibly, you may suffer a deficit from some types of income. If the total amount of necessary expenses is larger than the total amount of revenues, the gap is the deficit. These figures can offset the other types of income subject to the same taxation method, in principle.

(3) Computation of Taxable Income amount

Here, you have to classify the applicable types of income by the Taxation Method hey are subject to. That is , while many types of income are subject to the Aggregate Taxation Method(SOGO KAZEI), some others are covered by the Separate Taxation Method(BUNRI KAZEI) or the Withholding Taxation at Source(GENSEN BUNRI KAZEI). The Separate Taxation method applies to Capital Gains from Listed stocks and shares and Capital gains from Lands or Buildings or so, respectively. You can exceptionally select a Taxation method to be applied to Dividends Income from listed stocks and shares.

You can compute the Total Amount of Income by totaling up the income amount of the types which fall into the each categories.
Generally, the Aggregation of Profit and Loss(SON-EKI TSUSAN) shall be made in the each category. For example, the deficit from the Business income shall be subtracted from the Employment Income amount to compute the total amount of income subject to the Aggregate Taxation.

After it, you shall deduct the total amount of deduction/exemption items from the Total Amount of income, by the prescribed oredr. The calculation result shall be the Taxable Income amount.

(4) Computation of Tax Amouont by multiplying appropriate tax rate

The National Income tax amount shall be the total sum of the amount calculated by multiplying appropriate tax rate respectively to the taxable income amount of each category mentioned above.
The appropriate tax rate is divided into 7 levels depending on the amount from 5% through to 45% as to the taxable income for the Aggregate Taxation Method and the taxable income consisting of Retirement income. It is progressive as the taxable income amount goes larger.

Progressive tax rate applied to the Aggregate Taxation
Taxable Income Amount National Income Tax rate
~1,950,000yen 5%
1,950,000yen ~ 3,300,000yen 10%
3,300,000yen~ 6,950,000yen 20%
6,950,000yen~ 9,000,000yen 23%
9,000,000yen~  18,000,000yen 33%
18,000,000yen~ 40,000,000yen 40%
40,000,000yen~ 45%

On the other hand, the tax rate applied to the taxable income consisting of Capital Gains from Land or Buildings, the taxable income consisting of Capital gains from listed stocks and shares, and the taxable income consisting of Dividends income from listed stocks or such is 15%, no matter how much the taxable amount is.

In addition, the Special Tax for reconstruction is imposed together. The amount shall be 2.1% of the National Income tax for the relevant year, calculated as above.

(5) Balance of Tax Amouont

Finally, you can find the Balance of the tax by subtracting some items from the tax amount calculated at the preceding step(4).
The most popular subtracting item is the Withheld tax underthe Withholding Tax System.
If the Balance of tax is in surplus, you are suppposed to pay it. If the Balance is in deficit, you shall receive a tax refund corresponding it.

〔In Japanese〕




(1) 収入および支出の分類


(2) 各種所得の額の計算




(3) 課税所得の額の計算




(4) 所得税額の算出


課税所得の額 所得税率
~1,950,000円 5%
1,950,000円 ~ 3,300,000円 10%
3,300,000円~ 6,950,000円 20%
6,950,000円~ 9,000,000円 23%
9,000,000円~  18,000,000円 33%
18,000,000円~ 40,000,000円 40%
40,000,000円~ 45%



(5) 納付税額


How the Progressive Tax rate works

I will show how the progressive tax rate works with a sample case.
Given yourtaxable income amount subject to the Aggregate taxation is 5,000,000yen and it subject to the Separate Taxtion, on which the applicable tax rate is 15%, is 1,000,000yen, the total amount of National Income tax should be calculated as below.

(1) Tax amount on the taxable income subject to the Aggregate Taxation

Range Taxable Income,classified into this range tax rate applied corresponding tax amount
~1,950,000yen 1,950,000yen 5% 97,500yen
~3,300,000yen 1,350,000yen 10% 135,000yen
~6,950,000yen 1,700,000yen 20% 340,000yen
TOTAL 5,000,000yen 572,500yen

(2) Tax amount on the taxable income subject to the Seperate Taxtion

150,000yen, by multiplying 15% to the taxable income amount of 1,000,000yen.

(3) Totaling up the 2 amount

The National Income tax amount should be 722,500yen.
Added 2.1% of the Special Tax for Reconstruction, 737,672yen is the tax amouont at the calculation phase(4) of the preceding chapter.

〔In Japanese〕


(1) 総合課税対象となる課税所得に係る税額

税率帯 左記の税率帯に含まれる課税所得の額 適用税率 当該部分にかかる税額
~1,950,000円 1,950,000円 5% 97,500円
~3,300,000円 1,350,000円 10% 135,000円
~6,950,000円 1,700,000円 20% 340,000円
合計 5,000,000円 572,500円

(2) 分離課税対象となる課税所得に係る税額


(3) 上記2項目の合計