Guide to the 2024 Anti-Deflation Tax Credits and Benefit Payments

At the end of March, the government legislated a combination of tax credits and benefit payments, designed to ensure the end of deflation by compensating for slow wage growth (especially among employees of small and medium-sized businesses). These credits and payments were first [announced](https://www.kantei.go.jp/jp/headline/sougoukeizaitaisaku/index.html) by the Kishida Cabinet in November last year, and were included in the government’s tax reform plan in December. The scheme is surprisingly complex, but this post will attempt to explain the key aspects.

For more detailed and authoritative information, see:
– the NTA’s [dedicated information site](https://www.nta.go.jp/users/gensen/teigakugenzei/index.htm);　
– the NTA’s [FAQ (PDF)]( https://www.nta.go.jp/publication/pamph/gensen/0024001-021.pdf);
– the MIC’s [FAQ (PDF)](https://www.soumu.go.jp/main_content/000926356.pdf);
– the Cabinet’s [summary](https://www.cas.go.jp/jp/seisaku/benefit2023/shosai/index.html);
– the Cabinet’s [FAQ for municipal workers](https://www.chisou.go.jp/tiiki/rinjikoufukin/juutenshien/QA_4kyufukinteigakugenzei.pdf)

### TL;DR

If you are an employee and your employer asks you to declare your dependents by submitting a form like [this one (PDF)](https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/gensen/teigaku/pdf/0024002-044_01.pdf), you should do so.

### Who’s getting paid?

Most low-income households will receive a benefit payment. Almost everyone else will receive a tax credit. Some households will receive a combination of payments and credits.

There are separate tax credits for income tax and residence tax, and there are maximum income thresholds for both. People whose [net income](https://www.nta.go.jp/taxes/shiraberu/taxanswer/yogo/senmon.htm#word2) for **2023** was more than 18.05 million yen (corresponding to a gross salary of 20 million yen) will not receive a residence tax credit, while people whose net income for **2024** ends up being more than 18.05 million yen will not receive an income tax credit.

So people whose net income for both 2023 *and* 2024 exceeds 18.05 million yen per year will not receive anything. However, due to the way the income tax credits are being implemented, most employees, pension recipients, and/or business operators making mandatory prepayments (予定納税), will experience at least a *deferral* of part of their tax bill—even if their net income for 2024 will exceed 18.05 million yen—via reduced withholding and/or prepayment. If the recipient’s net income for 2024 ends up exceeding 18.05 million yen, the deferred tax will become due when a tax return is filed.

The income tax credit is worth **30,000 yen per taxpayer and 30,000 yen per dependent relative** (including dependent spouses). The residence tax credit is worth **10,000 yen per taxpayer and 10,000 yen per dependent relative**. The definition of “dependent” for these purposes is slightly different to the usual definition, though, as discussed below.

To cover all major scenarios without this post becoming unmanageable, I will define a few different income categories:
– “Low income” (0–3 million yen/year)
– “Low-middle income” (1–5 million yen/year)
– “High-middle income” (2–20 million yen/year)
– “Very high income” (>20 million yen/year)

The amounts in parentheses are approximate gross salary equivalents, and the categories are overlapping because the size of the household determines which category applies (e.g., a single taxpayer earning 1.5 million yen/year would be in the “low-middle” category, whereas a four-person household earning 2.7 million yen/year would be in the “low” category). Don’t worry too much about the contours of the categories at this stage, though. Their purpose and function will (hopefully) become clear by the end of the post.

### Low-income taxpayers

For the purposes of this post, low-income taxpayers are people who satisfy either of the following:
– their income in 2022 was so low that they did not owe residence tax on it or the residence tax they owed had no income-based component;
– their income in 2023 was so low that they did not owe residence tax on it or the residence tax they owed had no income-based component.

The factors determining who owes residence tax and which bills have no income-based component vary a little between municipalities. But [in Tokyo’s 23 wards](https://www.tax.metro.tokyo.lg.jp/kazei/kojin_ju.html#gaiyo_06), for example, the income threshold for not owing residence tax is 450,000 yen for individuals. For households with at least two members, the threshold is 310,000 yen plus 350,000 yen per person. While the threshold for having no income-based component is the same for individuals and 110,000 yen larger for households with at least two members.

