Japan Year-End Tax Adjustment Support Services

Japan utilises a tax withholding system, which automatically deducts income taxes in each current month from employee salaries as a means to reduce tax evasion and tax collection costs. Come year end, a process called year-end adjustment or Nenmatsu Chosei (年末調整) needs to be conducted by employers to settle the discrepancy between employees’ withheld tax amount and the actual taxable amount.

The year-end adjustment process requires companies to collect declarations from its employees in order to correctly calculate the deductions. These declarations include changes to dependents, spouse’s income and insurance payments. Once the final calculations are done, the employer prepare two copies of the withholding tax slip or Gensen Choshu Hyo (源泉徴収票), one for each employee and one for the National Tax Agency or Kokuzei-chō (国税庁).

Documents required to record withholding taxes to be submitted to the National Tax Agency include:

• Withholding record total table

• Withholding tax slips (for salary)

• Withholding tax slips (for retirement income)

• Reports of payment of remuneration, charges, contract money, and monetary rewards

• Reports of payment of real estate rentals

• Reports of payment for transfer of real estate

• Reports of payment for real estate intermediary fees

• Other reports of payment depending on payment type

Given the complexities involved in this year-end adjustment or Nenmatsu Chosei (年末調整) process, enlisting support in the form of outsourcing to Japan payroll experts such OS HRS will help ensure that this process can be completed by your company correctly. Contact us today to see how we can help you!