Mechanism of Tax

2016.08.25 update
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Even if you are a part-time worker, you must pay tax if you earn a certain amount of wages. In some cases you also have to pay for social insurance.

Here is useful information about taxation system you should know.

Income tax

There are 2 different types of tax part-time workers are required to pay: first is income tax, a kind of tax you must pay to the government depending on your income.

"Income"="earning"-"deduction" (money such as expenses which is exempt from taxation)
If your earning is over 1,030,000 yen in a year, you must pay income tax. Income tax will be deducted from your salary every month (this deduction system is called 源泉徴収 (withholding system)).

At the end of the year, the total amount of tax you have paid will be calculated again, and you will be reimbursed or required to pay additionally. Usually, the result of re-calculation will be made automatically on the tax you pay at the end of the year (this adjustment system is called 年末調整 (year-end adjustment)).

If the employer of your part-time job doesn't do your year-end adjustment (ex: if you quit job before the end of the year) you have to go to tax office and do it by yourself (this filing activity is called 確定申告 (final income tax return)).

Amount of income tax will be determined by ( Income tax = income x tax ratio - deductions), and the tax ratio and deductions is different based on income (this taxation system call 累進課税制度 (progressive taxation)). If you want to learn more about tax ratio go to National Tax Agency's website: (所得税の税率
A photo of 10,000 yen bill

Resident Tax

Resident tax is the tax you have to pay if you earn more than 1,000,000 yen a year. The difference from the income tax is that you will start to pay your tax from second year for the previous year (therefore, you don't pay resident tax at your first year).

You should know that you are required to pay your resident tax for the previous year, even if you leave the job. Your payment period will start from June to May of next year, and will be deducted from your monthly salary after your total due amount is divided in 12 months ("withholding system"). Resident tax is formed by 2 different system, 均等割 ("Per capita rate") and 所得割 ("Per income levy"), and your required amount is sum of these 2 systems.

"Per capita rate" is a taxation system every taxpayers are imposed equal amount regardless their income. Standard tax rate* is 3,500 yen for 市町村民税 (municipal locality tax), 1,500 yen for 道府県民税 (prefectural locality tax) (same as 特別区民税 (special ward inhabitants tax) and 都民税 (Tokyo metropolitan residents' tax)). "Per income levy" is a taxation system taxpayers are imposed based on their income basis. Standard tax rate* is 6% for municipal locality tax, 4% for prefectural locality tax (same as special ward inhabitants tax and Tokyo metropolitan residents' tax)

There are some exclusion from taxation for several cases:
・Receive on welfare
・Minor/Disability person/Single mother/father whose total income of previous year is less than 1,250,000 yen
・If the total income of previous year is less than the amount defined by the municipal

If you want to learn more about your resident tax, ask your municipal office.

* From the fiscal year 2014 to 2023

Saving your tax payment

There are some systems to save on your tax payment.

■Tax treaty
If there is a tax treaty between your origin country and Japan(*2), you don't have to pay income tax if you file the report (*3).

・(Case) Students from China
Chinese students can receive tax exemption if earned amount is just enough to cover living or school in Japan (Japan-China Tax Treaty, Article 21). * To receive tax exemption, you have to submit "租税条約に関する届出書" (Statement relating to tax treaty) to chief officer of employer's tax office through your employer who pays you your salary and your tax to tax office behalf of you.

■"Deductions" (控除)
Deductions is a system to reduce the amount for taxation. Here is some of Deductions you should know:

・"Legal deductions from taxable income" (基礎控除)
330,000 yen from your total income is automatically exempt from taxation.

・ "Deduction for employment income" (給与所得控除)
Depends on your income(*4), 650,000 yen from your total income will be exempted from taxation.
・"Income deduction for working students" (勤労学生控除)
Deduction you can receive if you apply if you are considered as "working students" under the law. (270,000 yen for income tax, 260,000 yen for resident tax)

You will be considered as "working students" if you can meet all of following 3 points at December 31st of the year:
(1) You have income earned by work (included part-time work).
(2) The total amount of income from work is less than 650,000 yen, and have earning besides (1) less than 100,000 yen.
For example, if the source of income is only from salary and the total amount of salary is less than 1,300,000 yen, the final amount of income is considered less than 650,000 yen after "Deduction for employment income" (650,000 yen) is deducted.
(3) Student of either of following schools
A Elementary school, junior high school, high school, university, and higher specialized school, which meet the definition in School Education Act.
B Special technical school founded by government, local government, or educational institution. Or school which required to take certain courses.
C Institutions to provide defined job training under the rule of Human Resources Development Promotion Act which required to take certain courses.

If you don't know if your school will meet the said standards, ask your school counsel.

Insurance and National Pension

■Employment Insurance
If you are a full-time student, who attend the school on daytime, you can not join employment insurance system. If you are a night-time student, who engage in part-time job more than 20 hours a week and the period for expected employment will be longer than 31 days, you are obligated to join employment insurance. Once you join the insurance, you are due to the insurance.

■Social Security
[1]If your working hours per day or week go over 3/4 of that of permanent employee (about 30 hours a week).
[2]If your working days per month go over 3/4 of that of permanent employee (about 17 days a month)
If you meet both conditions, you are obligated to join social security program and are due to the insurance.

■Work Accident Insurance
In case you are injured or suffers an illness attributed to your employment, you may be eligible to be compensated by Workers' Accident Compensation Insurance Benefits. This benefit is also applicable to foreign students. You should ask your employer in case you are injured.

■National Pension
Everyone who resides in Japan including foreign students and whose age is over 20 are obligated to join National Pension plan , and have to pay for the insurance. Foreign students over age 20 have to join National Pension plan when you submit a transference notification to local government office. Once you join National Pension plan, you will receive your blue color pension handbook and payment notice for your National Pension plan by mail (usually after a month). You must keep this pension handbook because you will need it in the future such as when you find permanent job in Japan or take up residency.

■Deferment System for Premiums on National Pensions for Students and Exemption System for Premiums on National Pensions
Deferment System for Premiums on National Pensions for Students is a system you can defer your due to National Pension while you are a student if it is difficult to pay. If your enrollment period for school is less than 1 year, you can use Exemption System for Premiums on National Pensions. Foreign students should use those systems and try to avoid the status you are "overdue" national pensions. You have to apply for these systems every year if you use. Contact department of national pension at your local government's public office how to make an application.

Summary

・If you earn certain amount of money at your part-time jobs, income tax and resident tax will be deducted from your salary.
・If you use some system such as "Statement relating to tax treaty" or "Income deduction for working students", you are able to save your tax payment or exempt from taxation.
・Basically you don't have to pay for insurances. However, some cases you have to pay upon your conditions.

If you are over age 20, You are due to national pensions while you live in Japan. You can also relax from your payment if you go some procedure. Contact your local government's public office if you have any questions related to your tax and insurances.

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