How to conduct Year End Adjustment (Nenmatsu-chosei) by yourself in Japan
How to make Year End Adjustment (Nenmatsu Chosei=年末調整) in 2022.
You can find newer information here
Tax filing by yourself is necessary
In the case, you have left your former job during this year (2019) and have not found next job during this year, you need to perform year end adjustment by yourself and file tax return ( Kakutei shinkoku = かくていしんこく ).
Assumed that you ( even if you were director of legal entity ) have worked in Japan and received salary or bonus, remuneration ( hereinafter referred to as “salary” ) from “Y company” for several years.
( In that case, you will be resident （ = Kyojusha ) for tax purpose.
Because you have been living in Japan for one year or more ).
However, you have left the company on 30, November, 2019 and have not found next job until 31, December, 2019.
( If you have found next job within 2019, your new employer will conduct year end adjustment for you. )
In 2018, when you worked in Y company, Y company withheld income tax ( shotokuzei ) and reconstruction special income tax ( Fukko tokubetsu shotoku zei ) from your salary.
( Hereinafter Income tax and reconstruction special income tax are referred to as ” income tax “)
It means Y company performed “gensen choshu = 源泉徴収 “.
” Gensen ” is source of income.
” Choshu ” is withholding.
Adjustment of withheld income tax is necessary.
The amount of withholding tax differs depending on the amount of your salary.
And end of year ( in December, 2018 ), Y company conducted year end adjustment ( Nenmatsu chosei = 年末調整 ).
Assumed that Y company withheld 1 yen each month.
So, after the time of payday for November, 2018, 11 yen was already withheld.
1 yen × 11 months = 11 yen.
This 11 yen is provisional annual income tax.
And according to calculation conducted ( after Y company received several documents from you mentioned below ) in end of 2018 ( but before payday for December 2018 ), it was found out that total amount of your annual income tax should be 15 yen.
In that case, Y company withholds 4 yen from salary for December.
( 15 yen – 11 yen = 4 yen )
According to calculation conducted in end of 2018 ( but before payday for December 2018 ), it was found out that total amount of your annual income tax should be 7 yen.
In that case, Y company returned 4 yen ( 11 yen – 7 yen ) to you.
Y company added 4 yen to your salary for December, 2018.
This process is called ” year end adjustments = Nenmatsu chosei = Nenmatsu chousei”.
If you do not have your employer, you need to conduct year end adjustment by yourself
However, as of now ( December of 2019 ) you have already left the company.
So, Y company can not conduct year end adjustment ( Nenmatsu chosei ) for you.
Y company’s obligation was just to issue slip of withholding tax = Gensen choshu hyo when you left Y company.
So, you need to perform year end adjustment by yourself and file tax return ( Kakutei shinkoku = かくていしんこく ) during mid of February and mid of March and pay income tax by mid of March, 2020.
You can use several income deduction in year end adjustment
Income tax is levied on your income in 2019.
You need to calculate the amount of income tax based on amount of your salary during 2019 and file tax return.
And you can apply for some tax deduction, for example, life insurance premium deduction, social insurance premium deduction, medical expense deduction, housing loan deduction.
These deductions are not reflected on the amount of monthly withholding tax.
( So, employers need to conduct year end adjustment by taking into account these matters, if you have )
Necessary documents for year end adjustment
So, I will explain how to conduct year-end adjustments and file tax return. ( in the case you have already left Y company and Y company does not conduct year end adjustment for you).
If you are employer and need to conduct year end adjustment for your employees, you need to know information below.
When you have left Y company, you have received slip of withholding tax amount ( Gensen choshu hyo. Below is sample of it ).
You need to conduct year end adjustment and file tax return to your local National Tax Office ( zeimusho ) with documents below.
( If you are living in Kachidoki, Chuoku, Tokyo, you need to go to Kyobashi branch of tax office ).
1 Withholding tax slip ( Gensen choshu hyo ) issued by Y company
In this paper, you can know the amount of salaried income and total amount of withholding income tax, social insurance premium.
2 Declaration of dependents’ exemption for salaried workers =
Kyuyo shotokusha no fuyo kojo shinkokusho.
Because, according to content of this document, the amount of your income tax differs.
The number of dependents is more, the amount of tax deduction increases.
