Friday, June 28, 2013

Tax Increases in Japan for 2013 and beyond

Feel that your pay packet is a little lighter these days? Perhaps it is a raise in your insurance, or maybe you bonus is a little smaller. While those maybe  a problem, pesky tax increases (zozei 増税) are also taking effect, so watch your wallet carefully.

After the Great Tohoku Earthquake, the already debt laden Japanese government needed to find a way to cover the monumental costs incurred by this unprecedented natural disaster. In order to help put the Tohoku region back together, a special "reconstruction tax" (fukko tokubetsu-zei 復興特別税) has been added and a planned five percent decrease to the corporate tax rate was scraped.

Note that is only income related and it is not related to the impending consumption tax (shohi-zei 消費税) increase scheduled to begin taking effect in 2014. The tax rates are in effect for 35 years before they must be renewed by the National Diet.

For regular income tax (shotoku-zei 所得税), this tax amount to an approximately 2.1 percent increase for most tax brackets. 

For resident tax (jumin-zei 住民税 also know as "local tax" or "prefecture and municipal tax"), the rate will jump about 1,000 yen per month. This is made up of a 500 yen increase in town/city/ward taxes and separate 500 yen increase in prefectural tax rates.

For income related to securities and dividends ( jojo kabushiki nado no haito nado ni kakawaru shotoku-zei 上場株式等の配当等に係る所得税), the formula is a bit trickier since it involves both resident tax, income tax (treated as special income separate from salaried income), and special reconstruction tax. The break down looks something like this:

  • Rates until December 31, 2012: 10% 
           (7% income tax, 0% reconstruction tax, and 3% resident tax)
  • From January 1, 2013 to December 31, 2013: 10.147% 
           (7% income tax, 0.147 % reconstruction tax, 3% resident tax)
  • From January 1 2014 to December 31 2037: 20.315%
          (15% income tax, 0.315% reconstruction tax, 5% residence tax)
  • From January 1, 2038 onward: 20%
          (15% income tax, 0.% reconstruction tax, 5% residence tax)

Know of any other tax increases on the horizon? If so, let us know in the comment section.


  1. Taxed to the max28 June 2013 at 10:37

    You indicate a 2.1% income tax increase for most brackets but looking at your table, it jumps from 7% to 15% on January 1st 2014. Which is correct?

  2. In Japan, salary income tax is separate from income from securities and dividends (special income). The chart only applies to the later category. I will try to clean the formatting and wording up to make that clear.

  3. Taxed to the max29 June 2013 at 16:58

    Alright, so the 8% increase is for income on investments only.
    Do you know if the salary income tax will also go up on January 1st 2014?

  4. Then income tax raise took effect this year for most tax brackets. There is currently another argument circling around the diet regarding raising the highest tax bracket from 40% to 45% in order to cover debt payments, but as far as I know that hasn't been put into law yet.