Taxes in Japan come in layers. A resident pays progressive national income tax from 5% up to 45%, a 2.1% reconstruction surcharge on that tax, a flat 10% local inhabitant tax, social insurance premiums of roughly 15% of salary, and a 10% consumption tax on most purchases. Generous deductions pull the effective rate well below the headline brackets for most workers, but the top combined marginal rate on ordinary income approaches 56%.
National Income Tax Brackets
Japan taxes personal income through seven brackets, and each rate applies only to the slice of taxable income within its range.1National Tax Agency. Income Tax Rates for Residents
- Up to ¥1,950,000: 5%
- ¥1,950,001 to ¥3,300,000: 10%
- ¥3,300,001 to ¥6,950,000: 20%
- ¥6,950,001 to ¥9,000,000: 23%
- ¥9,000,001 to ¥18,000,000: 33%
- ¥18,000,001 to ¥40,000,000: 40%
- Over ¥40,000,000: 45%
Someone with ¥10,000,000 in taxable income does not owe 33% on the full amount. The first ¥1,950,000 is taxed at 5%, the next slice at 10%, and so on up the ladder.
A 2.1% reconstruction surcharge is added to whatever national income tax you owe. Introduced after the 2011 earthquake and tsunami, it is currently scheduled to remain in place through 2037, though the government has discussed partially redirecting it toward defense spending.2National Tax Agency JAPAN. No.12006 Tax on the Income of an Individual as a Non-Resident in Japan for Tax Purposes
Local Inhabitant Tax
Every resident owes a local inhabitant tax to both their prefecture and their municipality. It is a flat 10% of taxable income, split 4% prefectural and 6% municipal, and funds schools, waste collection, and local infrastructure. A small per capita levy of about ¥5,000 per year applies on top, regardless of income.
The timing catches many newcomers off guard. Inhabitant tax is calculated on the previous year’s income and billed in the current year. Earn a high salary in your first year in Japan and the bill arrives in your second. The reverse also holds: if your income drops or you leave Japan, you still owe inhabitant tax on the prior year’s earnings.
Deductions That Lower Your Taxable Income
Effective rates are well below the bracket rates for most people because Japan’s deductions are substantial.
Basic Deduction
Every taxpayer receives a basic deduction, significantly increased starting in tax year 2025. For 2026, the maximum is ¥950,000, nearly double the previous ¥480,000, and it applies to taxpayers with total income of ¥13,200,000 or less. The deduction phases down at higher incomes and disappears once income exceeds ¥25,000,000.3National Tax Agency. Withholding Tax Guide (2026 Edition)
Employment Income Deduction
Salaried workers receive an additional deduction calculated from gross pay. The minimum was raised to ¥650,000 for 2025 onward, up from ¥550,000. Together with the basic deduction, these changes lifted the income threshold below which salary earners owe no income tax at all.
Dependents and Spouse
Taxpayers supporting family members can claim further amounts:
- Spouse exemption: up to ¥380,000 if the spouse’s total income is ¥480,000 or less, and ¥480,000 if the spouse is 70 or older
- Dependent child aged 16–18 or 23 and over: ¥380,000
- Specified dependent aged 19–22: ¥630,000
- Elderly dependent aged 70 or over: ¥480,000
- Single parent exemption: ¥350,000
Children under 16 do not generate an income tax deduction, though they may qualify for a separate child allowance paid directly by the government.4National Tax Agency. About Kinds of Deduction (For Employment Income Earner)
Social Insurance Contributions
Mandatory social insurance is not technically tax, but it comes out of your paycheck and matters to the total bill. Employers and employees each pay roughly half.
- Welfare pension: 9.15% of monthly wages (employee share), applied up to a salary cap of ¥650,000 per month
- Health insurance: about 5% of monthly wages (employee share), with the exact rate varying by prefecture and insurer
- Nursing care insurance: an additional premium that begins once you turn 40, calculated as a percentage of salary
- Employment insurance: a smaller percentage covering unemployment benefits
The employee’s share typically runs around 15% of gross salary for workers under 40, and slightly higher after 40 when nursing care premiums kick in. Employers match these contributions.
