みなと国際会計事務所 Accounting Intelligence blog by a CPA in Tokyo

みなと国際会計事務所 Accounting Intelligence blog by a CPA in Tokyo, tax tips, accounting, running business

Tax on salary income for non-residents

time 2017/01/27

Withholding tax of 20.42%

Salaries paid to non-residents are subject to Japanese withholding tax, always. If you are an employer in Japan and if you are paying salaries to non-residents, you have to take 20.42% income tax and pay to the government next month.

The penalty of missing the deadline is expensive, which is 5%-10% of the withholding tax itself. Please be careful not to miss it.

Filing tax return? Will not be accepted.

Employment income (that is another name of salary income in tax terminology) for non-residents are taxable at flat rate. It is always 20.42% and you are NOT allowed to submit a tax return to claim any expenses or deductions. It does not matter whether you have dependents in your country, donation, mortgage anything. It is not the same calculation formula for residents.

Typical situation is when you hire people who come to Japan to work with working holiday visa. We have several clients in ski resort areas. They hire people from abroad because it is hard to hire enough number of people for jobs that pay you only in winter. But fortunately, there are people who are willing to work AND ski.

Those people stay in hotels only for a few months, work and leave Japan when ski season is over. The tax rate seems high for staff as well but you need to deduct 20.42%. Otherwise, you will end up having to pay the tax. It is

Border line case

Some people come to Japan with working visa for one year and go back to their home country exactly after one year. They live in accommodation that their employer provides.

If they stay only a little bit less than one year, it is likely that the tax office will see they are non-resident from the beginning and therefore the 20.42% tax rate should apply from the first day. But if you could prove that they had intention to stay more than one year and then they suddenly had to return to their home country, they were Japan resident from the first day and therefore the tax rate for residents are applicable, which is much much lower, usually.

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