All You Need to Know before Coming to Work in Japan- Taxes, Salary, Pension, Insurances and Work

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  • Whether you have a passion for Japanese culture or just want to eat sushi every day, you’ve probably decided already:
    “I want to live in Japan!”
    Am I right?
    However, there is some important information you need to find out before deciding to come here!
    What I will cover in this article will be related to money. More precisely, the amount of salary paid by companies, taxes, and the reasons behind such deductions.

    From a monthly salary of 200,000 yen you get deducted 20%?!

    Have you heard someone saying that “When you are looking for work (be it contract, temporary, part time or full time) in Japan, you are drawn 20% of your salary?” and thought to yourself “Maybe a tax? But why so much? Is it mandatory?”

    In this article, I will explain thoroughly what and why 20% is withheld and many other important things you should know if you are planning to work here!

    Income tax

    お金

    In fact, the income tax in Japan depends on one’s annual income.

    You can see more details on the NTA Website. *Japanese Only

    If one’s salary is less than 1,300,000 yen per year and the monthly income less than 88,000 yen, the income tax is not applied.
    Then, in the case of an annual salary that’s more than 1,300,000 yen, how much will the income tax be?

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    Here’s an example to help you understand it better:

    First of all, let’s take a person whose monthly salary is 200,000 yen as an example.
    For a salary of 200,000 yen a month, the annual income will be 2.4 million yen. In this case, the income tax will be around 56,000 yen per year, and if you convert it the tax deducted every month will be 4,700 yen.

    Besides taxes is anything else being deducted?

    Yes, there are more details below about everything being withdrawn from your salary:

    The largest amount withdrawn is the for the company’s insurance.

    The company’s insurance is a social insurance system that includes health insurance, welfare pension insurance, employment insurance, workers compensation insurance, etc.

    I will briefly explain the types of insurance included in the social insurance system:

    1. Health insurance

    Health insurance is a type of coverage that pays for medical/surgical expenses (injury, illness, childbirth, death) incurred by the insured/a person who works for a company. Even if you are not a Japanese citizen, cases when you get sick or suffer an injury may happen, so the state/municipality will bear a part of the expenses (such as treatment expenses).

    In addition, there are situations when you may surpass a certain amount for high-cost medical expenses, in which case you can receive a refund afterwards. For more details, please refer to the Kenporeon Website. *Japanese Only

    When paying for health insurance, you automatically receive an insurance card that you’ll need to show whenever you go for a health check to a clinic or hospital.

    2. Pension Insurance

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    The employees’ pension insurance is a public pension system for the employees. It is a system for people between 20 and 59 years old that provides benefits when retiring; the accumulated amount will be received according to the Old-Age Benefits. There are also unfortunate cases that lead to death (because of illness, disability or injuries) when the family gets the pension of the deceased one.

    There are disadvantages, such as paying insurance for over 10 years in order to receive an employee’s pension and also the current system says you can only get it when you turn 65 years old. So, there are many things to take in consideration when it comes to your future.
    For those that are freelancers, temporary workers, unemployed people, etc. they will need to join the “National Pension” system and pay themselves.

    In present Japan, according to a set of factors (mainly working conditions), joining the system becomes mandatory. I will explain it in detail below:

    If (A) and (B) below are Regular three-quarter or full time employees, they are insured persons.

    (A) Working hours
    -If the working time per week is at least one of a Regular three-quarter employee

    (B) Number of working days
    -If the working time per month is at least one of a Regular three-quarter employee

    So, the number of working hours should be over 30 hours and the number of working days per month, more than 15.
    The reason is that the company calculates the employee’s working time reported to 5 days a week/8 hours per day, 40 hours × 3/4 = 30 hours or more, deducting the national holidays/weekends, the monthly working days will be calculated as 20 days × 3/4 = 15 days or more.

    Based on the total income of the previous example here is how I calculated it:

    -The health insurance: in standard remuneration monthly amount × 4.95% (Tokyo metropolitan government’s case), the rate varies in the whole country.
    -Employees’ Pension: standard remuneration monthly fee × 9.15% (Individual share)
    -The social insurance from a monthly salary of 200,000 yen (9,900 per day), the contribution amount of the welfare pension will be about 18,300 yen monthly.

    Now, what happens if:

    “I paid the national pension in Japan, but can it be refunded if I go back to my country?”

    A partial refund is possible but it depends on the period of payment (details are described on the home page of the Japan Pension Organization`s Website)

    3. Employment Insurance

    給与支給明細書

    Employment insurance is a system of insurance concerning unemployment/employment continuation based on the employment insurance law in Japan. The insurer is the Japanese government.
    A typical benefit is the “job seeker benefit” (so-called unemployment insurance) that one can receive for a certain period of time when unemployed.
    Employers must notify this insurance’s participation to workers who work more than 20 hours a week.

    The amount paid is the amount of 5/1000 minutes of face value of salaried money, and if you earn 200,000 yen per month it is about 1000 yen amount.
    Likewise, if you work less than 20 hours a week, you do not need to pay employment insurance, but if you work for more than 20 hours, you need to pay, and it will be a non-refundable insurance.

    4. Resident’s tax

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    Another tax you’ll have to pay is the inhabitant tax (a tax on income).
    Same as income tax, there is a tax rate to decide an inhabitant’s total tax. However, the resident will get it deducted from the previous year’s income, and won’t get it withdrawn from his/hers first salary.
    Residents’ taxes vary depending on the prefecture/city you live in; for example, Tokyo’s residence tax is about 9,958 yen.

    Conculsion

    オークション(色)

    To summarize the above explanation, it is a fact that you can not receive the full salary because a small amount from it will be deducted monthly according to one’s working hours for that month in order to pay mandatory taxes.
    Of course, there are cases when some people have a really low income. Therefore the tax they will be paying will also be lower, and entering the company’s insurance won’t be mandatory for such situations. However, if one’s monthly salary is 200,000 yen, the deducted insurance company, employment insurance, resident taxes will total 43,858 yen, almost 20% of the salary you are supposed to be getting.

    Also, as explained earlier, for your first working year in Japan, you won’t need to pay the residence tax. So, with 200,000 yen per month, the amount withdrawn, such as company insurance, employment insurance, income tax, etc., will be about 33,900 yen. (That means a few differences in trial calculations).

    People who work in Japan and those who plan on coming here in the future have to comprehend the circumstances of all these Japanese taxes and insurances explained above, know what what they are paying, and have an idea of what to expect or what to ask for when working for a company in Japan. That way, living here will become much easier..

    Also,in case of troubles with your employer, such as unpaid salary, contracts not being respected, etc. you can consult with Tokyo Labor Counseling Information Center’s labor standards supervision department.

    “Tokyo Labor Counseling Information Center Website”

    We will continue following this topic on our Website, so if there is anything in particular you’d like to know, please leave a comment or email us.

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