Categories of Earnings subject to Income tax

They say most kinds of earnings are subject to the Income tax in Japan. Very few kinds of earnings are exempt from the taxation. The familiar samples of Non-taxable Earnings are aquisitions from free gift from inividuals and inheritance properties. However, they are subject to the Gift tax / Inheritance tax in accordance with the Inheritance Tax Act.

Major categories prescribed in the National Income Tax act

Category Overview Income Amount NOTE1 NOTE2
BUSINESS Income derived from independent enterprises of commerce, personal srvices, industry, agriculture, etc. Subtracting necessary expenses from the total amount of revenues A B
REAL ESTATE Income derived from the leasing of land, buildings Subtracting necessary expenses(including approriate depriciation costs) from the total amount of revenues A B
EMPLOYMENT Income derived from salaries, wages, bonuses, allowances, etc. Subtracting "Employment Income Deduction" from the total amount of the salaries, bonuses and allowances A -
DIVIDENDS Income derived from dividends or distribution of profit from publicly-subscribed investment trust Subtracting a certain amount of the interest expenses related to them, from total of the Dividends revenues A/S/WS -
PUBLIC PENSIONS Income derived from public pensions Subtracting "Public Pensions Income Deduction" from the total amount of the public pension benefits A -
CAPITAL GAINS Capital gain from sales of things other than those listed below.
If the sales are conducted by a business activity, its arnings are excluded.
Subtracting the purchase price( after appropriate depriciation) and direct costs, from the sales price. A H
CAPITAL GAINS Capital gain derived from sales of stocks and shares Subtracting the purchase price and direct costs , from the sales price S -
CAPITAL GAINS Capital gain derived from sales of Land and Buildings Subtracting the purchase price(after appropriate depreciation) and direct costs, from the sales price S -
OCCATIONAL Accidental or occational income excluded from other types of income.This category includes income derived from lump-sum payments from life insurance policies, lottery winnings. Subtracting the direct costs from the earnings. A H
MISCELLANEOUS Taxable income excluded from other type of income. Income derived from a small scale business is included here. Subtracting necessary expenses from the total amount of revenues A B

"A" means "subject to the Aggregate Taxatin". "T" means "subject to the Separate Taxation". As to DIVIDENDS INCOME from listed stocks and shares, you can select the taxation method applied to it among the Aggregate taxation, the seperate taxatin and the Withholding taxation at Source.

"B" means "an appropriate accounting book is supposed to be arranged".
"H" means "only a half of the income amount is included into the taxation basis". It applies only to long term capital gains as to "CAPITAL GAINS".

For further details, an English guide prepared by the National Tax Agency is useful. Please refer to Page7 of this material.

〔In Japanese〕


所得区分 概要 各種所得の額 NOTE1 NOTE2
事業所得 商業、サービス業、工業、農業などの独立事業から生じる所得 総収入金額から必要経費の額を控除した額 A B
不動産所得 土地や建物の貸付けから生じる所得 総収入金額から必要経費の額を控除した額 A B
給与所得 給料、賃金などの所得 給与等の収入金額から”給与所得控除額”を控除した額 A -
配当所得 株式の配当や公募投資信託の収益の分配から生じる所得. 配当等の収入金額から、対応する支払利子の額を控除した額 A/S/WS -
公的年金 公的年金の所得 公的年金等の収入金額から”公的年金控除額”を控除した額 A -
譲渡所得 財産の譲渡益(下記に掲げる財産にかかるものを除く)
売却金額から、購入価額(減価償却後)と譲渡費用の額を控除した額 A H
株式等の譲渡益 売却金額から、購入価額と譲渡費用の額を控除した額 S -
不動産の譲渡益 売却金額から、購入価額(減価償却後)と譲渡費用の額を控除した額 S -
一時所得 偶然性、臨時性のある所得で、他の所得区分に含まれないもの。
収入金額から、それを得るためにのための支出した額を控除した額 A H
総収入金額から必要経費の額を控除した額 A B

"A" は総合課税の対象となるもの、 "T" は分離課税の対象となるものです。


さらに詳しく知りたい方には、国税庁発行の 英語版冊子 が便利です。7ページをご参照ください。


Setting the "necessary expenses" aside, "Employment Income deduction" and "Public Pension Income Deduction" is not well imaginable, I am afraid. They are mere extimated and provisional figures, based on various intensions in a long time.

EMPLOYMENT Income is the most popular income type. So that, I will explain the detail concretely about the "Employment Income Deduction".

Employment Income Deduction
Total of Full-year salalies/bonuses Employment Income Deduction
~1,625,000yen 650,000yen
1,625,000yen ~ 1,800,000yen revenues amount × 40%
1,800,000yen~ 3,600,000yen revenues amount × 30% + 180,000yen
3,600,000yen~ 6,600,000yen revenues amount × 20% + 540,000yen
6,600,000yen~  10,000,000yen revenues amount × 10% + 1,200,000yen
10,000,000yen~ 2,200,000yen

The Taxable ratio of the Employment Earnings are shown with the following chart. The range painted in blue, which is the Employment Earnings beyond the Employmend Deduction amount is taxable. The deduction amount increases as the Employment Earnings amount goes larger. But the proportion the Deduction amount accounts for is decreasing as the Employment Earnings goes larger.

〔In Japanese〕



年間の給与等の合計額 給与所得控除
~1,625,000円 650,000円
1,625,000円 ~ 1,800,000円 収入金額 × 40%
1,800,000円~ 3,600,000円 収入金額 × 30% + 180,000円
3,600,000円~ 6,600,000円 収入金額 × 20% + 540,000円
6,600,000円~  10,000,000円 収入金額 × 10% + 1,200,000円
10,000,000円~ 2,200,000円