Withholding tax system

The Withholding tax system (GENSEN CHOSHU SYSTEM) is implemented in the Japanese taxation system, to overcome the practical difficulties caused by the Self-Assessment principle. Under this system, payers of specific revenues are required to withhold certain amount as the national income tax, which is imposed on the payees in relation to the revenues. Revenues subject to this system are prescribed in the Income Tax Act. They include many of major types of revenues. Regarding payments to Japanese residents, salaries/wages/bonuses (Employment Income), several kinds of professional fees (Business Income), interests (Interest Income), dividends (Dividends Income), pension benefits (Miscellaneous Income) are among them. Regarding payments to Non-residents, wider range of revenues are subject to the system.
As a payer withholds and pays the tax amount to the tax office on behalf of the payees under this system, both the payees and the tax office are released from a lot of troublesome works. From the viewpoint of the National Tax Agency, this system can prevent people from evading tax or omitting tax payment without intention. From the viewpoint of taxpayers, they can be exempt from the obligation to file income tax returns. Instead, the payer is forced to bear considerable burdens at the expense of him/her.

[In Japanese]
源泉徴収制度は、日本の所得税の根本原則である申告納税制度に伴う実際上の困難を克服するために、その課税制度に組み込まれているものです。 源泉徴収制度においては、特定の種類の収益について、その支払いをする者に、その支払先に課される所得税を徴収することが義務付けられます。 源泉徴収制度の対象となる支払内容は法令に規定されており、居住者については給料や手数料等、利子、配当、年金などが含まれます。非居住者については、より幅広い範囲の収入が源泉徴収制度の対象とされています。
源泉徴収制度の下で、支払者が、その支払先に代わって所得税額を徴収し納付することにより、支払先(納税者本人)と税務署は、課税に関する多くの手間を省くことができます。 課税庁にとっては、源泉徴収制度があることで、脱税や申告漏れを防止することができます。 納税者にとっては、確定申告書を作成し、提出する負担を免除される場合がでてくるのです。それは他方では、支払者にかなりの負担をかけているということでもあります。

Withholding taxes on Employment income

The employment incomes are subject to the withholding taxation. The most important feature of the taxation method on the employment income is the "Year-end Adjustment". The employers make provisional deduction of income taxes from the salaries and later refigure the accurate tax amount to be imposed on the relevant employees.

Handling of the withholding taxation when salaries/bonuses are paid

A salary payment is usually arranged as below. The several different items are deducted from the primary amount and the withholding income tax is one of them. Employers, who pay the salaries, are supposed to hand statements which describe the breakdown of the payment amount.

Items Amount Note
Primary amount of the salary 100
Social Health Insurance premiums △5 None unless the employee is covered by the Social health insurance plan.
Nursing care Insurance premiums may be added.
Employees' Pension Insurance premiums △9 None unless the employee is covered by the Employees' pension insurance plan.
Employment Insurance premiums △1
National Income Tax △5 Under the Withholding Tax System
Local Income Tax △5 Under the Special Collection Method.
The amount paid after the deduction 75 After Subtracting foregoing items

In the example showed above, 5% of the primary amount of the salary is deducted as the withholding income tax. However, the ratio varies according to the different criteria.
The tax amount to be withheld is determined by the calculation methods prescribed in the related laws and ordinances. Anyway, this amount is essentially provisional.
Just for your information, the withheld amount is fixed depending on the taxable income amount of the previous years.

[In Japanese]


項目 金額 摘要
額面給与の額 100
社会保険料 △5 社会保険の被保険者でない場合はゼロ。介護保険料を含む。
厚生年金保険料 △9 厚生年金に加入していない場合はゼロ。
雇用保険料 △1
源泉所得税 △5 源泉徴収制度
住民税 △5 特別徴収制度
差引支給額 75 各種天引き後の直接支給額


Reconciliation to the accurate tax amount for Employment income

The income tax amount withheld from the salaries shall be reconciled with the accurate tax amount, which shall be imposed on the relevant taxpayers for the relevant year.
Actually, the former is usually considerably larger than the latter, which shall be figured out by the precise calculation with all related items taken into consideration. While the income tax amount shall be determined by considering different items, such as necessary expenses and exemption items, the employers cannot know all of them. The employers are forced to calculate the withholding amount based on rather limited information. As the National Tax Agency aims to prevent tax loss, the method usually incurs some excessive amount.
Therefore, the subsequent procedures shall be necessary, to adjust the withheld tax amount to the amount perfectly in accordance with the accurate calculation. The reconciliation shall be made by year with the following 2 measures:

