Withholding and Year-End Adjustment in Japan
Most salaried life in Japan never touches a tax form. Your employer withholds income tax every month, reconciles the full year inside your December paycheck, and that reconciliation usually ends the story.12
Procedures, fees, and requirements can change. Confirm current details at the National Tax Agency site. This article is general information, not tax advice; for your specific case, consult a licensed zeirishi (tax accountant).
Overview
Three stages make up the employee tax life: monthly withholding from each paycheck, a December year-end adjustment that settles the annual balance, and a separate filing only when one of four triggers fires.13 Understand which stage you are in and the system stops feeling mysterious.
Monthly withholding: how your paycheck is pre-taxed
源泉徴収 (gensen choshu, "withholding at source") means your employer deducts income tax before salary reaches you. For residents the monthly amount follows withholding tables keyed to your social-insurance premiums, your spouse situation, and your dependent count.1
The input that drives those tables is a form you file with your employer, not the tax office: the Application for Exemption for Dependents of Employment Income Earner. Submit it by the day before your first salary of the year, and re-file on the same form whenever the contents change.1 An outdated declaration means months of wrong withholding that December must then repair.
The dependent declaration that sets your rate
Resident employees claiming a non-resident relative as a dependent must attach a prescribed set of documents for that relative.1 Expatriates supporting family abroad should prepare these documents early in the assignment, because payroll will ask before December does.
Non-residents face a flat rate and no adjustment
Non-resident employees sit outside this system. Their salary is withheld at a flat 20.42 percent, and that withholding completes the tax procedure in principle, with no final return and no year-end adjustment (as of 2025-10).1 The trade-off for simplicity is the absence of deductions: no dependent relief, no basic exemption, no December repair.
Which track your employer uses follows your tax-resident classification, not your visa label. Confirm the classification article in this series before disputing a payroll deduction.
December: the year-end adjustment
At the last salary of the year, the employer settles the difference between everything withheld across the year and the true annual liability. This 年末調整 (nenmatsu chosei, "year-end adjustment") is the step that lets most employees skip filing entirely.12
Residents feed the adjustment with the prescribed application forms: basic exemption, spouse exemption, dependent claims, plus evidence for deductions the employer can process. Life-insurance premiums, social-insurance amounts not yet deducted, the housing-loan credit from its second year, and the standard personal exemptions all enter here.14
What the employer cannot see, the adjustment cannot fix. Side income from another payer, a second employer, first-year mortgage paperwork, and medical spending all sit outside payroll's field of vision. Those items push you into the February to March window below.
When adjustment is not enough: four filing triggers
The NTA lists the wage-earner cases that force a final return despite a completed adjustment. Four of them cover nearly every foreign resident who files:3
| Trigger | Threshold (as of the current NTA English guidance) |
|---|---|
| Total employment earnings | Over 20,000,000 yen |
| Single salary source plus other income | Non-employment, non-retirement income over 200,000 yen |
| Two or more salary sources | Non-primary salaries plus other income over 200,000 yen |
| Special deductions outside payroll | First-year housing-loan credit; medical-expense deduction |
The 20,000,000 yen and 200,000 yen lines above reflect the NTA English guidance (as of its current edition).3 Confirm the current figures before filing.
The first year of the housing-loan special credit always requires a filing at the tax office with the house documents attached; only from the second year can salaried filers take the credit through year-end adjustment.4 Medical-expense relief works the same way in reverse: spending above 100,000 yen in the year (or above 5 percent of income for incomes under 2,000,000 yen, up to a 2,000,000 yen cap) is deductible only through a filed return with the medical-expense statement attached (as of 2026-04).5
A full-time job plus weekend contracting is the classic accidental filing case. Add non-primary salary and net side income together; crossing 200,000 yen triggers the return.3
Why withholding discipline matters for renewals
Withholding slips are compliance evidence. Permanent residence screening requires proper performance of public duties including tax, and even late-paid amounts count against the applicant in principle (as of 2026-02).6 Keep every 源泉徴収票 (gensen choshuhyo, "withholding slip"), file when a trigger fires, and never assume payroll handled income it could not see.
Good to know
The 200000 yen rule counts net side income, not revenue
The test runs on income after expenses and excludes employment and retirement income.3 Gross receipts of 300,000 yen with 150,000 yen of costs sit below the line; 250,000 yen of pure margin sits above it.
Medical deductions never ride the year-end adjustment
No payroll form carries medical spending. The deduction procedure requires a filed final return with the expense statement, so December cannot help no matter how large the bills.5
The mortgage deduction joins payroll only from year two
Year one means a tax-office filing with registration and contract documents. From year two, the certificate from the tax office plus the bank balance certificate go to your employer instead.4
Keep the withholding slip; it is next year's proof
The slip proves a full year of compliant withholding. Renewals, PR document checklists, and loan applications all accept it as evidence, so archive it with the same care as the residence card.
See also
- Client-Side Withholding (Gensen Choshu)
- Side-Business While Employed: What's Allowed
- Shakai Hoken Overview
- The Financial and Tax Criteria for Permanent Residency
- Year-End Adjustment vs. Kakutei Shinkoku: Which You File
- Housing-Loan Interest Deduction