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Sunday, August 31, 2008

Needed: Advice on paying tax in Japan

I was wondering if anyone out there can give me some advice, or point me in the direction of a reliable information source, regarding tax and insurance in Japan.

Until now, when working in Japan my income tax has always been sorted out by my employer. Also, as I have never stayed there for a full year, I think I have escaped from having to pay certain other taxes. My health insurance has also been sorted out either by my employer or university.

As of next week, I’ll be pretty much self-employed.

I don’t want to find myself in the position where a year down the line I am suddenly faced with a large tax bill, so my question to people living in Japan is, does anyone know what I have to pay and how I go about paying it? Is there just income tax, or do they also have what we call Council Tax (charged to households, as opposed to , to pay for local services). Would I be eligible for the Japanese state pension if I payed contributions towards that, or would I be better off sorting out my own? Does anyone know of any specialist support centres / helplines that I could contact that give advice on all of the above?

Also, can anyone recommend a reputable life insurance company?

Finally, does anyone know how one goes about creating one’s Last Will and Testament in Japan, or what the default rules are if one dies without one?

Any advice would be gratefully received. Thanks :-)

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Blogger Orchid64 said...

I can't advise you about life insurance or wills, but I'm guessing that Twinkle can look into that as such things are not specific to foreigners or the experience of being "new" to Japan. Also, as your beneficiary, she'll need to be involved in the process anyway.

As for the tax situation (and health insurance), you won't get a big tax bill at the end of the year because the city government can't calculate your taxes until they have a year of wages to base them on, so they're always a year behind and they send you monthly payment booklets. They don't make you cover the year you're lagging behind on unless you move to a different ku (or out of the city). Then, you have to settle up for the year you're behind (but when you move to the next place, the process starts all over again and you're not paying anything the first year in your new area).

As a very rough rule of thumb, ku taxes are about 5-7% of your income and health insurance is about 10-13% depending on your age and your income. (Mine are 12%) There is a cap on health insurance of about 520,000 yen per year so it'll never exceed that even if you have a freakishly huge income. So, I recommend you save 20% of your income to be safe in the coming year or in case you move.

Income taxes are deducted by the company you work for. Depending on the company, they will either massively over pay or pay about the right amount in most cases.

Anyway, I can discuss this with you in much greater detail when you get here as we can talk on the phone or by Skype or whatever and I can tell you about our experiences if you don't get your answers from someone or somewhere else.

I wouldn't fret much about it. If you fall behind, you can just take awhile to catch up since the government doesn't get pushy for awhile.

31/8/08 23:25  
Blogger Granny Williams said...

You're MARRIED to an expert in all things Japanese ... ask her, for goodness sake !

If she doesn't know, she'll know a man who does !!

31/8/08 23:59  
Blogger Joseph said...

Thanks both for your comments. I will of course ask *Twinkle* when I get there, I was just concerned that things might be different for us foreigners.

Orchid64: thank you, invaluable advice, really appreciate that, just the kind of info I was after.

It would be good to see you both when I get back. I don't know my schedule yet, but I'm thinking that I will probably have more free time in the first couple of weeks before I start work, after that I foresee 6 months of long hours working to pay off our debts!

I'll email when I know what's going on!

1/9/08 06:10  
Blogger Orchid64 said...

I feel obliged to speak in your defense regarding granny's comment.

The circumstances for foreigners working and living in Japan is quite different from that for Japanese folks since we work under different contacts and enter the country under different circumstances. For instance, part-time workers, contract workers, freelance workers, etc. are charged 10% income tax if they are foreigners and they have to claim to get the difference back. Japanese freelance workers don't necessarily work under those conditions (they may pay nothing at all and be responsible for paying it all). Also, the year of delay situation is a little different because the Japanese people were born here.

I've found that most Japanese folks have no idea how it works for us because most of them don't have to do anything (the company's they work for handle everything). In fact, I taught a banker just last month who emphatically confirmed this. He said most Japanese people are utterly removed from their tax-paying as it's all taken care of for them whereas we are pretty much in the thick of it.

Foreign people get a lot of guff if they don't pay taxes and insurance fees, but the truth is that a lot of Japanese people don't actively pay them either. We not only have to make certain efforts to organize and work it all out, but we don't have Japanese people around us who can easily relate to our responsibilities and offer advice.

And I know this is going to sound weird, but being Japanese doesn't make you an expert in all things Japanese. In fact, a lot of foreigners, because they seek to understand everything, know more about a lot of things than some Japanese folks (like what their holidays celebrate, how their government works, etc.). This isn't a criticism, but I've lived here a long time and the questions I ask about Japanese culture and life can't always be answered by the Japanese people around me. They just don't care (or need to care) about the things that we care about. I don't see a problem with that, but it does mean you have to find your answers elsewhere in many cases.

1/9/08 09:07  
Blogger Joseph said...