Note that these figures refer to net income (i.e., income after expenses and before deductions), so the threshold for receiving a residence tax bill with an income-based component typically corresponds to employment income of between 1 and 3 million yen per year, depending on household size. Also note that the definition of low-income taxpayers for these purposes excludes people whose net income was below the relevant threshold due to the provisions of a tax treaty.

No benefit payment is available to low-income taxpayers who share a household with (or are being financially supported by) someone who is not a low-income taxpayer (i.e., someone with sufficient income to have an income-based residence tax bill). Instead, the person who is financially supporting them may be entitled to an increased payment and/or tax credit. All other low-income taxpayers will receive a benefit payment on a per-household basis (see below).

### Low-income households

Low-income households are households where all members of the household are low-income taxpayers, and at least one member of the household is not being financially supported by anyone (ignoring support provided by other low-income taxpayers).

Low-income households are entitled to benefit payments of **100,000 yen per household plus 50,000 yen for every child in the household** (“child” = person born on or after April 2, 2005). The 100,000 yen amount includes the 30,000 yen cost-of-living assistance payments made to certain low-income households during 2023 though, so households that already received the 30,000 yen payment will only receive 70,000 yen at this time (plus the 50,000 yen per child).

Payment logistics are being handled by municipalities, and the municipality with jurisdiction over your benefit payment is the municipality you were registered as living in as of December 1, 2023. Some payments will be made automatically, based on data the municipality already has available to them, whereas in other cases eligible households need to apply. Households that have changed municipalities since December 1, 2023 or changed composition since December 1, 2023 will generally need to apply, as will households that didn’t declare their 2022 income properly or haven’t previously designated a bank account for receipt of benefit payments. If you think you may be eligible for a benefit payment, check your municipality’s website and don’t ignore any mail you receive from them.

Municipalities have a lot of freedom to decide when to make the benefit payments to low-income households. Most municipalities have already made payments to eligible households, notified eligible households of forthcoming payments, and/or asked households that are potentially eligible to prove their eligibility by a certain date. Payments are typically being made on a rolling basis, as soon as a municipality can confirm that a household is eligible. However, some households won’t become eligible for benefit payments until around June 2024 (because their 2022 income wasn’t low enough for them to qualify whereas their 2023 income was low enough, for example). In which case, they will need to wait until around July to receive their payment (depending on whether their municipality requires them to apply in advance).

### Low-middle-income taxpayers

Low-middle-income taxpayers are people who had sufficient 2023 income to trigger an income-based residence tax liability, but whose 2023 income was so low that (1) their 2023 income-based residence tax liability is less than the residence tax credit they are entitled to and/or (2) their 2023 income tax liability (as estimated by their municipality) was less than the income tax credit they are entitled to.

Around the start of June, municipalities will calculate the residence tax due on each resident’s 2023 income and estimate each resident’s 2023 income tax liability (the NTA has the actual figure, of course, but municipalities don’t). They will then compare these amounts to the residence tax credit (10,000 yen plus 10,000 yen per dependent relative) and income tax credit (30,000 yen plus 30,000 yen per dependent relative) the resident is entitled to.

Any gaps between the tax credit and the corresponding liability will be added together, rounded up to the nearest 10,000 yen, and the resulting amount paid to the taxpayer as an “adjustment benefit”. (For example, if a person’s income-based residence tax liability is 4,000 yen and their estimated income tax liability is 3,000 yen, and they have no dependents, they will receive a payment of 40,000 yen, because 6,000 yen unused residence tax credit plus 27,000 yen unused income tax credit equals 33,000 yen, which is rounded up to 40,000 yen.)

