> Let Us Introduce Ourselves

よしこ先生/Yoshiko

Hello, I am Yoshiko, a Certified Public Tax Accountant of Japan, 税理士 pronounced “ZEIRI-SHI” (hereafter CPTA).
Today, Hikaru, a tax staff member of mine, is going to make sense of the chaos of your filing obligations for National and Local Individual Income Tax.
I am here to add some extra useful information for you.

ヒカル/Hikaru

Hello, I am Hikaru, an apprentice of Yoshiko’s.
A friend of mine, Akira, did not have to file a National Individual Income Tax return in 2017 but had to file a Local Individual Income Tax return for 2017.

What is hard to understand is that he did not have to pay any tax due to these tax returns for 2017.  However, in spite of the fact that he had no income at all in 2018, and, thus, no filing obligation for either National or Local Individual Income Tax returns in 2018, he had to pay some Local Individual Income Tax in 2018.
We will figure out the reason with Yoshiko, today.

あきら/Akira

Hello, guys.  I am Akira.

As Yoshiko said, the series of tax things I faced was chaotic for me.  I am so glad that Yoshiko and Hikaru are going to explain what happened to my incomes and taxes in 2017 and 2018.

Besides, Yoshiko said that I am likely able to apply for a refund of my Local Individual Income Tax which I paid in 2018 because it seems a fine line whether or not I had to pay Local Individual Income Tax in 2018.  I want to know if I really can.

I. National Individual Income Tax Filing Obligation

1) Who has to file National Individual Income Tax Return.

よしこ先生/Yoshiko

First, tell me who has an obligation to file a return for National Individual Income Tax, 所得税 pronouced “Shotoku-Zei” (hereafter “STZ”) .

ヒカル/Hikaru

It is an easy question.  

If your Gross Taxable Income (hereafter “GTI”), 合計所得金額 pronounced “Goukei-Shotoku-Kingaku” (hereafter “GSK“) exceeds 380,000 yen, you must file your income tax return to a National Tax Office, 税務署 pronounced “Zeimu-Sho” (hereafter “ZMS”)

ZMS is a subordinate organization of the National Tax Agency of Japan (hereafter NTA) and set up more than 500 locations all over Japan. 

Please be aware that you can only submit your STZ return to your 所轄税務署 pronounced “SHOKATU-ZEIMU-SHO” (hereafter SZMS).  SZMS is a ZMS which has jurisdiction over your residential district.  You cannot submit any forms including tax returns to the NTA directly.

2) Where You Find Your Gross Taxable Income.

ヒカル/Hikaru

You can find your GTI, 合計所得金金額, GSK in Japanese in 3 locations in your STZ return: line 5 on sheet 1 of Return A (SEE pic 1), line 9 on sheet 1 of Return B (SEE pic 2).   

*You can find if your return is Return A or Return B on the top of your return.  

(pic 1) Gross Taxable Income GTI, 合計所得金額 GSK in Japanese, on sheet 1 of Return A, 所得税確定申告書Ａ

(pic 2) Gross Taxable Income GTI, 合計所得金額 GSK in Japanese, on sheet 1 of Return B, 所得税確定申告書Ｂ

よしこ先生/Yoshiko

For the majority of taxpayers, an STZ Return has only 2 sheets, Sheet 1 (第一表）and Sheet 2 (第二表). 

However, the taxpayers who have Separately Taxed Incomes, 分離課税所得 pronounced “BUNRI-KAZEI-SHOTOKU” (hereafter BKS), such as Real Estate Capital Gain, Investment Capital Gain, and etc., have Sheet 3 (第三表）for Return B.

In this case, it is the total of the red section highlighted on sheet 3 of Return B (SEE pic 3). 

(pic 3) Gross Taxable Income GTI, 合計所得金額 GSK in Japanese, on sheet 3 of Return B

Please note that you should consult a 税理士, CPTA, or ZMS if you are in any of the following situations:
1) having 第四表, Sheet 4 of Return B.
2) having losses in this tax year.
3) applying Aggregation of Profit and Loss Provision, 損益通算 pronounced “Son-Eki-Tuusan” in this tax year.
4) carrying Deferred Taxable Loss, 繰越損失 pronounced “Kurikoshi-Sonshitu” in the recent four tax years including this year. 

