While salary is being calculated based on tax slabs, it takes into consideration of contribution to social insurance which consists of Health Insurance, Long Term Care, Pension and Labor with a % of your salary or capping range.
Basic information on regular pay items
Basic Salary
Salary refers to the monthly salary as stated within the employment contract or per compensation/merit in your current employment with Indeed.
Commuting Allowance
Commuting allowance (prorated for new hires who joined mid-month) refers to the transport allowance that the company pays the employee the cost of transport from home to office and vice versa. It is paid monthly together with the salaries.
Meal Allowance
Meal allowance covers the cost of meals that the company provides. Although there’s no impact to the salary or net take-home pay of the employee, it needs to be reported and the tax on the meal is taken up by the company with a gross-up.
Commission
Commission, if you’re eligible, earned for the applicable month is paid in the following month eg. Commission earned for January is processed and paid in February.
Quarterly Bonus
Quarterly bonus, if eligible, is paid on every January, April, July, and October for the preceding applicable quarter eg. payment made on January 17 is for the period from October 2016 to December 2016.
Gift / In-Kind Benefits
All gifts (including gift cards) or in-kind benefits (eg. Indeed Store Purchases) are reportable in payroll and is grossed-up for the purpose of tax payment. There is no impact to the salaries as the tax is covered by the company with the gross-up.
With Gift / In-Kind Benefits, the net value plus the gross-up amount will form part of your salary and included into the payslip.
Calculation of Tax on Salary
Tax on salary is calculated taking into consideration of several components (but not limited to): -
- Total monthly salary
- Social insurance premiums (Social Insurance is not applicable for 1st month for new hires)
- Social Insurance Consists of the followings:
- Health Insurance
- Pension Insurance
- Labor Insurance
- Long-Term Care (applicable to employees between the age of 40 to 64)
- The number of dependents
- Allowed deductible on Taxable Income
- Gift Cards (if applicable)
- Indeed Store Purchase (if applicable, for purchase made from the Indeed Store using points)
Example
An employee receiving a monthly salary of 400,000 JPY with meal allowance of 3,560 JPY (plus gross-up on Meals with 322 JPY) with no dependents.
Items* |
Amount (JPY) |
| Salary | 400,000 |
| Meal Allowance | 3,560 |
| Gross Up | 322 |
Total Monthly Income |
403,882 |
| Health Insurance (3.85%) | 15,785 |
| Pension Insurance (9.091%) | 37,273 |
| Labor Insurance (0.3%) | 1,211 |
| Total Social Insurance | 54,269 |
| Taxable Salary after deduction of Social Insurance | 349,613 |
Total Income Tax Amount @ 10.21%** |
12,432 |
*Note: Additional taxable pay items will be included eg. store purchase or gift cards, if applicable.
Calculation of Tax on Bonus
Tax on Bonus (including any other bonus that is due to you) is calculated with reference to the Gross Salary in the previous month and the applicable tax rates will apply according to the withholding tax table on Bonus per National Tax Agency.
Example
An employee is receiving a bonus of 500,000 JPY and previous month’s income is 403,882 JPY with no dependents.
Items |
Amount (JPY) |
| Quarterly Bonus | 500,000 |
| Health Insurance (3.85%) | 19,250 |
| Pension Insurance | 45,455 |
| Labor Insurance | 1,500 |
| Taxable Bonus after deduction of Social Insurance | 433,795 |
Total Tax on Bonus @ 14.294%** |
62,006 |
The applicable tax rate will apply against your actual earnings on salary and bonus and will be adjusted at Year End Tax Adjustment (YETA). For further information on the income tax, may refer to this link.
**Disclaimer: Tax rate quoted in both examples is used solely for this purpose only and will be subject to changes according to your income level.
IMPORTANT THINGS TO NOTE
Salary Payment Date
Salary will be credited usually on the last day of the month. However, if it falls on a weekend or holiday, it’ll be paid at the last working day and payslips are only available online.
Change of Bank Account Information
Employees are to inform HR/Payroll once they have changed or updated their bank account details, eg. Names. This is to avoid any rejection of salary payment due to incorrect match on the payment data against the bank record.
All changes, including bank account no. details have to be submitted before 10th of every month for the change to take effect.
Change of Residential Address
When employees changed or shift to a new address, he/she have to update HR with the changes immediately. This is to ensure the commuting allowance and inhabitant tax is calculated correctly and ensuring all mailers or correspondence will be mailed to the correct address if any.
Inhabitant Tax
What is Inhabitant Tax?
Inhabitant/Residence Tax is a tax collected by your local ward to compensate for fees necessary for social work in your district. A simple way to say it is the tax that you owe to your local ward for living there.
How and when does this Tax Incur?
Inhabitant tax is collected in the fiscal year from June till May of each year from all residents based on January 1st of that year. For those who are not residents of Japan or does not have sufficient income (ex: housewife, student) does not have the obligation to pay taxes.
If you arrive in Japan after January 1st of the year, you will be excluded from the tax collection for the current fiscal year of June-May, and the collection will start from June of the following year. This collection will continue to be deducted as long as you are a resident of Japan. If you ever decide to move out of the country, you will pay for the remaining months of the tax collection cycle until the end of the following month of May.
How is it Calculated?
The tax amount is based on your previous year's annual income (calculated from January till December) and the district you live in, so it differs for each individual.
All employees are to ensure their address is to date to ensure it’s correctly calculated.
Example
An employee earns an annual salary of 4,800,000 JPY in the previous year with 0 dependent and total social insurance paid for the year is 651,228 JPY.