This calculation is flawed, primarily because the income tax credit (30,000 yen plus 30,000 yen per dependent relative) will ultimately be applied to the taxpayer’s **2024** income tax liability, not their 2023 liability. It would be more accurate for municipalities to wait until the end of 2024 to see whether an “adjustment benefit” is needed. However, in the interests of getting money into taxpayers’ hands as early as possible, the government has decided to require municipalities to pay adjustment benefits in mid-2024, based on the taxpayer’s 2023 income. Municipalities have some flexibility regarding how they handle payment logistics, but eligible taxpayers can expect to receive something in the mail around June regarding the process for receiving an adjustment benefit.

When the municipality is eventually notified of the taxpayer’s 2024 income (in mid-2025), they will be able to check whether the adjustment benefit they paid in mid-2024 was too small or too large. Regarding discrepancies, the government has said: if the benefit was too small, the municipality will pay the difference to the taxpayer, but if the benefit was too large, no action will be taken. So low-middle-income taxpayers don’t have to worry about having to pay back any benefits if their 2024 income ends up being larger than their 2023 income.

In addition to the adjustment benefit, low-middle-income taxpayers will have their residence and income tax credits applied in the same way as high-middle-income taxpayers (see below). The adjustment benefit is just a supplementary payment intended to compensate for the low-middle-income taxpayer’s inability to fully benefit from the tax credits.

### High-middle-income taxpayers

High-middle-income taxpayers are people who had sufficient 2023 income to trigger an income-based residence tax liability, and whose 2023 income was not low enough to cause their municipality to pay an “adjustment benefit” (see above), but whose annual income is not more than 18.05 million yen/year (corresponding to a gross salary of 20 million yen/year).

High-middle-income taxpayers will have a residence tax credit applied to the income-based residence tax they owe on their 2023 income. The method of applying the credit depends on how residence tax is paid.

Employees who pay residence tax via their employer will have *no residence tax deducted from their paycheck in June*. Instead of paying residence tax in 12 equal monthly instalments starting in June, the total amount of residence tax due on the taxpayer’s 2023 income will be reduced by the value of the credit and the reduced total will be divided into 11 equal instalments, to be paid *starting in July*.

People who pay residence tax directly to their municipality will have their first instalment (typically due at the end of June) reduced by the value of the credit. If the first instalment would have been less than the value of the credit, the remaining credit will be applied to subsequent instalments until the credit is used up.

People who pay residence tax via the Pension Service will have their October instalment reduced by the value of the credit. If the October instalment would have been less than the value of the credit, the remaining credit will be applied to subsequent instalments until the credit is used up.

High-middle-income taxpayers will also have an income tax credit applied to their 2024 income tax liability. Normally, a credit would offset the tax due when an income tax return is filed or an employer does a year-end adjustment. But to get money in the hands of taxpayers earlier, the government is requiring employers and the Pension Service to effectively apply the credit “early” by reducing the amount of income tax withheld from payments made to most employees and pension recipients starting in mid-2024. For the same reason, the government is reducing mandatory prepayments for business operators. All these reductions will happen *regardless of the recipient’s income for 2023 and regardless of the recipient’s expected income for 2024*.

Anyone employed on June 1, 2024 who has submitted a 2024 dependents declaration to their employer will have 30,000 yen (plus 30,000 yen per dependent relative) subtracted from the amount of income tax withheld from the first payment their employer makes to them in June. It doesn’t matter whether the first payment the employer makes in June is a bonus or a regular salary payment; either way, the employer must deduct 30,000 yen (plus 30,000 yen per dependent relative) from the amount of withheld tax (increasing the employees’ take-home pay by 30,000 yen, etc.).

If the amount of income tax to be withheld from that first payment would have been less than 30,000 yen (plus 30,000 yen per dependent relative), then the amount of income tax withheld will become zero, and the remainder of the 30,000 yen (plus 30,000 yen per dependent relative) will be subtracted from the income tax to be withheld from the next payment made by the employer to the employee. This process continues as necessary until December, when a year-end adjustment will finally settle the employee’s income tax liability for the year (followed by an income tax return, of course, if necessary).