(1) Year-end Adjustment

"Year-end adjustment" is a sub system of the withholding Taxation on the Employment incomes. It is a simplified measure only for the specific range of Employment Income earners among the Residents and settled by payers of salaries and wages.
The Year-end adjustment covers only the Employment Earners who submit "Application for Exemption for Dependents (FUYO KOHJO SHINKOKU-SHO)" at the working place, and the report is accepted only at the main working place even if the employee gains salaries from 2 or more sources. It means there are some cases where an employment earner is not eligible to the treatment. In addition, in case your salaries amount within the relevant year exceeds 20 million yen, the employer cannot make the adjustment.
An employer is supposed to calculate the amount of income tax imposed on his/her eligible employees and compare the tax amount with the amount withheld in advance from the salaries and bonuses paid to the respective employees during the year. If there is any shortage, such shortage shall be withheld additionally from the last salary/bonus. If there is any excessing amount, such excess shall be refunded to the relevant employee by the employer.
However, the Year-end adjustment is settled only by data which the employer can access by certain measures provided by 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 related matters to the employers. The items put on those documents are limited. Therefore, the function of this system is also limited. For example, you cannot claim the Deduction for Medical Expenses nor the Deduction for Donations in this procedure. In addition, if you put a wrong figure on the documents, the Year-end adjustment shall be made wrongly. After all, this is merely a simplified method, and you have to submit a final return to reflect accurately all the related matters in the tax calculation.

(2) Final tax return

"Final return" is a procedure taken by a taxpayer himself/herself during the designated period in the following year.
The tax amount shall be calculated accurately, taking all related matters into consideration, when the tax returns are submitted. The tax amount withheld in advance shall be subtracted in the process of this tax calculation. In case the withheld amount is larger than the accurate tax amount, you shall receive a tax refund corresponding to the excess amount from the National Tax Office.

[In Japanese]
源泉徴収制度においては、その徴収税額は、法令に定められたそれぞれの計算方法に従って算定されるとはいえ、もともと暫定税額としての性格をもっています。 つまり、所得税額は、必要経費の額や所得控除項目など様々な事情を考慮して計算されることとなっているところ、その支払者は、限られた情報のみを基に、徴収税額を算出しなければなりません。 多くの場合、支払者は、その支払内容、金額及び支払先しか知らないのです。源泉徴収税額の計算方法は、課税漏れの防止を目指す国税庁によって規定されますから、 若干でも過大な税額を徴収する結果になりやすいのです。

(1) 年末調整

年末調整はその職場で扶養控除等申告書を提出した者に対する給与に対して適用されますが、扶養控除等申告書は、その従業員にとって主たる職場においてしか提出することができません。 つまり、2か所以上の職場で働き、給与の支払を受けている場合でも、その主たる職場での給与以外の給与については、年末調整は適用されないのです。
この制度においては、雇い主は、その従業員各自に課されるべき所得税額を算定し、その額と当年中に支払った給与から天引きされた税額とを比較します。 そして、不足がある場合には、その不足額を同年最後の給与から徴収します。逆に、余剰が生じている場合には、その額を従業員に還付します。このようにして、雇い主によって本来の税額への調整が行われているのです。
年末調整は、所得税法に規定された方法により、その雇い主が把握することができる情報のみに基づいて行われます。 保険料控除申告書や配偶者控除等申告書は、従業員がその雇い主に関連事項を知らせるための書類です。 ただし、これらの申告書に記載される項目は限定的です。 よって、年末調整の効果も限定的です。たとえば、医療費控除や寄付金控除を年末調整のなかで処理させることはできません。 また、もしこれらの申告書に誤った数値が記載された場合には、年末調整の結果もおかしくなります。結局のところ、年末調整は簡易的な制度であり、すべての項目を正しく反映させるためには、確定申告を行う必要があるのです。

(2) 確定申告

確定申告は、納税者自らによって行われる手続きで、翌年の決められた期間内に行います。所得税の確定申告の際は、源泉徴収制度によってその年中の収入金額から天引きされた所得税額を、納税額から控除することができます。 もし、この天引きされた税額の方が、本来の所得税額よりも大きい場合には、その差額が税務署から還付されます。