Consumption Tax
Japan’s consumption tax functions like a value-added tax and appears at the point of sale on nearly every purchase. The standard rate is 10%, in effect since October 2019 when it was raised from 8%. A reduced 8% rate covers groceries (excluding alcohol and dining out) and newspaper subscriptions published at least twice a week.
How Residency Status Changes What Japan Can Tax
How much of your worldwide income Japan can reach depends on how long you have lived there. The law recognizes three categories:
- Non-residents: people without a home or residence in Japan, taxed only on Japan-sourced income
- Non-permanent residents: foreign nationals who have lived in Japan for five years or less within the preceding ten years, taxed on Japan-sourced income and any foreign income remitted into Japan
- Permanent residents: anyone who has lived in Japan for more than five years within the preceding ten (and any Japanese national), taxed on worldwide income regardless of where it is earned or received
The shift from non-permanent to permanent resident status is automatic once you cross the five-year threshold. There is no application or notification; your tax obligations simply expand.5National Tax Agency. Individual Income Tax – Taxpayers and Scope of Taxable Income
To prevent double taxation, Japan maintains tax treaties that generally let you claim a foreign tax credit in Japan for taxes paid abroad on the same income.6Ministry of Finance. The List of Japans Tax Conventions
Filing and Deadlines
The annual filing period runs from February 16 through March 16 for the prior year’s income. For the 2025 tax year, returns are due by March 16, 2026, and any tax owed must be paid by the same date.7National Tax Agency. Final Return Procedures Guide
Most salaried employees never file a return. Employers handle income tax through monthly withholding and a year-end adjustment that reconciles the amount withheld against the tax actually owed after deductions. You generally must file your own return if you earn more than ¥20 million in salary, receive income from multiple employers, have significant investment or rental income, or are self-employed. Returns can be filed electronically through e-Tax or on paper at a local tax office.
Inheritance and Gift Tax
Japan’s inheritance tax rates are among the highest in the world, running through eight brackets from 10% up to 55% on amounts above ¥600 million. Before the rates apply, the estate receives a basic deduction of ¥30 million plus ¥6 million for each statutory heir. A married couple with two children, for example, would have a deduction of ¥48 million (¥30 million plus ¥6 million multiplied by three heirs). Only the amount above that is taxed.8Ministry of Finance, Japan. Learn About Inheritance Tax and Gift Tax
A surviving spouse receives a substantial credit that fully offsets tax on either ¥160 million or the spouse’s statutory share of the estate, whichever is greater. In practice, a spouse inheriting up to their legal share owes nothing regardless of estate size.
Gift tax operates as a backstop. Each recipient can receive up to ¥1.1 million per calendar year tax-free. Gifts above that exemption are taxed on a progressive scale that also tops out at 55%.9National Tax Agency. No.15002 Cases Where a Gift Tax Is Imposed
Exit Tax When You Leave Japan
Residents departing Japan may face an exit tax on unrealized capital gains if they meet two conditions: they held financial assets worth ¥100 million or more in total, and they lived in Japan for more than five of the preceding ten years. Covered assets include stocks, derivatives, and equity interests. The tax treats these assets as if sold on the day of departure. Deferral arrangements and return-trip provisions exist in some cases, but the threshold is low enough that high-net-worth residents need to plan before relocating.
What U.S. Expats Still Owe Washington
American citizens and green card holders living in Japan must file U.S. federal tax returns every year, regardless of where they earn their income. Two provisions reduce the risk of paying twice on the same money.
- Foreign Earned Income Exclusion: for 2026, you can exclude up to $132,900 of foreign earned income from U.S. tax if you meet either the physical presence test or the bona fide residence test.10Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
- Foreign Tax Credit: taxes paid to Japan can generally be credited dollar-for-dollar against U.S. tax liability on the same income.
If the combined value of your financial accounts outside the United States exceeds $10,000 at any point during the year, you must also file a Report of Foreign Bank and Financial Accounts (FBAR) electronically through FinCEN by April 15, with an automatic extension to October 15. The FBAR is filed separately from your tax return.11Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR)