A Japanese tax bill is assembled from three separate layers that are each computed on a different base and collected on a different timetable. National income tax (shotokuzei) runs on seven progressive brackets from 5% to 45%, administered by the National Tax Agency and computed using the bracket rate less a fixed deduction amount rather than a pure band-by-band build-up. On top of that sits the 2.1% special income tax for reconstruction, a surtax charged on the national tax figure itself rather than on income, in place until 2037. The third layer is local inhabitant tax (juminzei), a broadly flat 10% of prior-year taxable income split between the municipality and the prefecture plus a small per-capita levy, which is why your local tax bill always lags your income by a year. Salaried employees also benefit from the kyuyo shotoku kojo employment income deduction, which is subtracted automatically before any of these rates apply.

Key Regulatory Parameters & Frameworks (YA 2026)

Rule 01

Seven National Brackets and the Deduction Method

Rates step 5%, 10%, 20%, 23%, 33%, 40%, and 45%, with the top rate biting on taxable income above JPY 40 million. Japan's official tables express this as rate multiplied by taxable income minus a fixed subtraction (for example the 20% band carries a JPY 427,500 subtraction), which produces the same answer as a band-by-band calculation but is how the National Tax Agency tables and most payroll software express it.

Rule 02

Special Reconstruction Surtax

A surtax of 2.1% is levied on the computed national income tax amount, not on income, and applies to withholding as well as to the final return. It is why headline withholding rates appear as 10.21% and 20.42% rather than 10% and 20%, and it remains in force through 2037.

Rule 03

Local Inhabitant Tax (Juminzei)

Juminzei is charged at a combined 10% income-based rate, conventionally 6% municipal and 4% prefectural, on the previous calendar year's taxable income, plus a modest flat per-capita levy of a few thousand yen that varies by municipality and now includes the national forest environment levy. It is billed from June and collected in twelve instalments through the following May, either deducted from payroll (tokubetsu choshu) or paid directly (futsu choshu).

Rule 04

Employment Income Deduction (Kyuyo Shotoku Kojo)

Employees do not deduct actual expenses; a statutory deduction scaled to salary is applied instead. It has a floor for low salaries and is capped once employment income reaches the high-income tier (historically JPY 1.95 million of deduction at JPY 8.5 million of salary), so high earners see the effective rate climb more steeply. Recent reform rounds have adjusted both this deduction and the basic deduction, so confirm the current year's figures before relying on them.

Rule 05

Year-End Adjustment vs. Filing a Return

Most employees never file, because the employer performs nenmatsu chosei in December to reconcile withholding against the annual liability. You must file your own kakutei shinkoku if employment income exceeds JPY 20 million, if you have two or more employers, if side income exceeds JPY 200,000, or if you want reliefs the year-end adjustment cannot handle such as the medical expense deduction, the first year of the housing loan credit, or furusato nozei donations outside the one-stop scheme.

National Tax Breakdown at JPY 5,000,000 Taxable Income

Scenario Context: Tokyo resident with JPY 5,000,000 of taxable income after the employment income deduction, social insurance premium deduction, and basic deduction.

Calculation Stage	Computed Value
Tax on first JPY 1,950,000 (5%)	JPY 97,500
Tax on JPY 1,950,000 - 3,300,000 (10%)	JPY 135,000
Tax on JPY 3,300,000 - 5,000,000 (20%)	JPY 340,000
National income tax before surtax	JPY 572,500
Special reconstruction surtax (2.1% of national tax)	JPY 12,022
Local inhabitant tax (approx. 10% of prior-year taxable income)	Approximately JPY 500,000, billed separately from June

Final Deducted Result:National income tax of JPY 584,522 including the reconstruction surtax, with roughly a further JPY 500,000 of inhabitant tax collected over the following twelve months.

Frequently Asked Questions (FAQ)

When do I pay inhabitant tax?▼

Juminzei is assessed in June on the previous calendar year's income and collected over the twelve months from June to the following May. Employees have it deducted monthly from payroll under tokubetsu choshu; everyone else receives payment slips for four quarterly instalments. This one-year lag catches people out: your first year in Japan carries no inhabitant tax, and the year after you leave a job or the country you can still owe a full year's bill.

Why is the withholding rate 20.42% rather than 20%?▼

The extra 0.42 percentage points is the 2.1% special reconstruction surtax applied to the 20% base rate. The same arithmetic produces 10.21% on smaller professional fees and 20.42% on non-resident withholding. The surtax applies to the tax figure, not the income, and is scheduled to remain until 2037.

Is the 10% inhabitant tax the same everywhere in Japan?▼

The income-based portion is effectively uniform at 10% nationwide because the municipal 6% and prefectural 4% components are set by national framework law. What genuinely varies between municipalities is the flat per-capita levy and any small prefectural environmental surcharge, which together amount to only a few thousand yen a year, so moving within Japan will not meaningfully change your inhabitant tax.

What is furusato nozei and how does it interact with these rates?▼

Furusato nozei lets you donate to a municipality of your choice and receive credit for almost the whole amount against your income and inhabitant tax, beyond a JPY 2,000 excess, up to a cap driven by your income and family situation. Donors receive local gifts in return, which is why it is popular. You claim it either through the one-stop exception system, if you donate to five or fewer municipalities and do not otherwise file, or on your kakutei shinkoku.