Japan’s year-end tax adjustment, known as Nenmatsu Chosei, is the process by which your employer reconciles the income tax withheld from your monthly paychecks against what you actually owe for the calendar year. For most salaried workers, this employer-led calculation replaces the need to file an individual tax return. Whatever was over- or under-withheld shows up as a refund or extra deduction in your December or January paycheck.
Does the Year-End Adjustment Apply to You
The adjustment covers employees who reside in Japan and are still with their employer on December 31. If you quit or leave the country before year-end, your employer generally can’t perform it, and you file your own final tax return (Kakutei Shinkoku) instead. Workers who leave mid-year because of severe disability or on reaching retirement age can still have an immediate final adjustment done at the time of departure.
A few situations take you out of the employer-led process entirely:
- Annual salary above 20 million yen. Your employer will still issue a withholding statement, but you have to file your own return.
- Side income over 200,000 yen. Anything beyond that from sources outside your main job requires an individual filing.
- Multiple employers. The year-end adjustment paperwork can only go to one company. Earnings from any other job get reported separately.
If you hold more than one job, you designate your primary employer by submitting the Declaration of Exemption for Dependents to that company alone. That employer runs your year-end adjustment; the secondary income goes on your Kakutei Shinkoku. Getting this wrong risks double-claimed exemptions, which the National Tax Agency will eventually catch and correct with interest plus an additional tax of 10% to 15% on the underpaid amount.1National Tax Agency. No. 14001 Overview of Additional Tax and Delinquent Tax
Foreign workers should check their tax residency classification. Residents for Japanese tax purposes are taxed on worldwide income and go through the standard year-end adjustment. Non-residents, and people who arrive or depart part way through the year, face different withholding rules and may need to file a final return covering their partial-year earnings.
The Forms Your Employer Will Ask For
HR or payroll usually distributes the paperwork in late October or early November, with an internal deadline in mid-to-late November. The forms are also available from the National Tax Agency. Three declarations drive the calculation.
Declaration of Exemption for Dependents
Governed by Article 194 of the Income Tax Act, this form captures your household: spouse, children, and any other dependents, along with their estimated income. Every person listed needs a 12-digit My Number, the identification number assigned to all Japanese residents for tax, social security, and disaster-response purposes.2Digital Agency. About My Number System Names, birth dates, and My Numbers all have to match records exactly, because errors can hold up the whole calculation.
Declaration of Deduction for Insurance Premiums
This one covers life insurance, medical insurance, earthquake insurance, and individual pension contributions including iDeCo. Between October and November, your insurers mail you a Certificate of Insurance Premium confirming what you paid over the year. Attach the originals to the form. Photocopies are generally not accepted, so if you lose a certificate, ask the insurer for a replacement right away.
Declaration of Spouse and Income Amounts
This form asks for careful estimates of both your own income and your spouse’s income for the year. The spousal deduction scales with what your spouse earns, and it phases out as their income rises. For 2026, a spouse with gross salary income of 1,600,000 yen or less qualifies you for the withholding-based spousal deduction, provided your own income stays below 9,000,000 yen.3National Tax Agency. Application for Exemption for Dependents of Employment Income Earner (2026) Underestimating your spouse’s income creates a shortfall that the tax office will eventually recover with interest.
What the Adjustment Can and Can’t Deduct
The adjustment handles a useful but limited set of deductions. Knowing what falls inside saves you paperwork; knowing what falls outside prevents you from losing the money entirely.
Your employer can process the following during the adjustment:
- The basic deduction, applied automatically based on your income.
- Dependent and spousal deductions, from the forms above.
- Life and medical insurance premiums, backed by the insurer certificates.
- Earthquake insurance premiums, on the same insurance form.
- iDeCo contributions, claimed through the small enterprise mutual aid deduction on the insurance premium form. Your plan administrator sends a contribution certificate in the fall.
- The housing loan tax credit from the second year onward, once you’ve claimed it on your first-year individual return. The tax office then sends you paperwork for the remaining years, and combined with a year-end balance certificate from your lender, your employer takes it from there.
