How income tax works in Japan
Japan classifies individuals as residents or non-residents for tax purposes. A person with a domicile in Japan or a residence in Japan for one year or more is generally a resident; a non-Japanese resident with a domicile or residence in Japan for five years or less during the preceding ten years is generally a non-permanent resident.
Permanent residents are generally taxed on worldwide income. Non-permanent residents are taxed on Japanese-source income and certain foreign-source income, including foreign income paid in Japan or remitted to Japan; salary for work performed in Japan is Japanese-source even if the employer pays it abroad.
Non-residents are generally taxed on Japanese-source income. When Japanese work income is not fully settled through withholding, a non-resident can have to file and pay 20.42% on the relevant salary amount. Tax treaties can reduce or remove domestic withholding when their conditions and filing procedure are met.
Residents calculate taxable income by classifying salary, business, rental, investment, pension and miscellaneous income, subtracting the available deductions, and applying the national progressive table. Employers commonly withhold salary tax and perform a year-end adjustment, but self-employed people and many taxpayers file an annual return.
Individual inhabitant tax is a separate local tax. Its standard income-based rates are 4% prefectural and 6% municipal, assessed mainly on the prior year's income for people with a domicile or similar connection in Japan on January 1. Certain self-employed businesses also pay individual enterprise tax at 3% to 5%.
Very high-income individuals can also fall under a minimum-tax-style additional income-tax rule. From income years beginning in 2025, the rule compares ordinary income tax and reconstruction surtax with 22.5% of the amount by which the relevant base income exceeds ¥330 million.
Income tax brackets in Japan
| Bracket | Rate | Notes |
|---|---|---|
| ¥1,000 - ¥1,949,000 | 5% | National taxable income; deduction ¥0 |
| ¥1,950,000 - ¥3,299,000 | 10% | National rate; deduction ¥97,500 |
| ¥3,300,000 - ¥6,949,000 | 20% | National rate; deduction ¥427,500 |
| ¥6,950,000 - ¥8,999,000 | 23% | National rate; deduction ¥636,000 |
| ¥9,000,000 - ¥17,999,000 | 33% | National rate; deduction ¥1,536,000 |
| ¥18,000,000 - ¥39,999,000 | 40% | National rate; deduction ¥2,796,000 |
| ¥40,000,000 and above | 45% | National rate; deduction ¥4,796,000 |
Tax rates at a glance
- National income tax
- 5% - 45%2026
- Highest bracket tax
- 45%
- Inhabitant tax
- 4% + 6%
- Reconstruction surtax
- 2.1% of income tax
- Non-resident salary
- 20.42%
- Employment-income deduction
- ¥650,000 minimum
- Individual enterprise tax
- 3% - 5%
- Very-high-income additional rule
- 22.5% comparison rate
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesExpatsFreelancersHigh earnersCross-border workers
Watch out for
- The 5% to 45% table is the national rate on taxable income, not an all-in effective rate. The reconstruction surtax, inhabitant tax, social insurance, deductions and credits change the final result.
- The non-permanent-resident rule is not a blanket exemption for foreign income. Remittances, payments in Japan, salary for work performed in Japan, residence history and mixed funds require careful tracing.
- Inhabitant tax is usually collected one year in arrears. The January 1 status test means that leaving Japan during the year does not automatically erase the local tax attributable to the preceding year's income.
- A one-employer salary can often be settled through withholding and year-end adjustment, but foreign salary, rental income, crypto, securities, side work and large deductions can create a filing obligation.
- The ordinary 45% table does not cap every possible liability for the highest earners. The additional high-income rule can apply above the ¥330 million base-income threshold, and the calculation is a comparison rather than a simple 22.5% surcharge on all income.
- Social insurance is not income tax. Employees and employers generally share salary-based health and employees' pension contributions, while self-employed people may use national health insurance and national pension.
Frequently asked questions
What are Japan's income-tax brackets?
National income tax has seven brackets from 5% to 45% on taxable income. The 45% rate starts at ¥40 million, before the 2.1% reconstruction surtax and the separate local inhabitant tax.
Do foreign residents pay tax on worldwide income in Japan?
Permanent residents generally do. Non-permanent residents have a narrower rule for certain foreign-source income that is not paid in Japan or remitted to Japan, while non-residents are generally taxed only on Japanese-source income.
How is salary taxed in Japan?
Employers normally withhold national income tax and perform a year-end adjustment after applying the employment-income deduction and other deductions. Inhabitant tax is generally assessed separately on the prior year's income, and social insurance is withheld in addition to tax.