This post is a dedication from someone who is about to leave Japan for good to those who are just about to start their life in japan. Yokoso Nihon! Welcome to the land of raising sun, folks! 😀
Switching status from ‘student’ whose income solely came from scholarship to ‘working woman’, or as Japanese calls it ‘sarariwoman’ (read: salary woman) means an additional headache in the form of Japan Tax. For those who work in a company and have only one source of income from that company, it is easy. The company will take care of your taxes, withhold the tax from your paycheck every month, and by the end of the year, all you need to do is sign the form, update your status (i.e married, having dependents, etc), and you’re done (sometimes when you’re lucky, you got that little extra something called ‘tax return’).
However, for someone who gets extra income from other source, then here comes the nightmare calls ‘kakuteishinkokusho’ aka Tax return form. And yeah, there is no English version for the form. Only Japanese. This is the form/report that you need to file in March/April of the following fiscal year for your previous year income. And of course, you can always hire an accountant to do all the hassle for you, but be prepared to pay over 25,000 (around $300/IDR 3 million) to pay for such service.
So, in my craziness (or should I say stinginess), I decided to tackle it on my own and surprisingly, it’s not that complicated!
First, here are the helpful links to help you to understand how Japan Tax works:
This is a very useful English version of a complete explanation about how Japan Tax works. And it’s really worth reading to make you understand your obligation and more importantly, to prevent you from paying too much tax, lol! Don’t be intimidated by the number of pages. You can skip most of the part (i.e the pages explaining about retirement income, that is if you’re not retired, how to fill your name, etc) and just get into the part that is related to you.
The second link is a website made by wonderful people who explain about tax deduction in English, called Gaijin Tax.
This website will explain to you in excellent detail about how to calculate your deductibles.
Both links should cover your basic knowledge need about to file your tax, but here are some additional tips/information from me:
- File your tax as soon as possible. So, in case there’s additional paperwork you need to file, you will have time to submit it before the deadline. And be prepare of the long line during the tax return period. But, you know how Japanese are good at being organized. In my city, they rent a special hall at the Prefectural hall and assign many extra staff to help you with your tax, so the line will still be long, but at least they are trying ;). And be prepared of the non-existant of English-speaking staff. If your Japanese is not sufficient, ask a friend’s help to go with you.
- Don’t worry about the staff. They are really nice and helpful, actually. They will try to be fair about how much tax you have to pay, as long as you are honest and completely open about how much money you’re making and how much is your expenses.
- Prepare the income paperworks. Japan is surprisingly very lenient about the receipts and pay stubs. They are nothing like IRS, for example, and you don’t even need to submit ANY of your expense receipt, they will just take your word for it (ain’t that great for someone as forgetful as me?), as long as it makes sense. But you have to provide them with your proof of salary (the withholding tax form you get from your workplace, and any additional income you get that year, i.e the contract stating how much money you get for a year contract, copy of invoice, etc). So be prepared and bring all of the documents listing all of your income source.
- Even though I said they don’t usually ask for receipt, but for big expenses, it is always a good idea to have them handy. I.e, a receipt from Apple Store where you bought your iMac which you use for your work. They usually don’t even ask for a copy (I just showed them the receipt that Apple Store emailed me on my iPhone, and they just checked it and told me that it was enough, they didn’t need a copy of it), but showing them the receipts will help them judge how truthful you are about your expenses.
- Do NOT underestimate your expenses. This is a big mistake I made due to my lack of knowledge of what is deductible and what is not. If you work, say, as a technical consultant like me, all the expenses related to it is tax deductible. Here are the list that I would never thought as tax deductible but apparently (according to the very nice staff at the tax office) they are:
- Your suit/shoes/working attire: When you work as a scientist which doesn’t require you to have working attire other than jeans, T-shirt and Crocs clogs (you have to wear lab coat/sterile suit all day long anyways), and you buy a nice Ann Taylor suit and a pair of Jimmy Choo pumps for a meeting as a consultant, then the suit and the shoes are tax deductible. Of course, that doesn’t mean that you can buy Ferragamo every month and file them as deductibles, but the staff will calculate the reasonable amount you can file as deductible in a year. Not an extravagant amount, but still, it makes me happy!
- Keeping the tradition=tax deductible. Giving ‘omiyage’ aka souvenir is one of Japanese traditions, and sometimes even though you’re not Japanese, you follow suit. And when you buy a $100 souvenir for the CEO of a company that your work as a consultant for (it’s the CEO, of course you can’t just buy them a box of $10 strawberry mochi, lol), then it’s tax deductible. Imagine if you visit the country/company 4 times a year, that is $400 deductible there!
- Being nice=tax deductible. When you pick up the researchers who you are going to train as a part of your job as a consultant, then the train fare, etc is tax deductible. And it doesn’t stop just there. They just arrived from a long flight and haven’t had lunch yet. So you take them to a nice restaurant and pay for their lunch (you are being nice and it is a common courtesy to do that), and yes, the whole cost is tax deductible. So keep the receipts just in case!
- If you also work from home (having two jobs as an assistant professor at a University and also as a consultant makes me have to work from home as well), then 50% of your apartment rent and utilities (gas, electricity, oil heater, internet connectivity, etc) are tax deductible. This is very important since this is going to be a huge part of your total deductibles and as explained to me by a nice staff at the tax office, is sometimes forgotten by those who have to work from home. Sometimes they will only file 30% of it if you work only 30% from home, but they will calculate it fairly for you. You just need to let them know that you sometimes work from home.
- Your welfare= tax deductible. Like your gym membership. I kid you not. The guy at the tax office asked if I was a member of any gym club since the membership fee is tax deductible (which I am not). But yeah, all related to your welfare, extra health insurance, travel insurance, gym membership, yoga class membership, all are tax deductible.
Well, those are the things that I can think of right now. And remember, the amount of your taxable determine how big your resident is tax as well. So, better crunch those numbers to help reduce another nightmare calls ‘City and Prefectural Resident/inhabitant Tax’ (I am sure those who lives/lived in Japan and have to pay the resident tax on their own know how terrifying checking your mailbox in the end of May/early June can be, lol!)
Last but not least, my late Father in law once said, there are only two things that are certain in this life; death, and tax, so don’t mess with them. I can’t agree with him more!