Deduction from Salary in Japan

The residents tax is 10% of your deemed income, and remains that for both foreigners and locals. Usually, if you are a foreigner, you are not liable for taxation during your first year in Japan. Assuming you have only had your teaching job, the amount of earnings will be your salary. As such, the following is how tax liability is calculated on your salary. For those in Japan for less than 1 year or those who receive more than 1-million yen in a single payment, 20% is deducted as a withholding tax. The municipal office in your area of residency receives notice of the total amount of income tax paid by you, and they then send you a separate request for payment of the local tax.

The first step in calculating the tax liability is illustrated below.
Total Annual Income – Employment Income Deduction = Earned Salary Exemption

Employment Income Deduction
Annual Income (Yen) Employment Income Deduction
Up to 1,625,000 650,000 Yen
1,625,000 to 1.8 million Annual Income x 0.4
1.800,0001 to 3.6 million Annual Income x 0.3 + 180,000 Yen
3,600,0001 to 6.6 million Annual Income x 0.2 + 540,000 Yen
9,600,0001 to 10 million Annual Income x 0.1 + 1.2 million Yen

Over 10 million Annual Income x 0.05 + 1.7 million Yen
Your taxable income is your income after tax on salary (Earned Salary Exemption) minus any fixed-rate allowances for social security payments, insurances, dependants and a basic exemption, etc. Everyone gets a basic allowance of 380,000 for income tax.

Income after employment income deduction – Total fixed-rate exemptions = Total taxable income