Working in Japan: Tax Basics for Foreign Employees (2026)

The four big deductions from your salary

Roughly 25-30% of your gross salary is withheld as taxes and social insurance. The exact percentage depends on income level and dependents.

Income tax brackets (2026)

Plus a 2.1% surtax (Special Reconstruction Tax) and ~10% resident tax on top.

How withholding works

1. Your employer estimates your annual tax based on monthly salary.
2. They withhold approximately 1/12 of the estimated tax each month.
3. In November-December, your employer runs the Year-End Adjustment (年末調整).
4. This reconciles actual deductions (dependents, life insurance, iDeCo, etc.) against the estimated tax.
5. A refund or additional withholding is reflected in your December/January paycheck.

Year-End Adjustment vs. Filing yourself

Most employees do not need to file a tax return — the Year-End Adjustment covers everything. But you must file a Final Tax Return (確定申告) if any of these apply:

• Annual salary exceeds JPY 20 million
• You have side income exceeding JPY 200,000/year
• You worked at two or more employers during the year
• You want to claim medical expense deduction, furusato nozei (over 5 cities), or first-year housing loan deduction
• You received foreign income and are a permanent resident for tax purposes

Key deductions for foreign employees

• Basic deduction: JPY 480,000 (income tax) / JPY 430,000 (resident tax) — automatic for most
• Employment income deduction: 30-50% of salary, capped at JPY 1,950,000
• Spouse deduction: up to JPY 380,000 if your spouse earns under JPY 1,600,000 (2026 reform threshold)
• Dependent deduction: JPY 380,000 per qualifying dependent (more for elderly/disabled)
• Social insurance premium deduction: full amount of health insurance + pension
• Life insurance deduction: up to JPY 40,000 (income) / JPY 28,000 (resident)
• iDeCo (personal pension): full deduction, up to JPY 276,000-816,000 depending on employment type
• Housing loan deduction: 0.7% of loan balance, up to 13 years (only on Japan-located primary residence)

Resident tax — the surprise in year 2

Resident Tax is the big shock for many foreigners. It is roughly 10% flat, based on your previous year's income, and is paid in 12 installments starting June of the following year.

Practical implications:

• Year 1 in Japan: minimal resident tax (no prior year income in Japan)
• Year 2: full resident tax based on year 1 income — your take-home suddenly drops
• If you leave Japan mid-year: you still owe resident tax for the rest of the year. Appoint a tax representative or pay in full before leaving.

Tax residency status

Note: This is tax residency, separate from immigration status (visa).

Common mistakes by foreign employees

• Forgetting side income: Side income exceeding JPY 200,000/year requires a tax return. Many foreigners miss this.
• Not reporting foreign accounts: Once you become a permanent tax resident, all foreign income and assets > JPY 50M must be reported.
• Missing furusato nozei: Hometown tax donation reduces resident tax with effectively only JPY 2,000 cost. Take advantage.
• Wrong dependent claim: Foreign dependents living overseas require additional paperwork (remittance proof, relationship docs).
• Forgetting iDeCo: Even foreigners can join iDeCo and reduce taxable income.
• Leaving without appointing a representative: When leaving Japan mid-year, you need a tax representative for resident tax billing.

Related guides

• Tax residency status explained
• How to file a Japan tax return
• Japan tax calendar (month-by-month)
• Japan bonus (shoyo) explained
• Departing Japan tax checklist