No more dual pension contribution: International Social Security Agreement and Certificate of Coverage

photo by aarp

You know all residents aged 20 to 59 years residing in Japan are required to enroll in National Pension System. No matter of their nationalities or what their income is, all mid-to-long term residents must be covered by National Pension System. However, sometimes people may be obliged to enroll in pension systems and pay contributions in both Japan and their own country. An example of such people is corporate workers who are transferred to a branch office in Japan. To avoid such inconveniences, social security agreements have been concluded between Japan and several other countries. Some foreign residents may be exempt from National Pension or Employee’s Pension Insurance System by obtaining a certificate of coverage in their country.

Purpose of International Social Security Agreement

Social security agreements are concluded between Japan and specific countries to avoid “dual burden of contribution payments” and totalize coverage periods in two countries. While working in Japan, you must enroll in a public pension system in Japan. If you are a corporate worker or self-employed person and temporary transferred to Japan, you may end up paying pension contributions in two countries. In addition, you may waste your contribution money as you cannot meet the coverage period requirement to receive benefits in the future. International social security agreements are concluded to eliminate such disadvantages. Social security agreements cover the following people.

Employee who are transferred to Japan by their employer
Self-employed person (exclude who newly starts a business in Japan)

List of agreement countries

Implemented: Germany, United Kingdom, Republic of Korea, United States, Belgium, France, Canada, Australia, Netherlands, Czech Republic, Spain, Ireland, Brazil, Switzerland, Hungary, India
Signed (Under preparation for implementation): Italy, Luxembourg, Philippines

International social security agreements overview

The purpose of international social security agreements is to allow workers to be covered by a single social security system in either of Japan or the agreement country, and exempt from the other country’s system while working in Japan. Also, their coverage period in both Japan and the agreement country will be totalized to fill the gap for benefits under the system of the agreement country. Which country’s system a worker should enroll is decided by the period they are expected to work in Japan.

Temporary detachment for not more than 5 years: Covered by the agreement country’s system, and exempt from Japanese system
Long-term detachment for more than 5 years: Covered by Japanese system, and exempt from the agreement country’s system
Extension of period exceeding 5 years due to unexpected reason: Japanese system in principle, possibly the agreement country’s system if both countries approve (The length of extension period varies up to 5-years depending on each agreement country)

※In some cases, treatments under the social security agreements may differ in accordance with the system of each agreement country. The detailed contents of the social security agreement are published on the government website of each agreement country as well as Japan Pension Service website.

Certificate of coverage is required to be exempt from Japanese system

Workers who are transferred to Japan by their employer for less than 5 years need to obtain a certificate of coverage from the social security authority before they leave the agreement country to be exempt from Japanese social security system.
※The social security authority issues a certificate of coverage upon approval after assessment. If you don’t meet their criteria and a certificate cannot be issued, you must enroll in Japanese system while working in Japan.

Employees temporarily transferred to Japan: Employer apply for a certificate of coverage on behalf of you in the agreement country. You submit your certificate of coverage to the workplace in Japan to be kept there (Belgium and French employees must store their certificate by themselves).
Self-employed: Apply for a certificate of coverage in the agreement by themselves. Keep the certificate with them after arriving in Japan

There is no further procedure to be exempt from Japanese social security system after arriving in Japan. It is just employers don’t need to enroll the employee in Employee’s Pension Insurance System or self-employed don’t need to enroll in National Pension System. Their certificate of coverage must be kept ready to present all the time in case of inspections by the Japanese social security authority.

If you enroll in National Pension System

If you don’t fall into the previously mentioned type of workers, you must enroll in National Pension System or Employee’s Pension Insurance System in Japan. If you are an employee, your employer will arrange your enrollment to Employee’s Pension Insurance System. Self-employed, students or other mid-to-long term residents will need to visit a local office to apply for National Pension System. Residents whose purpose of stay is other than working, such as students and working holiday maker, are also required to be covered by National Pension as they are not eligible for treatments under international social security agreements. While all residents who fall into a certain age group must join a public pension system and pay contribution in Japan, most of the agreement countries impose pension contributions only on income earners. In such countries, non-workers are generally exempt from pension contributions and the pension authority doesn’t issue a certificate of coverage for them. If you think you don’t have an ability to pay monthly pension contributions because you don’t have an adequate income during your stay in Japan, apply for a special arrangement such as Special Payment System for Students, Contribution Postponement System or Exemption of the Contributions.

At the end of your stay, you will need to choose whether to receive Lump-sum Withdrawal Payment or totalize your coverage periods in Japanese system and your country’s pension system in the future. If you receive Lump-sum Withdrawal Payment, that completes the story. But if you wish to totalize the coverage periods, make sure to keep your Pension Book and a proof of your stay in Japan (e.g. passport or certificate of employment) to receive benefits in the future.

Choose your future, choose life

Social security system plays very important role to protect your life but it can be a burden if you are obliged to pay dual contribution in two countries. The last thing you want to do is paying contributions in Japan for an inadequate period of time for benefit and wasting all of your payments. So, make sure to check in prior which country’s social security system you are supposed to enroll while working in Japan.