Business operators making mandatory tax prepayments will have their first instalment (第1期分) automatically reduced by 30,000 yen. The deadline for payment of the first instalment will also be extended by two months (to September 30, 2024). If a business operator would like their first instalment to be reduced by a further 30,000 yen per dependent relative, they must [apply](https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/shinkoku/annai/02.htm) for the reduction. Applications for reduced prepayment must normally be made by July 15, but this year the deadline is July 31. If a business operator with dependent relatives doesn’t apply for a reduction, they will still receive the 30,000 yen credit per dependent relative, but they will not receive it until they file their 2024 income tax return.

People who have income tax withheld by the Pension Service will have 30,000 yen (plus 30,000 yen per dependent relative) subtracted from the amount of income tax withheld from the first pension payment they receive on or after June 1, 2024. As with employees, if the amount of income tax to be withheld from that first payment would have been less than 30,000 yen (plus 30,000 yen per dependent relative), the amount of income tax withheld will become zero, and the remaining amount will be subtracted from the income tax that would otherwise have been withheld from subsequent payments.

### Very-high-income taxpayers

As stated above, taxpayers whose net income for 2023 was more than 18.05 million yen (corresponding to a salary of 20 million yen) will not receive a residence tax credit. And taxpayers whose net income for 2024 is more than 18.05 million yen will not receive an income tax credit.

However, if these very-high-income taxpayers are employees, business operators, or pension recipients, they will still experience the reduced withholding/prepayment described in the previous section. And if the reduced withholding/prepayment means insufficient income tax was withheld/prepaid, they will pay the difference when they file their income tax return.

### Who counts as a dependent

A spouse counts as a dependent for the purposes of the residence tax credit and adjustment benefit if their net income for 2023 was less than 480,000 yen (corresponding to employment income of 1.03 million yen). If a spouse’s net income for 2023 was more than 480,000 yen, they do not count as a dependent; however, in that case they would typically receive their own residence tax credit and/or adjustment benefit (see above).

A spouse counts as a dependent for the purposes of the income tax credit if their net income for 2024 is less than 480,000 yen. As above, if a spouse’s net income is more than 480,000 yen, they do not count as a dependent but they will be eligible for their own income tax credit.

Spouses who live outside Japan do not count as dependents; nor do spouses who are employed by the taxpayer’s blue-tax-return-filing sole proprietorship. For residence tax credit purposes, the spouse’s eligibility is based on their status on December 31, 2023. For income tax credit purposes, the spouse’s eligibility is based on their status on December 31, 2024.

Other relatives count as dependents for these purposes as long as they are being supported by the taxpayer, are “relatives” under [Article 725 of the Civil Code](https://www.nta.go.jp/taxes/shiraberu/taxanswer/shotoku/1180_qa.htm#q8), and their net income for the relevant year (2023 for the residence tax credit and 2024 for the income tax credit) was less than 480,000 yen. Dependents who are employed by the taxpayer’s blue-tax-return-filing sole proprietorship are excluded. This is the same as the definition of dependents for regular income tax purposes, with two exceptions: dependents living outside Japan are excluded, and dependents aged under 16 are included.

### Claiming dependents

For the most part, municipalities already know who was claimed as a dependent for 2023, because the dependents were identified by the taxpayer on their tax return or year-end adjustment documentation. So unless you made a mistake on your 2023 tax return or year-end adjustment, there is no need to do anything further with respect to claiming dependents for the purposes of the residence tax credit.

There is one significant exception to the above, which applies to taxpayers whose net income for 2023 was more than 10 million yen (corresponding to employment income of 11.95 million yen). Such taxpayers could not claim their spouse as a dependent on their 2023 tax return or year-end adjustment documentation, because there is a 10 million yen income threshold for claiming a dependent spouse. This year, the tax return and year-end adjustment forms have been revised, enabling people whose income is more than 10 million yen to claim a dependent spouse (solely for the purposes of these tax credits).

Accordingly, the government has decided to provide a 10,000 yen residence tax credit to taxpayers whose 2024 income is more than 10 million yen (but less than 18.05 million yen) and who claim a dependent spouse on the new 2024 tax return/year-end adjustment documentation. Since the relevant documentation won’t be processed by municipalities until 2025, the government has determined that this credit should apply to the taxpayer’s residence tax liability on their 2024 income (i.e., the bill issued in June 2025).

