Understanding Japanese Taxes: Year-end Tax Adjustment

【Koshida Accounting Firm Column Date:

Hi, my name is Taisei Koshida, and I am a certified public accountant as well as a tax accountant.


I aim to assist non-Japanese business owners who struggle with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.


This blog may help if you are unclear about the Year-end tax adjustment.


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What is the Year-end Tax Adjustment?

It is the process of calculating the annual salary amounts based on the calendar year for executives and employees, and adjusting their individual income taxes accordingly.


Monthly Withholding Income Taxes

When paying salaries to executives and employees, both individual proprietors and companies must withhold individual income taxes. However, the withheld amount is temporarily calculated based on specific tables, so the annual salary and its taxes are confirmed and adjusted at the time when the calendar year-based salary amount is finalized.


Life Insurance, Mortgage Loan Deductions, and More

Certain tax deductions, such as those for life insurance, medical expenses, and mortgage loans, are not reflected in the monthly withholding taxes. These deductions are accounted for during the year-end adjustment.


Paying Withheld Income Taxes

Businesses that withhold taxes are required to pay those taxes to the tax office by the 10th of the month following the payment month. However, businesses with fewer than ten executives and employees can opt to pay semi-annually by applying for a special exemption.



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