Withholding tax slip 源泉徴収票

A WITHHOLDING TAX SLIP (源泉徴収票 GENSEN CHOSHU HYOU) is issued by employers to their employees, in order to make clear the items regarding the National income tax amount the employers withhold from the salaries/bonuses or retirement allowance. The items include:
1. How much the issuer paid salaries/bonuses
2. How much the issuer withheld the National Income tax from the relevant salary payment
3. Whether or not the issuer made the year-end adjustment
4. Other items related to tax calculation about the Employment earnings at the working place

In case the year-end adjustment is settled for the employee, many items are written in this document. Particularly if your taxable revenues during the year are only salaries/bonuses at a single working place, you can see the most of taxation matters by the withholding tax slip. But please note the Withholding tax slips are prepared by the employers of the respective taxpayers, not by a public body. It means only items which the employer can grasp can be put on the withholding tax slips. Therefore, you cannot see other items with the withholding tax slips. For example, you cannot see the revenue amount from other working places or the deductible donation amount.

[In Japanese]
源泉徴収票は、従業員に給料や退職金を支払った雇い主によって発行される書類で、給料から天引きしてる所得税に関する各種項目を明らかにするものです。 たとえば、下記の項目が記載されています。
1. 作成者から支給された給料(退職金)の合計額    
2. 作成者によって、その給料(退職金)から天引きされた所得税の額
3. 当該従業員について年末調整を行ったか否かの別
4. その他、その職場での給与所得の額の計算に関する事項

その従業員が年末調整の対象となっている場合には、記載項目が多くなります。なかでも、その年中の課税収入がその職場での給料だけである場合には、源泉徴収票だけで税務関連項目のほとんど全てを把握することができます。とはいえ、源泉徴収票は、それぞれの雇い主によって発行されるものですから、その雇い主が所定の方法で把握することができる項目だけしか記載されません。 たとえば、他の職場での給与の額や所得控除の対象となる寄付金の額などは、源泉徴収票には反映されていないわけです。

Reconciliation for Non-Resident employment income earners

The Non-Residents are also supposed to file the tax returns to reconcile the gap between the accurate tax amount to be imposed and the tax amount provisionally withheld during the year.
But as for the payments to the Non-Residents without any Permanent Equipment in Japan, there are several cases where no procedures are prepared to realize the accurate tax amount. In such cases, there is no way to get back the potential excessive tax amount.

[In Japanese]
非居住者についても、本来納付すべき所得税額と源泉徴収税額との乖離を解消するために、確定申告をすることが予定されています。ただし、特に日本に恒久的施設を有しない非居住者に対する課税においては、いくつかの所得類型について事後調整の仕組みがなく、この源泉徴収のみによって課税関係が完結することがあります。 この場合、本来的には過大となっている税額を取り戻すことはできない結果となります。

Handling of payments of fees

A payment of fee to an individual, if subject to the withholding taxation, is arranged as below.
As is the case for salaries/bonuses, you cannot see the original value of the payment only with the cash-transfer amount. Pleae take care to accurately grasp the details of your receiving amount. Otherwise, you can be involved in unexpected confusion about the taxation matters.

Items Amount Note
Original value of the fees, rents or others 100
Consumption tax +10 10%
Sub Total 110
National Income Tax △10 Multiplying a certain rate to 100( or 110)
The amount paid directly 100

[In Japanese]

項目 金額 摘要
消費税額 +10 消費税率10%
上記計 110
源泉所得税 △10 源泉徴収制度
差引支払額 100

Reconciliation to the accurate tax amount for Business income

The year-end adjustment does not cover the Business incomes, the Dividends incomes and so on. There is no other similar measure for the incomes. Therefore, the recipients of the incomes are supposed to file their final returns.

[In Japanese]

Guidance by the National tax agency

The National Tax Agency has recently posted useful guides about the particular forms in different languages. Please refer to the relevant page on the NTA website for Withholding tax. You can find various report forms to be filled and submitted to your employer by you.

[In Japanese]
国税庁では、このほどこれらの書式の英語版の解説をWEB掲載しました。国税庁ホームページのWithholding taxのページから、関連書式を探すことができます。

Forms and guidance (NTA website)