From foreign nationals who have started a sole proprietorship in Japan, we often hear the same thing in their second year: “I thought I finished paying my taxes in March — and now another payment slip has arrived.” In Japan, besides the income tax paid to the national government, there are taxes payable to prefectures and municipalities in connection with your business, and many of them are billed in the following year, based on the previous year’s income. Because the timing differs from tax to tax, this article lays the year out as a schedule.
As the starting premise: the income tax return and payment are due on March 15 of the year after the income arises. On top of this, there are three taxes whose payments follow at staggered points in the year. (On the return itself, see our note: What Is the Blue Return?)
Resident tax from June
First, resident tax. This is paid to the municipality and prefecture and is charged on the previous year’s income. The municipality calculates the amount from your filed tax return, and a tax notice arrives around June, with payment typically in four instalments: June, August, October and the following January. Resident tax has two components — a portion calculated on income (the income-based portion) and a portion charged as a fixed amount regardless of income level (the per-capita portion). Because of the latter, some resident tax can fall due for the following year even where the previous year’s income was small.
Individual enterprise tax from August
Second, individual enterprise tax. This is paid to the prefecture, likewise on the previous year’s business income. There is a proprietor deduction of ¥2.9 million per year, so no tax is charged if income is below that level; above it, a tax notice arrives around August, with payment in principle in two instalments, August and November.
Estimated prepayments in July and November
Third, the estimated prepayment of income tax. If your assessed income tax for the previous year was ¥150,000 or more, you are required to prepay — as an advance on the current year’s tax — one third of an amount based on the previous year’s tax, in each of July and November. This is not an additional tax; it is a prepayment settled at the following March’s final return. But it is a system many people first learn about when the notice arrives.
In addition, if you are a consumption tax filer (including those registered for the invoice system), the consumption tax return and payment, due March 31 of the following year, are added to the list.
A year in the second year
By way of example, take the second year of a proprietor whose first year was profitable: income tax and consumption tax in March; resident tax from June (four instalments); the first estimated prepayment in July; individual enterprise tax from August (two instalments); the second estimated prepayment and the second enterprise tax instalment in November. How much of which tax you pay varies with your income level and line of business, but what is common to everyone is that payment dates keep arriving throughout the year.
| Month | What arrives / falls due |
|---|---|
| March | Income tax return and payment (15 March) · consumption tax return and payment, if you are a filer (31 March) |
| June | Resident tax notice arrives · 1st instalment |
| July | Estimated income tax prepayment, 1st (31 July) |
| August | Enterprise tax notice arrives · 1st instalment · resident tax 2nd instalment |
| October | Resident tax 3rd instalment |
| November | Estimated income tax prepayment, 2nd (30 November) · enterprise tax 2nd instalment |
| January | Resident tax 4th instalment |
| February | (quiet — until the next return season opens on 16 February) |
These are all taxes on the previous year’s income. When you finish your tax return, we recommend checking what payment notices will arrive during the year, roughly when, and in roughly what amounts.
Planning your first full year?
We help sole proprietors keep the payment calendar under control — by email.
Every enquiry is read and answered personally by the principal — first reply within 3 business days.
Get in touch