Understanding taxes and insurance in Japan is important when you stay here. Even as a traveller, there are certain taxes you’ll need to pay, and for long-term residents, the obligations increase. This article will explain the essential taxes and insurance you should be aware of in Japan.
Taxes and Insurance You Pay in Japan
Taxes for Everyone, Including Travellers
As a foreign traveller in Japan, you will pay the following taxes when using goods or services:
- Consumption tax: Applied to almost all goods and services in Japan, currently set at 10% (with a reduced rate of 8% for food and non-alcoholic beverages). Prices of products and services may either include consumption tax or be displayed without tax, depending on the store.
- Liquor tax: This is applied to alcoholic beverages. It varies depending on the alcohol type and strength, such as beer, sake, or whiskey.
- Tobacco tax: Special taxes are imposed on tobacco products, which are included in the price. The amount depends on the type and cost of the tobacco.
Taxes for Residents Only
If you stay long-term or begin living in Japan, you’ll need to pay the following taxes:
- Income tax: This tax is based on the income you earn within Japan and follows a progressive rate—the more you earn, the higher the tax rate. As of 2024, rates range from 5% to 45%.
- Resident tax: Paid to the municipality where you live, this tax is calculated based on your previous year’s income.
- Property tax: If you own land or buildings, you’ll be required to pay this tax.
- Vehicle tax: If you own a vehicle, you’ll pay a tax based on its type and engine size.
- Inheritance tax: This is imposed on inherited assets, and the rate depends on the amount received.
Other taxes include gift tax (on assets given before someone’s death), business tax (for self-employed individuals), and stamp duty (for certain contracts).
Insurance for Residents
If you stay long-term in Japan, you’ll need to enrol in the following insurance programs:
- Health insurance: Covers part of your medical expenses. Employees are covered by social insurance, with part of the cost paid by their employer. Self-employed or unemployed individuals must join the national health insurance system.
- Pension insurance: A public pension system for everyone living in Japan to support their retirement. Self-employed individuals and homemakers join the National Pension, while employees are covered by the Employee Pension as part of social insurance.
Other insurances include workers’ compensation (for work-related injuries), long-term care insurance (for those aged 40 and over), and fire insurance (to protect property from fire damage).
Tax-Free Shopping for Travellers
Japan offers a tax-free shopping system for foreign travellers. By using this system, you can avoid paying consumption tax on eligible purchases that meet certain conditions. Eligible items include electronics, fashion, and souvenirs, with a minimum purchase of 5,000 yen. To take advantage of this, you’ll need to show your passport when shopping at participating stores.
If you’re planning to stay long-term, make sure to understand your tax and insurance obligations so you can live comfortably in Japan. If you’re visiting as a traveller, take advantage of the tax-free system to enjoy smart shopping during your trip!
