When you live in Japan, you have to pay a variety of taxes. This page explains the main taxes that international students will have to pay, and how to use the Japanese yen.
If you have been living in Japan for more than a year, you have to pay taxes on the income you earn from your part-time job, even if you are an international student. You also have to pay taxes when you purchase any goods or services. Let's learn about the main types of taxes and how they are collected and learn about Japan's tax system.
Income tax is a tax paid to the government on all income earned by you from January 1 to December 31 of a given year. You must file a tax return between February 16 and March 15 of the following year. However, international students do not need to file an income tax return since they mainly earn income from part-time jobs. This is because the company automatically deducts income tax from your salary and pays it every month through a system called "withholding tax”.
Even if you are a foreigner, the scope of taxation and tax rates are different for “residents” and “non-residents”. Residents are individuals who have been living in Japan for at least one year. Generally, they are subject to the same tax rates as ordinary Japanese people, depending on their income. Non-residents are individuals who are not residents, and as a general rule, they are taxed at about 20% of their income.
Local inhabitants tax is a tax paid to the prefecture or municipality where you live as of January 1. There are two types of payment methods: ordinary tax collection and special tax collection. Ordinary tax collection is a method where you pay the tax yourself. You will receive a payment slip from your local government around June and pay it by yourself in four installments. Payment can be made at the nearest bank or post office. You can use direct debit from your bank or post office account.
On the other hand, special taxation is a method in which the company pays the tax on your behalf. It is deducted from your monthly salary (this is a system called withholding tax).
The consumption tax is a tax on all goods and services, including purchases at supermarkets, and is paid to the government. The tax rate is mainly 8% for groceries and 10% for all other items. There are two types of product display prices: tax-inclusive and tax-excluded. Be sure to check whether the price of the product or service you are buying includes the consumption tax so that you know how much you have to pay.
Motor vehicle tax is levied on anyone who owns an automobile as of April 1 every year. When you receive a tax notice from the prefectural office, pay it at a post office or bank by the due date.
Light motor vehicle tax is levied on people who own motorized bicycles, small special motor vehicles, light motor vehicles, small motor vehicles with two wheels, etc. as of April 1 every year. When you receive a tax notice from the municipal office, pay it at a post office or bank by the due date.
In Japan, only Japanese yen is usually used. Exchange American dollars or other foreign currencies into Japanese yen at the airport or at a money changer before using them.
There are two types of Japanese yen: bills and coins. For bills, there are 1,000 yen, 2,000 yen, 5,000 yen, and 10,000 yen bills. On the other hand, there are 1 yen coins, 5 yen coins, 10 yen coins, 50 yen coins, 100 yen coins, and 500 yen coins. If your bills or coins become dirty or torn, you can exchange them at a bank or post office, depending on their condition.
The exchange rate for Japanese yen is 1 JPY = 0.0095 USD (as of February 15, 2021).
There are two ways to use Japanese yen: cash or cashless payment. When using cash, you can withdraw cash at ATMs located in banks and convenience stores. You will need to open a bank account in order to use ATMs. Also, some stores accept cash only, so be careful about the payment method.
On the other hand, it is possible to use cashless payment. The main cashless payment methods used in Japan are credit cards, debit cards, smartphone payments, electronic money, and QR (barcode) payments. Each of them has its own features, so choose the payment method you prefer.