Items |
Amount (JPY) |
| Annual Salary | 4,800,000 |
| Annual Social Insurance | 651,228 |
| Income Deduction | 1,500,000 |
| Basic Deduction | 330,000 |
|
Total amount subjected to Tax |
2,318,772 |
| Inhabitant tax @ 10% | 231,877 |
| Per Capita Levy | 5,000 |
Total Inhabitant Tax |
236,877 |
*Note: Inhabitant tax payable is different for each individual per income and status. It is calculated by the local municipal office with the tax slips to be sent to you yearly in June.
Declaration of Dependent Form
Employees are to declare the no. of dependents as it’ll provide allowable deductions from taxable income to reduce income tax and inhabitant tax liability.
Income Tax Certificate of Salary for the Current Year
At the end of every financial year, the employee will receive an income tax certificate detailing earnings including tax withheld for the year. A recalculated tax adjustment will be included in December payroll in the year-end tax adjustment (YETA).
A tax adjustment at the end of the year is to reconcile the following, if applicable and/or not included in the monthly deduction:
- Basic Tax Deduction
- Employees are applicable for a basic taxable income deduction of 380,000 JPY at the end of the year. This basic deduction is not included in the calculation of monthly withholding amount
- Any changes in the dependent status
- Dependents must have estimated annual income no greater than 380,000 JPY to be eligible for a tax deduction. When calculating the final tax amount, the employee receives a tax deduction for active dependents as of the end of the year. The monthly withholding amount is calculated based on dependent status as of the given month.
- Special deduction for spouse
- Employees whose estimated net income is 10,000,000 JPY or less can claim a special deduction for their spouse if their spouse’s estimated net income is between 380,000 JPY and 760,000 JPY.
This special deduction is included in YETA (Year-End Tax Adjustment), but not included in the monthly withholding amount.
- Insurance premium deductions
- Income deductions for insurance premiums paid by the employee are not included in the monthly withholding amount but are included in YETA. Among the various types of insurance deductions that may be included are Life, Long-Term Care, Personal Pension, Earthquake, Long-term casualty, Small-Scale Mutual Aid, and Government Social insurance premiums that are not deducted from salary.
- Housing loan deductions
- After purchasing a home, the employee must file an individual tax return to obtain a housing loan deduction, and be issued a declaration form and certificate from the tax office. From the 2nd year of the housing loan, these documents can be used for YETA. Housing loan deductions are determined based on the housing loan balance as of the end of the year and are not included in the amount withheld monthly.
Additional Information on YETA Documents to be prepared and submitted:
All employees are required to complete these online YETA forms:
- Declaration for dependents deduction (for current year)
- Declaration for dependents deduction (for following year)
- In addition to the Dependent details, employees have to provide additional documents depending on the employment date and whether they are claiming any tax deductions.
New employees who received income at a previous company during the year must provide:
- Income Tax Certificate issued by the previous workplace
Any employee who would like to claim an insurance deduction must submit:
- Declaration Form for Insurance Premium Deduction
- Proof of Insurance Premium Payment
Any employee who would like to claim a housing loan deduction must provide:
- Housing Loan Deduction Declaration Form
- Housing Loan Year-End Balance Certificate
- Housing Loan Deduction Certificate for YETA
Employees will not be eligible for the YETA, needs to file their individual tax return by 15 March of the following year, if they fall within below conditions:
- Total amount of earnings from employment income during the year is more than 20,000,000 JPY
- Non-residents of Japan as of the end of the year
- Leave the company before the end of the year
- The main source of income is a job at another company
Documents to prepare when filing manual Final Income Tax Return:
- Copy of the My Number Card and Resident Card
- Original copy of your Tax Withholding Certificate issued
- If you are receiving a refund, the bank account no. is required in order to receive the deposit
- Personal Seal
- Copies of both sides of your family dependents' special permanent resident/resident certificate if you have family living in Japan and are eligible for receiving deductions for spouse or family dependents.
- Documents that verify the income of family dependents/spouse (Tax Withholding Certificate) if you have family living in Japan and are eligible for receiving deductions for spouse or family dependents.
- Birth and Marriage Certificate to verify the dependents and spouse relationships and information.
- Translation copy is required if the documents are written in foreign language.
- The original remittance detailed statement is required to show proof of remittance made to dependents not living together (eg. living abroad).
- If you are claiming income deductions, you are required to provide following documents:
- payment certificates for insurance payments made for your National Health Insurance Tax
- life insurance deduction certificate for insurance payments made to your life insurance company
- receipts of medical bills
*Note: Please ensure personal information on the documents is correct to avoid any rejections by the Tax Office. Above information provided is general in nature and may be different to your tax filing needs. You are encouraged to check with your tax consultant for a complete presentation of information required during your filing.
The due date for paying tax is the same for filing a final return ie. 15 March. Payment can be made your the Tax office or any financial institution "Bank of Japan annual revenue agency" with a tax payment slip, which is available at the institution (contact your nearest Tax Office in the district when tax payment slips are not available at the financial institutions). Alternatively, you may apply to make tax payments by bank transfer by filling out the Application for/Notification of a Change in Tax Payment by Bank Transfer and submit the completed form to your Tax Office or financial institution no later than 15 March.
Note:
- Employees who are eligible for the YETA may also choose to file their own tax return in order to process additional claims that cannot be included in YETA, eg. First-year housing loans and stock dividends.
- Notification of Online YETA entry will be sent to all employees towards the 4th quarter of the year and to be completed by the due dates (to be determined) in order for it to be processed in December.
For any other payroll queries or questions, please email to jppayroll@indeed.com