When you worked in Y company in 2018, you submitted this paper to Y company.
And Y company retained it. It does not need to submit this paper to tax office.
In the case you are working in 2 companies at the same time, you can submit this paper to only one employer.
If you have dependents and who are living outside Japan, you need to prepare documents that you are supporting their living ( scanned copy of bank book etc ).
At the same time, you need to prove that they are your specific relative ( documents in lie of family register etc ).
3 Application for Deduction for Insurance Premiums and application for a Special deduction for Spouse of salaried workers =
hokenryo kojo shinkokusho ken haigusha tokubetsu kojo shinkokusho
In the case you have paid life insurance premium, earthquake insurance premium, social insurance = shakai hoken, you can apply for tax deduction for it.
So when you submit this paper, you need to prepare documents that certificates amount of insurance premium etc.
As for life insurance premium deduction, you can provide paper certifies annual life insurance premium ( Seimei hokenryo kojo shomeisho ) .
Such insurance premium deduction is not reflected on the monthly withholding tax.
If you purchased insurance in Japan, you will receive paper that indicates the amount of annual life insurance premium.
Insurance company will send this paper by end of November.
So, please keep the paper until you file tax return.
This is sample of Seimei hokenryo kojo shomeisho
As for national pension ( one of social insurance ) = Kokumin nenkin, you need to provide certificate.
You may have already received this paper from Pension office ( Nenkin jimusho ) .
This paper is sent to you every year.
This paper certifies national pension premium amount paid by you.
As for social insurance other than national pension = kokumin nenkin, you do not need to provide documents that certificate amount of payment.
So, as for health insurance = kenko hoken, you do not need to provide certificate of your payment.
But you need to fill the amount of your payment in Application for Deduction for Insurance Premiums and application for a Special deduction for Spouse of salaried workers ( 給与所得者の保険料控除申告書兼給与所得者の配偶者特別控除申告書 ).
You can know the amount of your payment in your bank book or receipt.
In order that you apply for your spouse as special deduction, you need to provide paper that indicates amount of your spouse’s salary.
If amount of your spouse’s salary exceeds specific amount ( 1,410,000 yen per one year. Law related to this figure may be changed within several years ), you can not apply your spouse as special deduction.
However, if the amount of your wife’s salaried income is from 1,030,000 yen to 1,410,000 yen, you can apply for this special deduction.
If amount of your spouse’s salaried income is 1,030,000 yen or less, the amount of special deduction for spouse is zero.
But you can apply your spouse as dependents and acquire tax deduction of 380,000 yen.
So, in order to prove amount of your spouse’s salary, you need to provide your spouse’s withholding tax slip ( gensen choshu hyo )
( In the case your spouse has business income, for example your spouse is operating Language school in your residence etc., you can provide documents that clarify her income. )
On the other hand, if amount of your annual salary is 10 million yen or more, you can not apply for special deduction for spouse.
In the case you apply your spouse as spouse for special deduction, your wife can not apply you as spouse for special deduction.
If your spouse is not living in Japan, you need to provide documents that certificates relationship between you and your spouse.
Because some persons have claimed that they have spouse in foreign country and applied for tax deduction and found out their claims were fake.
So, you need to provide documents in lieu of family register ( with this document, you can prove your spouse is legitimate spouse ).
And you need to provide document that indicates you are supporting your spouse.
So, if your spouse is living in foreign country and send money by bank transfer, you can provide scanned copy of it.
Matters related to special deduction for spouse is not reflected on the amount of monthly withholding tax.
So, by submitting this document, you can implement year end adjustment.
4 If you have purchased or repaired real estate for your residence by borrowing money from bank ( during 2019 ), you need to prepare documents related there to.
( In the case you purchased your residence before 2019 and did not apply for housing loan deduction, you may be able to apply for housing loan deduction still. )
This process is called ” housing loan deduction = Jutaku loan kojo “.
This is a kind of tax credit = zeigaku kojo.
You need to prepare documents that indicate balance money of your loan.
Bank will send you this document every year.
And you can provide Purchase contract of real estate and certified copy of real estate registry ( Tohon ).
(If you have lost the paper, you can contact me)
With these documents, you can prove you have purchased real estate.
And you can provide document of your legal address ( Juminhyo ).