The purpose of providing this credit in 2025 is to compensate taxpayers who do not receive a 10,000 yen residence tax credit for their dependent spouse in 2024, due to their 2023 income being more than 10 million yen. However, it is worth noting that taxpayers whose income was less than 10 million yen in 2023 and more than 10 million yen in 2024 will receive two 10,000 yen residence tax credits for their dependent spouse (one in 2024 and one in 2025).

Claiming a dependent for the purposes of the income tax credit will ultimately happen when taxpayers file their income tax return for 2024 or submit year-end adjustment documentation to their employer. However, as discussed above, the government is requiring employers, etc., to apply the income tax credit “early” via reduced withholding.

To receive the full withholding reduction they are entitled to, eligible employees (those who have a 2024 dependents declaration on file with their employer and are employed as of June 1, 2024) must ensure that their employer is aware of how many dependents they have, prior to June 1, 2024. For this purpose, the NTA has created a new form (PDF [here](https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/gensen/teigaku/pdf/0024002-044_01.pdf)) that employers can use to check how many dependents their employees have. (Employers are allowed to create their own version of the form, or collect the information electronically, as long as the substance is the same.)

Some people may have already received some version of this form from their employer. If you are an employee with eligible dependents and you would like to enjoy reduced income tax withholding, look out for this form and make sure you submit it to your employer by June. (Keep in mind that even very-high-income employees can enjoy the reduced income tax withholding—though they will not receive the corresponding income tax credit when they file their income tax return.)

If an employee does not submit this form, employers will use the information on the employee’s dependents declaration to calculate the employee’s income tax credit. However, the 2024 dependents declaration was not designed with this income tax credit in mind, so there are a few scenarios in which a person who qualifies as a dependent for income tax purposes will not appear on the employee’s dependents declaration (e.g., the dependent spouse of an employee whose net income is more than 9 million yen cannot be claimed on a dependents declaration). Rather than try to work out whether the information on each employee’s dependents declaration is sufficient for the purposes of this income tax credit, employers are being encouraged to simply distribute the new form to all employees, giving all employees the chance to confirm how many eligible dependents they have before the reduced withholding begins in June.

Note that the dependent claim to be made on this form is based on the dependent’s 2024 income. For this reason, employees must provide the details of their eligible dependents again, towards the end of the year, for year-end adjustment purposes. (Year-end adjustment forms have been updated for this purpose.) If the number of dependents has changed by that time, the discrepancy between the amount withheld and the size of the income tax credit will be reconciled when the employer does a year-end adjustment. And if the dependent claim on which the year-end adjustment is based ends up being incorrect, the employee will need to file an income tax return to receive the correct income tax credit.

The value of the withholding reduction enjoyed by pension recipients will be determined by the 2024 dependents declaration that the taxpayer previously submitted to the Pension Service. Any discrepancies between the taxpayer’s actual situation and the situation described on the dependents declaration will need to be reconciled when the taxpayer files an income tax return.

As discussed above, business operators subject to mandatory tax prepayment will have their first instalment reduced by 30,000 yen automatically. If they wish to receive a further reduction by claiming dependents, they must apply for the reduction by July 31. Either way, they can claim the full income tax credit when they file their income tax return.

### Arrivals and departures

To be eligible for the residence tax credit, it is necessary to have been living in Japan as of January 1, 2024. The residence tax credit will be automatically applied to the taxpayer’s 2023 residence tax bill, so no action is necessary on the part of the taxpayer.

To be eligible for the income tax credit, it is necessary to have been a tax resident of Japan at some time during 2024. However, people who leave Japan before June 2024 must file an income tax return in order to claim the credit. Unless they file the return by the day they leave Japan, they must appoint an income tax representative to file the return on their behalf. People who leave Japan on or after June 1, 2024 can have the income tax credit handled by their employer (assuming they qualify for a year-end adjustment), but if their employer doesn’t apply the correct credit (or they aren’t eligible for a year-end adjustment, etc.), they will need to file an income tax return to claim it.

by starkimpossibility