The withholding tax system(GENSEN CHOSHU SYSTEM) is implemented into the taxation of National Income tax, to overcome practical difficulties brought up by the Self-Assessment system as the fundamental principle. Under this Withholding Tax System, payers of specific earnings are forced to withhold certain amount of National Income tax imposed on the payees. The Specific earnings subject to this system are prescribed in the laws and ordinances. They include many of major types of earnings, such as salaries/wages/bonuses(Employment Income), interest earnings(Interest Income), dividends(Dividends Income), pension benefits(Miscellaneous Income) and others. Please note the system covers Employment Income, the most popular earnings in the present economy.

As a payer withholds and pays an appropriate amount of tax on behalf of the payees to the tax office under this system, the payees(the tax payers) and the tax office are relieved of a lot of bothering works related with the taxation. It means the payer bears a considerable burden, instead. You know, some people are exempt from the obligation to file income tax returns. It is mainly enabled by this Withholding tax system.

〔In Japanese〕



Similarity with the Special Collection System

The Withholding tax system looks similar to the Special Collection System(TOKUBETSU CHOSHU SYSTEM). The latter is adopted for the Local Income tax, the Nursing Care Insurance plan and Long-Life Medical Insurance plan. The withholding of premiums of the Social Health Insurance plan and the Employees' Pension Insurance plan also looks similar to them.
The difference between them is that, while the Withholding Tax System requires the payer to calculate the amount to be withheld and paid to the government, the Special Collection System does not do so. Under the Special Collection System, the amount is notified from the relevant government office after calculated by it.
However, maybe the difference is not so important for the payees. From their view point, they are common in the point that they themselves do not settle the taxation matters.

〔In Japanese〕


Adjustment to the appropriate tax amount

Under the Withholding Tax System, although the tax amount to be withheld are calculated following the respective calculation method prescribed in the relevant laws and ordinances, the amount is provisional by nature. That is to say, while the income tax amount shall be determined by taking various items into consideration, such as necessary expenses and deduction items, the payers are forced to calculate the withholding amount based on so limited information. In most cases, they know only the types, the amount and the receipients of the payments. So, the subsequent procedures to adjust the tax amount to be eventually borne by the each tax payer shall be necessary. Nevertheless, in some cases, the taxation on the earnings are completed by the Withholding Tax system, without any other subsequent adjustment procedures. Especially , the taxation on NON-RESIDENTS( HI KYOJYU-SHA) are often subject to this taxation method, "WITHHOLDING TAX at SOURCE".

The National Income Tax Act implements 2 procedures for this adjustment to the appropriate tax amount.

(1) Final return(KAKUTEI SHINKOKU)

This is a procedures taken by a tax payer himself/herself during the prescribed period in the succeeding year. When you file a final return, you can subtract the tax amount withheld from your earnings for the relevant year,in advance under the Withholding Tas system, from the tax amount as the result of the accurate calculation taking all related items into consideration.
If the former is larger than the latter, you shall receive a tax refund corresponding to the gap from the National Tax Office.

(2) Year-End Adjustment(NENMATSU CHOUSEI)

This is a sub system of the Withholding Tax System. Differently from the preceding measure, this is a simplified measure only for a specific kinds of Employment Income earners of the RESIDENTS. This procedure is made by the employers, not by the tax payers.
The Year-End Adjustment shall cover the Employment Earnings for those who have submitted "Report of Exemption for Dependents(FUYO KOHJO SHINKOKU-SHO)"at the working place. The report is accepted only at the main working place for the respective workers. So, this measure cannot cover salaries at working places other than the main one, even if you gain salaries from 2 or more sources. Besides, if your salaries amount within the relevant year exceeds 20 milliion yen, the employer can not make the adjustment.

Under the Year-End Adjustment System, an employer is supposed to calculate the tax amount levied on his/her eligible employees for the relevant year and compare them with the tax amount withheld in advance from the Employment earnings he/she paid to the respective employees during the year. If there is any shortage, such shortage shall be withheld from the last salaries/bonuses. If there is any excessing amount, such excess shall be refund to each employee. By that, the employer adjusts the income tax amount borne by his/her employees.

The Year-End Adjustment is settled only by data which the employer can access by a certain kind of measures provided in the National Income Tax Act. "Report of deductions for Insurance Premiums(HOKEN-RYO KOHJO SHINKOKU-SHO)" and "Report of Exemptions for Spouses and etc.( HAIGU-SHA KOHJO SHINKOKU-SHO) are documents for the employees to notify the necessary matters to the employers. The items put on those documents are limited. Therefore,the function of this system is also limited. For example, you can not claim the Deduction for Medical Expenses nor the Deduction for Donations by this procedure. In addition ,if you put a wrong figure on the documents, the Year-End Adjustment shall be made wrongly. You know, this is just a simplified system and you have to submit a final return to make some matters reflected in the tax calculation accurately. However, this system makes many people exempt from the obligation to file Income tax return.

〔In Japanese〕



(1) 確定申告


(2) 年末調整