Hi /japanlife/,
After 3 years in Japan, I am starting to plan to move back to my home country and need some advice – I have a few separate, but related questions. I want to make sure I have enough money set aside to be able to make all needed tax payments done before leaving.
Right now, I am working in Tokyo and my company deducts each of these below from my pay each month. As far I know, I am up-to date with all my payments.
– pension (厚生年金)
– residence tax (住民税)
– income tax (所得税)
Assuming my last day of work is 25-Dec-2022, I receive my final pay on that day, and I leave Japan by the 31st – which of the above, and for how many months would I need to pay at the Ward or Tax office to settle everything before leaving?
My understanding is that I might still owe money in 2023 because I will have earned income in 2022, but definitely want to pay everything before leaving in 2022, it’s just not clear to me which items & for how many months would require payments.
Another scenario – if for example, I stayed until March 2023. Would I be responsible for residence tax, pension & income tax payments for all of 2023, even though I lived/worked in the country only three months?
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Secondly, regarding the Lump Sum Pension Withdrawal. My understanding that this paper work needs to be submitted after having left the country and I need to designate a Tax Representative ahead of time before leaving. About 80% of my pension contributions will be returned via bank transfer to a non-Japanese account & the remaining 20% sent to my Tax Representative – is this correct?
I’ve heard that it can be sometimes a hassle for the person acting as Tax Rep, I would not want to ask this to any of my friends here. Can this be contracted out to an accounting firm or tax advisor? If anyone has recommendations on this, would be great.
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Lastly, related to the Pension Withdrawal there is no Social Security Agreement between Japan and my home country in place right now. Would this impact the ability to receive a lump sum payment? I am not sure what the implications of not having a Social Security Agreement in place means for this situation.
Really appreciate the help! Thank you!!!
4 comments
Regarding your resident tax, if you leave on/before December 31st 2022 then you will need to pay what remains of your 2021 resident tax (billed from June 2022 to May 2023).
However, you won’t have to pay resident tax for 2022 (billed from June 2023 to May 2024) because you won’t be a resident January 1st 2023. Essentially meaning you earned income all of 2022 resident tax free.
However, if you leave on/after January 1st 2023, but before June 2023. Then you will have to pay what remains of 2021 resident tax bill (billed June 2022 to May 2023) and then you will need to pay the 2022 bill (from June 2023 to May 2024) via a resident tax representative (designate at your billing municipality/ward office) OR ask the billing municipality/prefecture will post you the bill overseas (some do, other don’t…. So ask them). This is because you would be a resident as of January 1st 2023.
Regarding your income tax. It’s likely your employer will do your 2022 end of year tax adjustment for you. However, if you have any other sources of income, or any other reason to file a final tax return then you can file a 2022 final tax return before you leave. (Or have an income tax representative do it for you. Appoint at your local tax office before you leave).
*(It’s worth nothing that if your employer does file your end of year tax adjustment, and you have no other reason to file a final tax return for 2022. Then should your the aggregated total of all “side income” not exceed ¥200,000 then you can utilize that income tax exemption. When one utilizes this exemption, they’re supposed to file a resident tax return, as no exemption exists for resident tax. However, (as mentioned in my resident tax reply) if you leave Japan before January 1st 2023, then no need to file a resident tax return because you’re not liable for 2022 resident tax bill, as not a resident as of January 1st 2023)*
If you stay until March 2023 then you will also need to file a final tax return for 2023 before you leave… but only if your taxable income exceeds ¥0
Taxable income is total income minus tax deductibles. So if you’re not planning to earn income from January 1st 2023 to the date you leave in March 2023 then chances are you won’t even exceed the ¥480,000 basic income tax deduction. But obviously if your taxable income for 2023 is >¥0 then you will need to file a final tax return before you leave March 2023 (or have an income tax representative do it for you. Appoint at your local tax office)
Regarding your pension. Pension is billed the final day of the calendar month.
It’s likely your employer will still withhold Shakai Hoken from your pay December 25th because essentially it’s for the month of December 2022 salary…. You just happen to get paid it 25th as opposed to 31st
However, should you stay until dateX March 2023 then you will need to enroll in and pay national pension for January 2023, February 2023 and if still a resident as of March 31st 2023… March 2023 too.
You will also need to enroll in and pay national health insurance for January 2023, February 2023, and a day rate for March 2023, based on whatever date you actually leave in March 2023.
Also, if you stay until March 2023, and you’re on a work visa, make sure you inform immigration within 14 days after your final day with your current employer.
As for the pension lump-sum withdraw, that process it outlined in quite detail here: https://www.nenkin.go.jp/international/japanese-system/withdrawalpayment/payment.files/A.pdf
Friend recently vetted the same question, he came up with November as the best time to leave to wrap up everything.