The address on this document should coincide with address of your real estate, basically.
5 Your my number card
( Social security number of Japanese version )
6 Receipt of Medical expense ( Iryohi )
If the annual amount of medical expense is 100,000 yen or more, you can use tax deduction = iryohi kojo.
Moreover, in the case the amount of medical expense is less than 100,000 yen, if the amount of medical expense is more than 5 % of your income, you can apply for medical expense deduction.
Such medical expense deduction is not reflected on the monthly withholding tax.
You can also sum up train fee to go to hospital.
7 Bank book ( Tsucho ).
When tax office returns a part of tax paid by you, tax refund will be remitted to your bank account.
So, on application form for tax filing, you need to fill in your bank information.
Now, you have already understood necessary documents to conduct year end adjustments and file tax return.
How to calculate amount of withholding tax for year end adjustment?
So, I will explain how to conduct year end adjustments and tax filing with example.
Assumed the amount of your annual salary during 2019 is 5.87 million yen.
You are married ( your wife does not have income ) and have one child of 16 years old.
( Withholding income tax of 140,595 yen is already deducted during 2019)
1 At first, you need to calculate the amount of your salaried income after deduction of salaried income.
In order to calculate it, you can use this table.
( In the event the amount of your salaried income is less than 6.6 million yen per a year, you need to use this table.)
In this table, there is a word ” Kyuyo shotoku kojo gaku = 給与所得控除額”.
It is a kind of deductible expense for salaried workers ( salaried income deduction ) .
In the case of self employees, they can apply for deductible expense ( train fee, rental fee of office etc ).
So, to be fair, salaried workers can apply for Kyuyo shotoku kojo gaku = 給与所得控除額”.
According to this table, the amount of salaried income after deduction of salaried income deduction is 4,154,400 yen.
This figure does not reflect personal circumstance and it is provisional one.
You need to adjust it by reflecting several elements.
You can apply for your personal circumstances with this 4,154,400 yen.
You can use several income deduction
For example, dependents deduction = fuyo kojo etc.
You have a spouse who does not have any income and a child of 16 years old.
So, you have 2 dependents for tax purpose.
During 2019, you have paid these amount.
829,975 yen ① Social insurance premium = shakai hoken ryo
71,550 yen ② Life insurance premium = seimei hoken ryo
45,000 yen ③ Earth quake insurance = Jishin hoken ryo
380,000 yen × 2 ④ Exemption for dependents ( Your spouse and child )
380,000 yen ⑤ Basic deduction = Kiso kojo ( Every person can apply for this basic deduction )
① + ② + ③ + ④ + ⑤ = 1,706,525 yen.
4,154,400 yen – 1,706,525 yen = 2,447,875 yen.
This 2,447,875 yen is taxable income.
At last you can calculate income tax based on this 2,447,875 yen yen.
2,447,875 yen ×10％（ tax rate of income tax ）－97,500 yen（ deduction ）＝147,287 yen ( income tax ).
Tax rate of reconstruction special income tax is 2.1 % of the amount of income tax.
So, total amount of Income tax and reconstruction special income tax is
147,287 yen × 102.1％＝150,380 yen
This is amount of income tax and reconstruction special income tax after year end adjustments.
Execution of Adjustment
On the other hand, 140,595 yen was already withheld.
So, 150,380 yen – 140,595 = 9785 yen.
So, 9,785 yen will be withheld from your salary for December 2019.
In below cases, you also need to conduct tax filing by yourself
Even if you have not left Y company in 2019, if you fall under either of items below, you need to conduct tax filing by yourself.
1 If you have salaried income from Y company and X company ( even if the amount of salaried income from X company is less than 200,000 yen per a year ) at the same time or
2 The amount of your annual salary from Y company is more than 20 million yen or
3 You have additional income ( the amount is more than 200,000 yen during 2019. This 200,000 yen does not include salaried income. ) other than salaried income from Y company.
4 You have paid a medical expenses of over 100,000 Yen during 2019.
(excluding amount covered by your insurance. This medical expense does not include health check fee. )
5 You have purchased real estate for your residence with borrowing money from bank in Japan in 2019.
You need to file tax return （ make a report the amount of income tax ）by yourself with interpreter or hire tax accountant ( zeirishi ).