In these cases, determining GSK is not simple, besides the judgment of whether filing a return or not should be based on which is the most preferable for you, not based on whether or not you have a legal obligation for filing a tax return.

ヒカル/Hikaru

We finished the filing obligation from the STZ point of view.

Next, we will talk about Individual Inhabitant Tax, 個人住民税 pronounced “KOJIN-JYUUMIN-ZEI” (hereafter “KJZ”).

II. Local Individual Income Tax or Inhabitant Tax Filing Obligation. (Metropolitan Tax, Ward Tax, Prefectural Tax and Municipal Tax, etc.)

1) Tax Return Transfer between National Tax and Inhabitant Tax. 

ヒカル/Hikaru

First, I would like you to know when you file your STZ return to a ZMS, you do not have to file any KJZ return because the ZMS transfers a copy of your STZ return to your municipality.

Then, the municipality administers and levies both of your Prefectural Individual Income Tax, 個人県民税 pronounced “KOJIN-KENMIN-ZEI” (hereafter KKZ) and Municipal Individual Income Tax, 個人市民税 pronounced “KOJIN-SHIMIN-ZEI” (hereafter KSZ) based on the copy provided by your SZMS.

* Certificate of Residency, 住民票 in Japanese pronounced “JYUUMIN-HYOU“

Depending on which municipality your certificate of residency has been registered in, 個人県民税 can be either 個人道民税 for people living in Hokkai-Do, 個人都民税 for people living in Tokyo-To, or 個人府民税 for people living in Osaka-Fu or Kyoto-Fu. 

Likewise, 個人市民税 can be either 個人区民税 for people living in the 23 special wards in Tokyo, 個人町民税 for people living in any town, 町 pronounced “MACHI”, or 個人村民税 for people living in any village, 村 pronounced “MURA”.

2) Tax Base and Tax Payment Timing for the Individual Inhabitant Income Tax

ヒカル/Hikaru

Thus, the municipality will receive your 2018 tax information around April 2019 and will complete the computation of your KJZ based on your 2018 income, then, mail a tax bill to you or your employer if you are a salary earner in June.

Commonly, you have to pay your KJZ in four equal installments, due at the end of June, August, October in 2019 and January in 2020, or your employer will deduct your KJZ from your monthly salaries over the period of June 2019 to March 2020.

Please be aware that this KJZ paid from June 2019 to 2020 January or March is defined as the KJZ of 2019, despite its tax base is your taxable income in 2018.

 

よしこ先生/Yoshiko

As some of you might already realize, if you quit your job and have no income after that, it would be better for you to keep a certain fund for your KJZ for the next year.

Even if you do not have any income in 2019, you still have to pay the high KJZ in 2019 regardless of your current income because it is computed based on your income in 2018.

あきら/Akira

That happened to me last year.  I had to pay some KJZ even though I had no income at all in the year of the KJZ payment.

* Corporate Income Tax

This tax return transfer system between ZMSs and municipalities does not exist for Corporate Income Tax Returns.  So, corporations must file three tax returns, for National Corporate Income Tax, Metropolitan or Prefectural Corporate Income Tax, and Municipal Corporate Income Tax.

However, corporations located in the 23 special wards in Tokyo file a return for Metropolitan Corporate Income Tax and Ward Corporate Income Tax for the Tokyo Metropolitan Government Bureau of Taxation, 都税事務所 pronounced “TO-ZEI-JIMUSHO” (hereafter TMGBT).

ヒカル/Hikaru

Next, we will talk about Filing Obligation for KJZ.

Akira, can you explain your experience in 2017 and 2018?

3) Individual Inhabitant Tax Filing Obligation

アキラ / Akira

I had quit my job in February 2017 and did not have a filing obligation that year.  

However, I got a notice from the municipal government around May 2018, and they said to me that I should have filed my KJZ Return for 2017 by March 15, 2018, which I did following the municipal officer’s instruction.

よしこ先生/Yoshiko

That seems the typical case where you must file your KJZ Return for the municipality but not your STZ return for the ZMS.

If it is possible, can you give us your real figures, Akira?

あきら/Akira

Yes, I can. 

Even though I filed my KJZ Return and paid some KJZ following the instruction by a municipal officer, I did not understand the system and have had doubts about the tax procedures all the way up to now.

4) Case Study: Akira’s Case for KJZ in 2018

あきら/Akira

I was living in Edgawa-Ku, Tokyo, and had no spouse nor qualified dependant. 

