Resident Tax When Changing Jobs in Japan: Switching Collection, Deductions and Apparent Double Payments

Japanese resident tax is charged on the previous year's income and deducted from your salary in twelve instalments running from June through to May of the following year. So when you change jobs and the entity paying your salary changes, a procedure is needed to switch how the tax is collected.

This article sets out how resident tax is handled according to when you leave and how long the gap is before you start your next job.

Start Here: Resident Tax Arrives a Year Late

Income tax comes out of the salary for the month in which you earn it. Resident tax works differently: the tax due is fixed on the basis of a full year of income, and collection begins in June of the following year. This one-year lag is the source of every difficulty people have with resident tax when changing jobs.

There are two collection methods.

• Special collection: Your employer deducts the tax from your monthly salary and remits it on your behalf. This is the default for employees.
• Ordinary collection: You pay directly using payment slips sent by your municipality, usually in four instalments a year.

Treatment by Date of Departure

The collection year runs from June to May. Where in that cycle you leave determines what happens.

Leaving Between January and April: Lump-Sum Collection Applies

For departures in this window, the outstanding amount through to May is deducted in one go from your final salary or severance payment. Unlike other periods, this happens regardless of whether you ask for it.

Up to five months of tax can come out at once, so your final take-home pay may shrink considerably. Leaving at the end of March is the most common pattern in Japan, and people who count on that final salary without knowing this find their finances squeezed. Where the salary is too small to cover the amount, the balance switches to ordinary collection.

Leaving Between June and December: You Choose

You can either switch to ordinary collection and pay the remainder yourself, or ask for it to be taken in a lump sum from your final salary. If you say nothing, ordinary collection is the usual outcome.

Leaving in May

May is the final month of the collection year, so the last instalment is deducted as normal and that year is complete. The new year's tax starts in June under whichever collection method then applies.

Special Collection Can Continue if You Have a Job Lined Up

Where leaving and starting run back to back, you can carry special collection straight over by obtaining a notification of change for salary earners from your former employer and giving it to your new one. This is the least troublesome route.

The step is not automatic, however. When you resign you need to tell your former employer's HR department that you want special collection to continue at your new employer and ask for the notification. Without that, it will be processed as ordinary collection and payment slips will arrive later on.

The notification has to reach the municipality by the tenth day of the month following the change. If too much time passes after you leave, the procedure will not make it in time, so ask early. The Tokyo Metropolitan Government Bureau of Taxation publishes a practical handbook on special collection of individual resident tax that sets out the three patterns of lump-sum collection, ordinary collection and continued special collection. Note that form names and administrative practice differ between municipalities, so confirm the details with the city, ward, town or village where you live.

What Looks Like Paying Twice

This is a common worry, and the short answer is that resident tax is never charged twice on the same income. The impression usually arises in one of two situations.

1. Lump-sum collection overlapping the start of a new year: You leave in March, pay through to May in one go, and then the new year's tax begins in June. Different tax years are involved, so nothing is duplicated.
2. A month already paid under ordinary collection is also deducted at your new employer: This is a genuine error that does occur. If it sounds familiar, take your receipts to the tax counter at your municipality. They will refund the amount or apply it against what is due.

If There Is a Gap Between Jobs

Where you spend some time out of work after leaving, ordinary collection payment slips arrive at your home. What makes this hard is that you are paying tax assessed on a year when you had income, at a time when you have none. The higher your previous year's earnings, the heavier the burden.

Before you leave, work backwards from your payslip to establish your annual resident tax and how much of it remains. If paying becomes difficult, do not simply leave it: municipal tax counters can discuss instalment arrangements.

Why Take-Home Pay Falls the Year After You Move

By the same logic that leaves first-year graduates with no resident tax deduction, anyone whose income drops after leaving a job finds the following year lighter. Conversely, if you move to a better-paid role, resident tax steps up from June of the following year, and your take-home pay does not rise as much as the increase in salary suggests. When you are moving for a pay rise, it is worth building this timing into your expectations.

Common Questions About Resident Tax When Changing Jobs

Will my new employer learn my previous salary from the resident tax?

Where special collection continues, what the municipality sends your new employer is the monthly amount to deduct for each employee. A breakdown of your income is not normally provided, though the figure does allow the previous year's income level to be estimated to some degree. If this concerns you, choosing ordinary collection is an option.

My payment slips have not arrived.

Your employer may be late in filing the notification of change. Their absence does not remove your obligation to pay, and the amount will be billed later in a lump. Check with your municipality.

If I move house mid-year, where do I pay?

You pay to the municipality where you were living on 1 January of that year. Moving partway through the year does not change where that year's tax is paid.

Summary: Saying So When You Resign Prevents Most Problems

Most resident tax trouble arises not because the system is complicated but because nothing was said at the point of resignation. If you have a job lined up, ask for the notification of change; if you are leaving between January and April, expect the lump-sum deduction. Those two steps alone head off most of the surprises.

This article sets out general principles. Form names and administrative practice vary between municipalities, and the rules are subject to change. For specific procedures, check with the tax counter of the municipality where you live, or consult a qualified professional such as a tax accountant or a certified social insurance and labour consultant.