When relocating overseas, a tax to check separately from income tax isResident tax. Its assessment mechanism is entirely different from that of income tax.

Income tax status is determined as circumstances change based on the actual domicile and residence, and may change during the year to resident receives Non-resident. Inhabitant tax is determined ata single point in time: January 1.

The Assessment Date Is January 1

Articles 39 (prefectural inhabitant tax) and 318 (municipal inhabitant tax) of the Local Tax Act.

For individual prefectural inhabitant tax, theassessment dateis, in the calendar year in which the first day of the relevant fiscal year falls,January 1That is its role.

For individual municipal inhabitant tax, theassessment dateis, in the calendar year in which the first day of the relevant fiscal year falls,January 1That is its role.

Who Is Liable to Pay?

Article 24, paragraph (1), item (i) (prefectural inhabitant tax), and Article 294, paragraph (1), item (i) (municipal inhabitant tax), of the Local Tax Act.

(i) Within the prefecture,an individual domiciled

(i) Within the municipality,an individual domiciled

For these individuals domiciled in the area, Article 24, paragraph (2), and Article 294, paragraph (2), provide that, for persons subject to the Basic Resident Registration Act, the term meanspersons recorded in the Basic Resident Register.

Item (i) Is Not the Only Category.In the same paragraph,No. 2refers to an individual who has, within the prefecture or municipality,an office, place of business, or residential propertybut is not domiciled there. Such a person is subject tothe per capita levy.If you leave Japan while retaining a home, the per capita levy may apply even if you are no longer domiciled there.

The Tax Applies to the Previous Year's Income

For the income-based levy, see Article 32, paragraph (1), and Article 313, paragraph (1), of the Local Tax Act.

The tax base for the income-based levy is calculated on the previous year's income and comprisestotal income, retirement income, and forestry income.

HoweverThe Income-Based Levy on Retirement Allowances Is an Exception.Articles 50-2 and 328 of the Local Tax Act, both headed “Special Provisions for Taxation of Retirement Income,” provide for taxation separately from other income bythe prefecture and municipality where the recipient is domiciled as of January 1 of the year in which payment becomes due.Retirement benefits are taxed at payment, rather than in the following year.

Combining These Two Rules Reveals the Structure of Inhabitant Tax.

Thus, a person domiciled in Japan on January 1 must paythe income-based levy on the previous year's incomein that year. The year income is earned differs from the year the tax is paid.

A Point You Cannot Afford to Miss: Deregistration Alone Is Not Enough

Article 294, paragraph (3), of the Local Tax Act.

A municipality may, where an individualnot recorded in its Basic Resident Registerisdomiciled within that municipality, deem that individual to be recorded in the registerand impose municipal inhabitant tax on that person.。

A Change in Resident Registration Does Not Decide the Matter Alone.This provision allows taxation even without registration if the person is considered actually domiciled there. As with the domicile determination for income tax,the facts matter.

This deeming rule is not limited to municipal inhabitant tax. The parenthetical provision in Article 24, paragraph (2), includes persons deemed registered under Article 294, paragraph (3), and excludes those covered by paragraph (4) of that Article, so italso extends to prefectural inhabitant tax.Article 294, paragraph (4), provides that, where a person is taxed under paragraph (3), the municipality in whose Basic Resident Register the person is recorded may not also impose the tax.

Another point concerns theTax Agentprovisions in Article 300 of the Local Tax Act (Tax Agents for Municipal Inhabitant Tax) where a person has no domicile or similar presence in the municipality. This isa separate procedure from appointing a national tax agent under Article 117 of the Act on General Rules for National Taxes.Paragraph (2) of that Article addresses cases in which the municipal mayor certifies that there is no impediment to securing collection.

Points that require care in practice

• What Changes If You Leave at Year-End Rather Than at the Beginning of the Year?You need to understand the significance of January 1 as the assessment date.
• Does Deregistering Your Residence Eliminate Inhabitant Tax?Article 294, paragraph (3), must be considered.
• What Happens to Inhabitant Tax on Income from the Year Before Departure?Start from the rule that the tax base is the previous year's income.
• How Do You Pay After Leaving Japan?The tax agent provisions of Article 300 of the Local Tax Act and collection through payroll become relevant.
• What Happens to National Health Insurance and Long-Term Care Insurance Premiums?These are separate systems from inhabitant tax, but they also use domicile as a criterion.
• What Happens to Hometown Tax Donations?Consider that the relief presupposes liability to inhabitant tax.

Becoming a Non-Resident for Income Tax Does Not Automatically Eliminate Inhabitant Tax.The assessment mechanisms are separate.

Before deciding when to relocate, consult us about income tax, inhabitant tax, and social insurance together.

Legal basis

• Articles 24 (Persons Liable for Prefectural Inhabitant Tax, etc.) and 294 (Persons Liable for Municipal Inhabitant Tax, etc.) of the Local Tax Act
• Articles 39 (Assessment Date for Individual Prefectural Inhabitant Tax) and 318 (Assessment Date for Individual Municipal Inhabitant Tax) of the Local Tax Act
• Articles 32 and 313 of the Local Tax Act (Tax Base for the Income-Based Levy)
• Articles 50-2 and 328 of the Local Tax Act (Special Provisions for Taxation of Retirement Income)
• Article 300 of the Local Tax Act (Tax Agents for Municipal Inhabitant Tax)
• Article 117 of the Act on General Rules for National Taxes (Tax Agents)
• Article 2, paragraph (1), items (iii) and (v), of the Income Tax Act (Residents and Non-Residents)

Provisions under local ordinances and individual determinations require confirmation.