photo by Rusty Wallet
Hi, everyone! How’s your work every day? If you are working for a company or someone, probably you are paid wages every month. When you get your salary, you receive a payment slip too, but do you check it every time you get it? A payment slip has many numbers on it, and you can see there are many items deducted from your gross wage. Yes, taxes and social security premiums. People who are self-employed or freelance may be filing their tax return themselves. Anyway, taxes and social insurance premiums are something you can’t avoid as long as you earn income in Japan. So, what if you ignore payments of these fees?
Various taxes and social insurance premiums paid in Japan
Payment of taxes and social security premiums is unavoidable as long as you work in Japan. Even though you are working for a foreign capital company, you are taxed in Japan if you reside in Japan. Likewise, if you are a resident of Japan, you are required to pay for social insurance of Japan. Then, what sort of taxes and premiums do residents of Japan have to pay?
National income tax
Income tax is a tax on the income you pay to the government for the year (January to December). You don’t have to pay tax for a full amount of your income, and spending such as medical expenses, life insurance, and donations are deducted from your taxable income.
Prefectural and municipal income tax
These are two types of regional taxes and you pay these taxes to the local government of your residence. Prefectural and municipal taxes are calculated by a local government by your income in the previous year (January to December) and paid from June in the following year to May two years later. That means most new employees who newly graduated from school don’t pay these taxes in their first year of employment.
National health insurance
People who reside in Japan are obliged to join the National Health Insurance system under the government’s policy of the medical service system for the whole nation. Insurance premiums are calculated by local governments by your annual income. Therefore, the calculation of insurance tax is different for each municipality.
Employment insurance
Employment insurance is insurance that covers expenses while you are unemployed. Employment insurance premiums are calculated in accordance with your monthly wages. Self-employed people and freelance are exempt from the employment insurance and are not covered.
National pension/employees’ pension
Employees of a company or business join the employees’ pension, and self-employed and freelancers join the National Pension system and pay monthly premiums. Employees’ insurance premiums are calculated by annual income, but National Pension premiums are at a flat rate (the premium amount is announced every fiscal year).
How do non-employee workers pay taxes and social insurance premiums?
If you are a company employee, the taxes and social insurance premiums mentioned above are deducted from your monthly salary, therefore you don’t need to make payments yourself. However, self-employed people and freelancers who are not employees, or some part-timers and casual workers who don’t meet the conditions to join the company’s insurance system have to pay taxes and premiums by themselves. Each tax and social insurance premium is to be paid to the national government or local government, depending on the type of such. Payment methods are also different.
- National income tax: The tax amount confirmed by tax return is to be paid by the due date. National income tax can be paid by e-Tax, internet banking, credit card, convenience store, direct debit, office counter of a bank or tax office.
- Prefectural and municipal income tax: Paid by using a payment slip sent by the local government at a bank, local government office, or convenience store basically by cash. Some local governments accept internet banking.
- National health insurance: At the time of application, you select a payment method from direct debit and manual payment using a payment slip. Manual payment using a payment slip can be made at a bank, convenience store, or a local government office. Some local governments accept credit card payments.
- National pension: National pension can be paid by direct debit, credit card, in-person payment at a bank, convenience store, post office, or internet banking.
What will happen if you don’t pay taxes and social insurance premiums?
Taxes and social insurance premiums are withheld from your monthly salary if you are a company employee, therefore there hardly is a delay in payment. However, self-employed workers and freelancers need to make payments by due dates themselves and there may be penalties for late payment.
National/Prefectural and municipal income taxes
The tax office or a local government office will send you a reminder notice once your tax payment is overdue. If you ignore the remittance notices a few times, your asset may be seized. Also, late payment tax/fees are charged for the period from the due date to the day of completing a payment. The sum of such late payment taxes/fees increases at an accelerating rate as the delayed period grows longer, and will never be revoked. Therefore, late payment of taxes should be avoided.
National health insurance
National health insurance is administrated by local governments. Therefore, the national health insurance premium is treated as part of the municipal tax. If you are late to pay the premium, the local government office will send you a reminder first. If you don’t respond to the reminders, your properties may be seized by the local government. Also, receiving reminder notices means that your payment is overdue and subject to late payment fees according to the length of the delayed period, the same as the income tax. More than anything, you will not able to use the national health insurance, therefore have to pay the full amount of your medical costs.
National pension
Same as other taxes and premiums, you will receive a reminder notice if you are late to pay the national pension premiums. If you keep ignoring reminder notices a few times, your properties may be seized at the end. Also, you will lose the entitlement to receive a pension in the future. The national pension is not just about the old‐age pension but also covers the disability pension and survivor’s pension, and you will lose the entitlement of these pensions as well.
Summary
Payment of taxes and social insurance premiums is something unavoidable as long as you live in Japan since these are the fundamental resources to support infrastructures and people’s lives. If you are late to pay these taxes and social insurance premiums for a long time you will result in penalties such as frequent reminders and late payment taxes/fees (rates are high). More than anything, you will lose benefits from the social insurance system. If you are unable to pay taxes and social insurance premiums because of an unavoidable reason, there are relief measures for such people, so consult with the staff of your local government office instead of delaying payments.