I earned a salary of 1,020,000 yen in 2017

ヒカル/Hikaru

In that case, your 合計所得金額, GSK is 370,000 yen (*1) calculated:

1,020,000 yen – 650,000 yen, which is Salary Income Deduction, “給与所得控除” pronounced “KYUUYO-SHOTOKU-KOUJYO”.

The 370,000 yen does not exceed 380,000 yen, which is actually Standard Deduction of 所得税, STZ, thus, you did not have to file an STZ return.

よしこ先生/Yoshiko

We already know that you do not have to file an STZ return when your GSK is 380,000 yen or less because you explained it earlier.

Continue to talk about KJZ, please.

ヒカル/Hikaru

While STZ Standard Deduction is 380,000 yen, 個人住民税, KJZ Standard Deduction is generally only 350,000 for a single taxpayers.

Your GSK of 370,000 yen exceeds 350,000 yen, thus, you had to file your KJZ return to your municipality. 

よしこ先生/Yoshiko

Please do not forget that there are two types of KJZ, the KJZ per income and the KJZ per capita.  Besides, Standard Deductions for KJZ varies widely depending on your detailed personal conditions.

So I recommend, in most cases, contacting municipality to find the exact figure of your Standard Deductions for KJZ per income and per capita. 

*Standard Deductions for KJZ

In Akira’s case,  the Standard deductions of both KJZ per income and KJZ per capita are 370,000 yen as a single taxpayer.  Your Standard Deduction is determined by in which prefecture and municipal district you are living, if you have qualified spouse or dependents, what kinds of incomes you have, and etc.  

ヒカル/Hikaru

Finally, we can compute that Akira’s 所得税, STZ in 2017 was nil, KJZ per income for 2018 was2,000 yen and KJZ per capita for 2018 was 5,000 yen.

所得税, STZ Liability: Nil because his GSK does not exceed 380,000 yen.

個人住民税, KJZ per income: (370,000-350,000)*10% (Flat rate)=2,000 yen

個人住民税, KJZ per capita: 5,000 yen (Flat amount)

相談者/Consulter あきら/Akira

Thank you, Yoshiko.  Thank you, Hikaru.  Now, I finally get it.

よしこ先生/Yoshiko

You are welcome, Akira.

However, your case is the simplest case because you are single and have no family.  The KJZ formula is complicating especially when taxpayers have a family.

So, when you do not file an STZ return, I recommend you to contact municipalities to find how to treat your KJZ matter.

ヒカル/Hikaru

You are welcome, Akira.

Yoshiko, you mentioned a posibility of applying a 個人住民税, KJZ refund the other day.  Please tell us about it.

III. Filing Volanteer National Individual Income Tax Return.

1) Reduce Your Gross Taxable Income to Equal or Less than 260,000 yen.

よしこ/Yoshiko

The safest and simplest way to avoid to miss an opportunity to apply for a refund or not to pay unnecessary taxes is that filing STZ return to reduce your GSK equal or under 280,000 yen because, to the best of my knowledge, the lowest tax exemption is 280,000 yen in both National and Local Individual Income Taxes.  Besides, if you file an STZ return, it will be transferred to your municipality.

あきら/Akira

I could have actually reduced my GSK to much less than 280,000 yen because I was a working student.  I did not apply for a Working Student Deduction in my KJZ return because I did not know I was qualified, while I knew that I was qualified for 270,000 yen deduction in my STZ return.  The municipal officer did not give me such advice thereto.

よしこ先生/Yoshiko

It happens to many people.  Neither municipal officers nor ZMS officers do not advise you to reduce your tax payment.  It is your responsibility to study the tax regulations and file a correct tax return because Japanese tax acts adopt a self-assessment system.

Actually, a Working Student Deduction for KJZ is 260,000 yen which is 10,000 yen less than that of SKZ.

ヒカル/Hikaru

By the way, I think that these differences between the National Tax Deductions and Local Tax Deductions make the tax return filing obligations or other tax procedures complicating.

So that means Akira could have avoided any KJZ payment in 2018 anyway.

あきら/Akira

Can I change my tax return in 2018 now? 

よしこ先生/Yoshiko

Yes, you can.  Apply a refund of 7,000 yen you paid to you municipality in 2018.