Retirement Allowance Tax Calculator (Japan)

How it is taxed

1. Taxable retirement income = (allowance − retirement income deduction) × 1/2
2. Income tax is calculated on that at the normal progressive rates, plus the 2.1% reconstruction surtax.
3. Resident tax is 10% of the taxable retirement income.

The deduction is ¥400,000 per year of service for the first 20 years (at least ¥800,000), and ¥700,000 per year after that. For example, a ¥5 million allowance after 10 years has a deduction of ¥4,000,000, so the tax is only ¥25,525 income tax and ¥50,000 resident tax.

For 5 years of service or less, the halving applies only to the first ¥3 million above the deduction.

Submit the declaration to your employer

Give your employer the declaration for receiving retirement income (taishoku shotoku no jukyū ni kansuru shinkokusho) before you are paid. The employer then withholds the correct tax and you do not need to file a return. Without it, 20.42% of the whole allowance is withheld and you have to file a return to settle it.

If it is paid after you leave Japan

• A retirement allowance for work in Japan paid to a non-resident has 20.42% income tax withheld from the whole amount, with no deduction.
• You can choose to be taxed as if you were a resident (taishoku shotoku no sentaku kazei) by filing a return, usually through a tax agent (nōzei kanrinin). The difference is refunded, which is often most of the tax.
• Resident tax on retirement income goes to the city where you lived on January 1 of the year you retire, so it usually still applies if you retire and leave in the same year. The calculator includes it.

The same refund applies to the pension lump-sum withdrawal. See the pension refund calculator and the Leaving Japan money checklist.

Assumptions

• One retirement allowance in the year, with no overlap with earlier allowances or iDeCo lump sums.
• Not for company officers with 5 years or less of service, or for retirement caused by disability.
• Resident tax is at the standard 10%.