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Japan Retirement Income Tax

Japan Retirement Income Tax

What is Japan retirement income tax ?

Assumed that you have been employee in Japan for some period and leave the workplace. Then you might receive lump sum payment of salary. It is called Retirement Income (Taishokukin).

Then when you receive such money, you need to pay Income tax to tax office of Japan and I call it “Japan Retirement Income tax“. 

And if you leave Japan after you resign from the work, you can apply for refund of Pension tax that was withheld from your salary. So you can refer to this page “How to apply for Refund of Pension tax”.

Calculation of Japan retirement income tax

“Amount of retirement payment (before tax withholding)- retirement income deduction × 1/2″ is taxable amount of Japan Retirement income. 

Assumed that you have received 900,000 yen (amount of withholding tax is 100,000 yen).

Amount of Retirement payment is 1 million yen.

How to calculate amount of Japan Retirement income deduction ?

You can calculate amount of Japan retirement income deduction.

In the case, duration of your work is 20 years or less
400,000×duration of your work ( at least 800,000 yen)

In the case, duration of your work is more than 20 years
400,000×20 years + 700,000 yen – ( duration of your work – 20 years ).

Ex. You have received 20 million yen as Retirement payment.
You have worked in the company for 11 years.

20 million yen – 400,000 × 11 years * 1/2 =
20 million yen – 4.4 million yen * 1/2 = 7. 8 million yen.

This 7.8 million yen is taxable amount of Japan Retirement Income.

Director and Japan Retirement income tax

In the case you are director (including deemed director) and duration of your work is 5 years or less ( “specified director), you can not apply for “× 1/2”.

Some persons have incorporated a company and assumed director and resigned its position and received retirement salary (In stead of monthly salary) several times in order to reduce income tax.

Because if they can utilize Retirement income deduction, they can reduce amount of income tax.

So, authority has taken necessary measures.

By the way, Japan Retirement income is separate taxation.

So you do not need to consolidate amount of retirement income with other income.

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