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Japan’s taxation and social security system are quite complicated. Moreover, as it often undergoes reform, it is required to update frequently such information. For the year 2013, it is necessary to update the following information that applies to the payments of salaries starting from January 2013.
1. Withholding income tax rate
Starting from year 2013 and lasting for a period of 25 years, an extra 2.1% is added to the current withholding income tax rate. For example, by adding 2.1%, 10% of applicable withholding income tax rate will be 10.21%, 20% will be 20.42% and so forth. The surtax fund is planned to finance the reconstruction after the Great East Japan Earthquake occurred on 11 March 2011.
2. Deduction for salary income
The deduction for salary income will be capped at JPY2,450,000 for one’s salary being paid since year 2013 of which the amount is JPY15,000,000 or above.
3. Resident tax
Resident tax is assessed in June every year based on the individual’s prior year’s taxable income. Beginning from 2014, an additional JPY1,000 standard amount of per capita tax is being imposed on this resident tax for the period from 2014 to 2023 as a Special Reconstruction Tax. The standard amount of per capita tax levied in a year will therefore be raised from JPY4,000 to JPY5,000, regardless of the amount of income. Employers will withhold taxes from employee salaries and wages and then make year-end adjustments to the amount paid.
4. Pension
Japan’s government has decided that the pension-withholding rate will be gradually increased by 0.354% every year until September 2017 to the target rate 18.3%.
5. Health insurance
In the case of Tokyo, the current health insurance rate is 9.97%. As the same as pension withholding, both the employer and the employee are responsible to pay the health insurance on a fifty-fifty basis. For those whose age ranges from 40 to 64, the nursing insurance rate of 1.55% will be applied.
6. Child upbringing fund
To finance the child upbringing fund, 0.15% is withheld from employee’s monthly salary. Only the employer is liable to pay for the child upbringing fund.