Thanks Orchid64,

Whilst I know the situation is as you describe it (and indeed that's why I posted the entry in the first place) I think granny's comment is totally understandable.

I mean, if someone came to the UK and was to ask me about paying taxes or national insurance (what the threshold is, how they pay etc) I would feel fairly confident in providing them with the answers. It's not that I'm an expert in this area - it's just 'common knowledge' (even though it's taken at source / sorted out by the employer as in Japan).

The 'knowing stuff about Japan' is interesting too, and I can recognise it turned on its head with my Japanese friends here in the UK, many of whom know a lot more about our geography / history / politics than I do.

It's like living in a tourist town for twenty years - you never bother to go and see the attractions on your doorstep, they're just 'there'.

1/9/08 14:50  
Anonymous Anonymous said...

The following info was taken without permission from:

Every person regardless of nationality over twenty years old residing in Japan is required to be enrolled in a:

1. Health insurance program
2. Pension fund program

Employee's Health Insurance (健康保険)
kenkou hoken

Back to basics: the insurance system in Japan, depending on the size of the company in which you're currently employed, falls into two categories. If you're with a company that employs more than five people, you must pay under the Social Insurance system (shakai hoken, 社会保険).

Under the Social Insurance system, we have:

1. Employee health insurance (kenkou hoken, 健康保険)
2. Employee pension (kousei nenkin, 厚生年金)

Social Insurance, health insurance
Social Insurance, pension

Eikaiwa employees and those teaching English in Japan

Be careful what you sign up for. I know if you're first coming to Japan, you're busy settling things at home, getting the visa paperwork taken care of, and learning about the job and country, but pay attention to the fine print.

Last year, AEON gave its employees an option: continue working 29.5 hours/week and accept the fact you have minimal emergency insurance, or convert your contract to a 36-hour working week and pay into the shakai hoken health insurance and pension system.

I came into AEON and Japan in complete ignorance about the health care system. Complete - unknowing, uncaring. After all, I'm immortal, aren't I?

For some years, AEON had its employees working 29.5 hours a week. Why not round up to thirty? Because they didn't want the extra charges of paying into the employee insurance system:

"According to the Health Insurance Law and Employees' Pension Law, companies must enroll all workers who work more than 30 hours a week and who have been in Japan for over two months in both the health insurance and pension systems. No exceptions."

Under the shakai hoken, you pay 50% of all premium costs monthly, and the company pays the other half. By keeping employees on a reduced workweek, AEON was sneakily avoiding its responsibilities to both the government, and the working foreign "teachers". As I mentioned in my "The Truth About AEON" posts, management was willfully ignorant of just how corporate headquarters chose to circumvent the law:

...working hours. 29.5. Why? Because, according to Japanese law, if you work over 30 hours you are a full-time worker, and entitled to full-time benefits (and on the reverse, different taxes, of course). Still, management just stared me in the face when I explained this to them.

"According to Japanese law, I am a part-time worker."
"No, you are not. You are full time teacher."
"No, not according to the law."
"Why are you saying this?"

Because it's important for all parties to understand that. No amount of insistence or stubbornness will change that fact. And if I am a part time worker, I should not be coerced into working extra hours unless you want to face the consequences of employing me as a full-time worker.

Other part-time workers in Japan have had it much worse; everyone knows unpaid overtime is as natural as having black hair in Japan. Some were working 40-50 hour/weeks while still under a part-time contract. No health insurance. Part-time wages. No assistance for childcare. There have been some attempts to improve this, but I believe it's still rather rampant.

Let's discussion of this issue

What does the kenkou hoken cover?

- 70% of all medical costs
- 60% of salary from lost days (beginning from the third day absent from work due to injury or sickness)
- High-cost medical expenses cannot exceed about 80,100 yen/month
- 0% interest loans are available

Social Pension (kousei nenkin, 厚生年金)

If you're not planning to stay in Japan long-term:
dattai ichijikin, 大体一時金

You can choose to withdrawal a portion of the pension you have paid into, proportional to the amount of time you have spent in Japan (see details here, under "Lump-sum Withdrawal Payments"). To qualify, you must have lived in Japan and paid into the pension for at least six months; the return must be filed within two years of your departure from Japan. The application form (only applicable for foreign residents of Japan) is here.

"You can file for a refund of up to 90% of your contributions provided you've been contributing for over 6 months but stay in Japan for less than 3 years."

The refund is calculated by taking your average monthly remuneration over the time you paid into the pension and multiplying it by the benefit rate:

Benefit = Average standard remuneration (monthly salary bracket) x Benefit multiplier

If your final month paid in the employee pension fund is between September 2007 and August 2008, and you have lived in Japan for (benefit multipliers):

6-11 months - multiply by 0.4
12-17 months - multiply by 0.9
18-23 months - multiply by 1.3
24-29 months - multiply by 1.8
30-35 months - multiply by 2.2
36+ months - multiply by 2.6

A refundable 20% withholding tax will be deducted from this total. The tax can be recovered however, minus a fee, by signing up with a tax agent before you leave Japan.

