The headache of Resident Tax

2 comments

1. Yes. Residence tax (based on the previous year’s income) is due from all people who are residents on January 1st.

2. > I’ve been researching and reading about the resident tax info online, and to my surprise, the system is complicated.

   1. If you are a resident on January 1st in year N you will have to pay residence tax for the income earned in year N-1.
   2. If you are an employee, your employer will start withholding residence tax for year N-1 in June of year N (until May of year N+1).

   And the cycle starts again.

   (I’m only focusing on employment income here for you. Residence tax from other income *can* also be paid in other ways.)

   > For example, if we leave Japan in Dec 2025, we are liable to pay a lump sum until May 2026 (10% of our 2024 salary). If we leave in Jan 2026, we have to pay until May 2027 (+ 10% of our 2025 salary)

   Correct.

   Right now, you need to pay residence tax for income earned in 2024. You have not paid all of it **yet** due to the employer’s residence-tax-withholding collection method. So when you leave the country you have to pay the unpaid remainder.

   If you stay into January 2026, you get an additional year’s tax liability: You need to pay residence tax for income earned in 2025. When you leave Japan in January you need to pay both the unpaid remainder of the 2024 residence tax (January to May payments) **and** the entire unpaid residence taxes for 2025.

   So, the tl;dr is, try to leave in December rather than next year.

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