Income tax （所得税, shotokuzei）

Income tax （所得税, shotokuzei） is a national tax paid by individuals in proportion to income earned each year （from January 1 to December 31）. The Income Tax Law takes into consideration each taxpayer’s ability to pay, creating tax brackets and setting down a method of calculation for each.

Income taxes are calculated by applying the formula in the table below to a person’s taxable income, which is calculated by deducting basic, spousal, and dependent deductions and the like from total income.

Taxable income	Rate	Deductible amount
1,950,000 yen and under	5%	0 yen
1,950,001 yen – 3,300,000 yen	10%	97,500 yen
3,300,001 yen – 6,950,000 yen	20%	427,500 yen
6,950,001 yen – 9,000,000 yen	23%	636,000 yen
9,000,001 yen – 18,000,000 yen	33%	1,536,000 yen
18,000,001 yen – 40,000,000 yen	40%	2,796,000 yen
40,000,001 yen and up	45%	4,769,000 yen

In the process referred to as 源泉徴収 （gensen choshu）, income taxes are often withheld at the source from salaried workers’ salaries and wages. In this case, the employer pays the employee’s taxes in advance, and provides the employee with an annual withholding certificate.