RESOURCES

Sep 17 2019 A FOREIGNER'S GUIDE TO THE INSURANCE AND TAX SYSTEM IN JAPAN

As a foreigner residing and working in Japan, 2 of the things that you have to understand and pay attention to are the insurance and taxation system.

We want to walk you through on the basics of handling both.

 1. Social Insurance

Social Insurance is one of the social security systems in Japan. It consists from two types of insurance, “Employees’ Health insurance (EHI)” and “Employees’ Pension Insurance (EPI)”. If you have status of residence which permits work and work with a company or other business entity, you will pay these premiums through your company. 

  • Employees’ Health Insurance (EHI or “Kenko hoken”)

The monthly premiums of EHI are calculated in accordance with an employee’s wages, and are shared equally between an employer and an employee. An employees’ portion is deducted from his/her monthly salary and bonus. An employer pays both the shared premiums together each month. 

In addition, an employee between the age of 40 and under 65 shall pay premiums for Nursing-care Insurance. 

Premium rates differ by prefecture (for the insurance managed by Japan Health Insurance Association) and for different health insurance societies. 

Main Benefits: When an insured person or dependent receives medical treatment for illness or injury; Medical care benefits (individual payment: 30% of medical fees for both outpatient and inpatient expenses), high medical care benefits, transportation benefits, etc. Other than that Disability benefits will be covered in case of absence from work due to an injury or illness, Maternity allowance for maternity leave is covered. 

  • Employees’ Pension Insurance (EPI or “Kosei nenkin”)

The Employees’ Pension Insurance is a system for paying insured person’s remuneration-related pension in addition to the “basic pension benefits” of the National Pension. Those covered by a pension system for 25 years or more receive a pension when they turn 65 and thereafter. Disability pensions and survivor’s pensions are also provided to eligible persons. 

International Social Security Agreement

There is a scheme to prevent “dual enrollment” and it allows summing up of enrollment periods between Japan and the following countries: Germany, United Kingdom, Republic of Korea, United States, Belgium, France, Canada, Australia, Netherlands, Czech Republic (*), Spain, Ireland, Brazil, Switzerland, Hungary, India, Luxembourg, Philippines, Slovak Republic, China (as of September, 2019). Please visit and check here for the details.

Lump-sum Withdrawal Payments

You may claim Lump-sum Withdrawal Payments when you satisfy all conditions as below:

  1. Non-Japanese 
  2. Have/had been covered, under the EPI for six months or more. Or you have six months or more of coverage period in total under the National Pension, including; – Number of your coverage periods (months) for which you paid full amount contribution – 3/4 of your coverage periods (months) for which you were exempt from 1/4 contribution payment – 1/2 of your coverage periods (months) for which you were exempt from 1/2 contribution payment – 1/4 of your coverage periods (months) for which you were exempt from 3/4 contribution payment. In addition to that, total coverage period is less than 10 years.
  3. No longer have an address in Japan registered to the municipal office. (Should be applied within 2 years from the date you don’t have address in Japan.) 

Please take note that if you have coverage periods of certain countries which have totalization agreement with Japan, you may be eligible for totalized benefits from Japan or/and the other country, if you meet certain conditions. If you apply and receive the Payments, your Japanese coverage periods used for the purpose of the Payments calculation will no longer be valid for totalization purpose.

Useful Links:

・Japan Pension Service

https://www.nenkin.go.jp/international/english/index.html

・Outline of EHI and EPI

http://www.nenkin.go.jp/international/english/healthinsurance/employee.html 

・Calculation Chart of EHI and EPI of Tokyo in fiscal year 2019

https://www.kyoukaikenpo.or.jp/~/media/Files/shared/hokenryouritu/h31/ippan4gatsu_2/h31040213tokyo.pdf

   

2. Employment Insurance (“Koyo hoken”)

Unemployed benefits are provided for the following cases.

1) If a person is unemployed for the reason of bankruptcy or dismissal, benefits eligibility is to have been insured for six month or more in total for one year prior to the date of becoming unemployed.

2) If a person leaves employment for his/her own reasons, and is unable to find a new job despite having a positive will to get employment and the ability to take up a job any time. 

*Restriction on benefits” for 3 months is usually applied if a person has been discharged due to serious reason concerning his/her responsibility or when a person has resigned owing to his/her personal reason.  

*Please be noted a person having working visa is supposed to find a next job within 3 months from resignation date of previous employer. Otherwise, it would affect on his/her future visa process, since working visa is issued based on the contract with the previous employer.  


3. Tax System

There are two kinds of tax payment that the employees have to pay.  

  • Income tax (”Shotoku zei”)

Income tax is withheld by the employer from the employee’s salaries and the employer pay the tax to the national government on behalf of the employee. Since the estimated income tax is deducted from the monthly salary by the employers, the  year-end adjustment is carried out by employers upon the last salary of the year.

  • Inhabitant tax (“Jumin zei”)

A person who lives in Japan as a resident as of January 1st is subject to Inhabitant tax. The amount of inhabitant tax is decided based on the previous year’s income tax record of the person and notified to the person after April that year. If you are employed, it would be deducted from the salary between June of that year to May of the following year, so that the employer can pay it on behalf of the employee to the local government. Please be noted the person is still subject to inhabitant tax eve if he/she changes address or leaves Japan after January 1 as long as the person had income in the previous year. 

e.g. If you started to work in Japan from April 1, 2019, the inhabitant tax will not be deducted from the salary of April 2019 to May 2020 and will be started to deduct from June 2020 according to the amount of income in the year of 2019.

 

Useful Links:

・National Tax Agency JAPAN https://www.nta.go.jp/english/  (About Income Tax)
・Bureau of Taxation, Tokyo Metropolitan Government (About Inhabitant Tax)http://www.tax.metro.tokyo.jp/english/topics.html

 

The amount of income on the job information, job offer letter etc. is gross salary in general, since the amount of premium for the insurance or taxes would depend on individual situation. However, approximately 20% from gross salary will be deducted for the insurance premiums and taxes in general.

 

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