In Japan, it’s common for taxes to be deducted from your salary before you receive it. This system is called “withholding tax” (源泉徴収, gensen choushu), and it means that your employer takes the required tax directly from your salary and sends it to the government.
Main Taxes and Social Insurance Deductions from Your Salary
Here are the main types of taxes and social insurance fees that are deducted from your salary:
1. Income Tax (Shotokuzei – 所得税)
Income tax is calculated based on your yearly income. When it’s deducted from your salary, your employer calculates the amount each month and sends it to the government on your behalf. The tax rate is progressive, meaning the more you earn, the higher the percentage of tax you pay.
2. Resident Tax (Juminzei – 住民税)
Resident tax is paid to the local government (city or municipality) where you live. It’s calculated based on your income from the previous year and is deducted from your salary starting the following year. The amount of resident tax depends on your income; the higher your income, the more tax you pay.
3. Health Insurance (Kenko Hoken – 健康保険)
Health insurance covers medical expenses in case of illness or injury. A certain percentage of your salary is deducted for health insurance, which helps reduce your medical costs when you go to the hospital. Both you and your employer share the cost equally.
4. Employee Pension (Kousei Nenkin – 厚生年金)
Employee pension is a system that helps provide for your living expenses in retirement. Both you and your employer pay half of the required contribution. Even if you leave Japan or don’t live here in the future, you are still obligated to pay into the pension system.
5. Unemployment Insurance (Koyou Hoken – 雇用保険)
Unemployment insurance helps support you if you lose your job. A small amount is deducted from your salary, and you can receive benefits if you become unemployed. It also provides support if you take leave for childcare or caregiving.
For a Salary of ¥4,000,000: Tax Deduction Simulation
Here, we will simulate the tax deductions for an annual salary of ¥4,000,000. This simulation assumes a standard situation, such as being single and without dependents. Please note that the amounts are average estimates and can vary depending on personal circumstances, such as additional deductions or exemptions you might qualify for (e.g., for a spouse or children).
| Income Tax | ¥189,500 | Calculated based on the progressive tax rates and after basic deductions. |
| Health Insurance | ¥240,000 | Calculated at approximately 6% of gross income for health insurance premiums. |
| Employee Pension | ¥352,000 | Calculated at 8.8% for employee pension contribution. |
| Unemployment Insurance | ¥20,000 | Calculated at approximately 0.5% for unemployment insurance premiums. |
| Resident Tax | ¥400,000 | This is the estimated local tax, typically around 10% of annual income. |
Total Deductions: ¥1,201,500
This means your take-home pay is about ¥2,798,500.
Take-Home Pay for Other Salaries
For an annual salary of ¥3,000,000, after deductions, your take-home pay will be about ¥2,300,000.
For an annual salary of ¥4,000,000, after deductions, your take-home pay will be about ¥2,800,000.
For an annual salary of ¥5,000,000, after deductions, your take-home pay will be about ¥3,500,000.
For an annual salary of ¥6,000,000, after deductions, your take-home pay will be about ¥4,100,000.
For an annual salary of ¥7,000,000, after deductions, your take-home pay will be about ¥4,700,000.
The amounts are average estimates and can vary depending on individual circumstances.
Understanding Tax and Insurance Deductions
It’s important to understand the taxes and insurance deductions from your salary. These deductions are essential for your future social security, health insurance, and support in case of unemployment. Additionally, income tax and resident tax are adjusted based on your annual income, so you may receive a refund of overpaid taxes through the year-end adjustment process.
Summary
Understanding Japan’s salary system, taxes, and insurance deductions is very important for living in Japan. It is recommended that you check your pay slip every month to verify which taxes and insurance fees are being deducted from your salary.
Take-Home Salary Calculator