Several common deductions cannot go through the year-end adjustment at all. If you don’t file a Kakutei Shinkoku for them, you simply lose the savings.
Medical Expense Deduction
If your household’s out-of-pocket medical costs exceed 100,000 yen (or 5% of total income, whichever is lower), you can deduct the excess: hospital visits, prescriptions, dental work, and certain transport to medical facilities. The year-end adjustment can’t process this. You claim it by filing a final tax return between mid-February and mid-March of the following year. Many workers skip it because they assume their employer handles everything.
Furusato Nozei
Hometown tax donations are not part of the year-end adjustment. If you donate to five or fewer municipalities in a year, you can use the One-Stop Special Exception system: send an application form and ID documents directly to each municipality by January 10 of the following year, and the deduction is applied automatically to your resident tax. Donate to six or more municipalities, or need to file for any other reason, and you have to claim the donations through a Kakutei Shinkoku. Payments must be finalized by December 31 to count for that tax year.
Other Things That Need Their Own Return
The first-year housing loan credit, foreign tax credits, dividend credits, and capital gains from stocks or real estate all sit outside the employer-led process. If any apply to you, the year-end adjustment covers only part of your tax picture.
Refund, Extra Withholding, and Your Gensen Choshu Hyo
Once payroll enters your data, the corporate tax software recalculates your total annual income tax on the updated deductions and compares it to what was withheld across the year. The result appears as a line item in your December or January paycheck. If more was withheld than you owed, the difference gets added to your net pay. If less, it comes out. Larger deductions such as insurance premiums or the spousal deduction tend to produce refunds, because monthly withholding runs on estimates that don’t factor them in.
After the adjustment closes, usually in January, your employer issues a Withholding Tax Statement (Gensen Choshu Hyo). This single page shows your annual gross salary and total tax paid. Keep it. You’ll need it for loan applications, visa renewals, and any tax filings of your own.
Fixing an Error After the Fact
If you catch a mistake after the adjustment is finalized, or you forgot to submit a certificate, you can fix it by filing a Kakutei Shinkoku with the National Tax Agency. The window for the 2025 tax year runs from mid-February through March 16, 2026. If the correction results in a refund, such as forgotten insurance certificates, you can file as early as January.
Filing a final return automatically updates your resident tax records with your municipality, so no separate declaration is needed there. The NTA’s e-Tax portal handles the whole process electronically with My Number card authentication.
If you underpaid because of incorrect information on the year-end forms, filing an amended return before the tax office contacts you avoids the harshest penalties. The additional tax for understatement is 10% of the shortfall, rising to 15% on amounts exceeding either your original tax liability or 500,000 yen, whichever is greater. Voluntarily correcting before any audit notice means no additional tax at all.1National Tax Agency. No. 14001 Overview of Additional Tax and Delinquent Tax
US Citizens: The Adjustment Doesn’t Discharge Your IRS Filing
American citizens and green card holders owe US federal income tax on worldwide income regardless of where they live. Completing Nenmatsu Chosei satisfies your Japanese obligation and does nothing for the IRS. You still file a US return; for Americans abroad the deadline is automatically extended to June 15, though any tax owed accrues interest from April 15.
Two mechanisms prevent double taxation. The Foreign Earned Income Exclusion lets you exclude up to $132,900 of qualifying foreign earnings from US taxable income for 2026, provided you meet either the bona fide residence test or the physical presence test, plus a housing amount up to $39,870.4Internal Revenue Service. Figuring the Foreign Earned Income Exclusion The Foreign Tax Credit, claimed on Form 1116, gives a dollar-for-dollar credit against US tax for income taxes paid to Japan under the US-Japan Income Tax Treaty.5Internal Revenue Service. Japan – Tax Treaty Documents You can choose either in a given year, though switching from the exclusion to the credit carries restrictions. For most Americans whose Japanese salary falls under the exclusion cap, the FEIE is simpler; higher earners often do better with the Foreign Tax Credit because Japan’s marginal rates can exceed US rates at comparable income levels.
Your Gensen Choshu Hyo is the key supporting document either way, since it proves exactly how much Japanese income tax was withheld and paid on your behalf.