Health and Pension in Japan
City of Tochigi Guide to Social Insurance

National Health Insurance (国民健康保険)
kokumin kenkou hoken

If you are self-employed, in a company that employs fewer than five people, or in a different situation entirely (unemployed, student, retired, long-term traveler, etc) you might consider signing up for the National Health Insurance system of Japan; there are alternatives - see "Insurance through Private Companies" below.

Under the National Insurance system, we have:

1. National health insurance (kokumin kenkou hoken, 国民健康保険)
2. National pension (kokumin nenkin, 国民年金)

National health insurance
National pension

What does the kokumin kenkou hoken cover?

Practically the same benefits as the shakai hoken system, with the exception of:

- Not being paid for lost time at work (if employed at a company)
- A smaller cut-off for high monthly medical expenses (i.e. you pay more)


Unlike the shakai hoken, the National Insurance System premiums (monthly payments) are based on your previous year's salary.

Thus, if you are new to Japan, the government does not consider your employment status from the previous year, and you pay the monthly minimum. If you choose to stay a second year, you may notice your paychecks will be substantial smaller, due to the national system now having some data on your salary.

If you stay in Japan without paying into any insurance system, and then try to register with the kokumin kenkou hoken, you will have to pay retroactive from the moment you entered the country. It is illegal to be a resident of Japan without having some kind of health insurance and a pension.

If you're not planning to stay in Japan long-term

The same procedure can be used to get a lump-sum withdrawal of the money you've paid into the pension (dattai ichijikin, 大体一時金). However, it's calculated differently:

Time in Japan
6 - 12 months, ¥41,580
12 - 18 months, ¥83,160
18 - 24 months, ¥124,740
24 - 30 months, ¥166,320
30 - 36 months, ¥207,900
36 months or more, ¥249,480

No withholding tax is taken from the national pension withdrawal.

"The National Health Insurance is managed by ward offices in big cities and by small town government offices. Although it is a "national" insurance, each municipality is receiving funds and paying the claims. They are like a group of small insurance companies. They are all in the red. Some are just redder than others. As a result, insurance rates vary from one city to another. Even Japanese feel cheated by this disparity."

This website goes on to point out how easy it is to be trapped in the National Insurance system; if you're leaving the country, it's generally not a problem, but once you're signed up, it can be difficult to switch to a private company. Some have tried moving without forwarding their address to the insurance, leaving Japan on paper, or just presenting the proper paperwork and taking their chances:

Labor Insurnace (Worker's Comp, 労災保険)
rousai hoken

This is a compulsory insurance that employers are required to provide. It covers injury, sickness, disability, and death related to work, whether at the company or while commuting.

What does the rousai hoken cover?

- 70% of most medical costs (and 100% of some)
- 60% salary paid for lost days (beginning from the third day absent from work due to injury or illness)
- Disability, graded according to the injury

Labor Insurance Information (English)
Labor Insurance Information (日本語)

Insurance through Private Companies

Although employees are required to register with the shakai hoken as per their working contracts, those working freelance or at smaller companies do not necessarily have to pay into the National Health Insurance plan (kokumin kenkou hoken).

- If you are currently paying into the shakai hoken, you can choose to supplement this (and avoiding paying the 30% in the event of injury) by signing with a private company

- If you aren't signed up for the National Health Insurance plan yet (supposed to do it as soon as you receive your gaijin card), it is possible to sign on to a private company, present proof of insurance to the government, and they should stop hounding you to enroll in their plan. However, once you are in the national insurance system, I've been told it can be rather difficult to escape; read some of the controversy at National Health Insurance Watch.

One of the private insurance companies serving Japan is AFLAC

Particular Companies

- AEON employees are all now on the Social Insurance system (shakai hoken, 社会保険)
- Teachers with the JET Programme are on the Social Insurance system

Useful Japanese

ryouyouhi shikyuu shinseisho
Application for Medical Expenses

shobyou teatekin shikyuu shinseisho
Application for Sickness and Injury Allowance

Name of injury or sickness

Was the injury the result of someone else's actions?

Describe the circumstances that led to the injury or disease (when, where, why)

Name and address of treating physician

Period of receiving medical care

Period of hospitalization and medical care

Commuting to hospital


During your time in the hospital, how much did you pay for medical care?

Useful Websites

Social Insurance Agency
- The official website, listing all details of employee insurance and national insurance, and links to some of the paperwork (日本語で)

National Health Insurance Watch
- Controversy surrounding the National Health Insurance system of Japan; some good examples

The General Union Interac Branch
- A review of your rights in Japan concerning health insurance and pensions

City of Yokohama Services
- Detailed information about the National Health Insurance Plan

Living Guide
- Very useful guide for all situations, including medical and insurance issues, in all languages

Income Tax Guide for Foreigners
- The official website of the National Tax Agency. Includes information for foreigners in Japan, foreigners working in Japan, and those leaving Japan.

Legal Counseling for Foreigners
- List of legal counseling services for foreigners in Japan; on the phone and in person, pro-bono and charged

AMDA International Medical Information Center
- A good page covering the general procedures for medical care; there are links to insurance information, but the regulations are a little dated

Health Forum on Gaijinpot

In Case of an Emergency
Call 119 for an ambulance. Don't forget to take your Health Insurance Certificate with you.

Labels: insurance in japan, legal issues, medical care in japan, studying japanese, teaching english in japan, working in japan

1/9/08 22:43  
Blogger Joseph said...


wow. Thank you SOOO MUCH, really appreciate that, that was so kind of you to gather all of this information together, it will be invaluable.

Thank you thank you thank you.

1/9/08 23:37  
Blogger Orchid64 said...

Most of the information given to you by Anonymous is true, but all the ways in which things work don't apply necessarily to you. Any company which doesn't want to be listed on the stock exchange will not comply if they don't want to and, depending on your contract, you will have zero power to force them to do so.

T. works over 40 hours a week, but his contract is for only 25 hours. He does not get his health insurance paid in part by the company and if he insisted on having them do it, they'd just cut his hours and he wouldn't make enough money. Foreigners are frequently given "fictional" contracts to cover the company in the even of any sort of dispute regarding benefits they might get.

It's all well and good to talk about what the Japanese get by law, but we don't those benefits (nor do many other "temporary" and "part-time" workers who are Japanese). Unless you're a part of a union (and Nova was the only school with a union), you are pretty much screwed.

I just want to caution you because you mentioned work for Gaba at one point and they will not cover you as outlined in that piece no matter how many hours you work and if you complain, you'll find yourself not getting enough work to pay the bills.

Finally, at least this one statement, is untrue:

"If you stay in Japan without paying into any insurance system, and then try to register with the kokumin kenkou hoken, you will have to pay retroactive from the moment you entered the country. It is illegal to be a resident of Japan without having some kind of health insurance and a pension."

I don't know where it came from, but I didn't register for my first two years in Japan. When I finally did register, I didn't have to pay retroactively. If it is a rule written down somewhere, it is not enforced.

2/9/08 09:11  
Blogger Joseph said...

Thanks for that Orchid64.

It's good to hear how it is on paper, and how it is in real life too.

GABA are quite explicit in stating that they won't pay anything for you (in terms of tax etc), that you're not actually classed as an 'employee' at all, rather, you're a self-employed teacher being contracted out to them on a lesson-by-lesson basis.

I appreciate them offering me a contract, but at the same time I feel that it is pretty exploitative.

I'm also aware that their staff may read this blog.

2/9/08 09:23  
Blogger Joseph said...

Brian - thanks for the comment, really useful!

Unfortunatly the link to the book was so long that is stuffed up teh page formatting so I can't publish your post, but I have it as an email and will use that - thanks again!!

2/9/08 10:27  
Blogger Turner said...

No problem with you posting that, Anonymous - I was putting the information out there for everyone.

As for Orchid's comments on:

"If you stay in Japan without paying into any insurance system, and then try to register with the kokumin kenkou hoken, you will have to pay retroactive from the moment you entered the country. It is illegal to be a resident of Japan without having some kind of health insurance and a pension."

I'll grant you it may not be enforced or the various offices just never bother to catch up with the paperwork, but it is a matter of law; if you're caught, don't expect to be able to get out of the retroactive coverage fees if you still want to be insured,

24/11/08 13:26  
Anonymous Anonymous said...

i do also have some doubts in this Kokumin Kenkou Hoken.
i did went to japan hold a student past in 2006 march.Been in Japan osaka for a duration of 2 years.
When i first arrive in japan ,i did went to sign-up for my aliean car & Kokumin Kenkou Hoken.
But i did not pay even once for my monthly Kokumin Kenkou Hoken Fee.As i had a change in my address thus did not receive any infomation on the billing fee for Kokumin Kenkou Hoken.
i had since return back to my home country but i would still want to go back for short holiday trip in japan.
Am i consider currently status being banned from visiting japan??
Due to i did not pay my Kokumin Kenkou Hoken fee during my stay in japan/.
And may i ask if Kokumin Kenkou Hoken had expired since i do not receive a new card that was suppose to change every 6 months/
i need HELP~thanks

5/12/08 10:54  
Blogger Joseph said...

Anonymous, I very much doubt that you would be banned from entering Japan sue to not paying health insurance. I would just contact the town hall you registered at when you get back

6/12/08 10:55  

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