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In Japan, the income tax system is based on tax payments which are automatically deducted from your income by your employer. This is called the "Withholding Tax System or Gensen-kazei." "Under the withholding tax system, the payers of salaries and wages (employers), interest dividends, ...calculate at the time of payment the amount of income tax... (and withhold this amount to pay to the nation)." This withholding of tax payments at the "source of income" is called Gensen Choushuu.

When the last (wages) of the applicable year are paid, the payers (employers) calculate the total amount of wages paid in that year to each employee and calculate again the tax amount for the total amount of wages, and compare such tax amount with the total amount of tax already withheld in that year. If there is any shortage in payments, such shortage will be withheld from the last (wages paid) and if there is any overpayment, such overpayment will be adjusted by appropriating it to the tax amount to be withheld from the last (wages) or refunding it to each employee. (This) is called "Year-end adjustment" or Nenmatsu Chousei, through which most employment income earners are not required to file the final (tax) return (income tax refund application).

In essence, the year-end adjustment administered by your employer is your tax return. This means employees are not required to file individual tax returns on their own. However, depending on your company and working conditions, as well as conditions laid out in the publication, "2005 Income Tax Guide for Foreigners," income earners may have to file an individual income tax return in order to process their income taxes.

Just as a counter example, most income earners in the US would file a Form 1040. Employers in the US do not file tax refund applications for their employees although they do deduct taxes. Instead, they issue a document called Form W-2 to all employees. This document not only authenticates one’s income, but also provides a numerical breakdown of one’s income when they file their US (and State) Income Tax Refund Applications (Returns). The equivalent to the W-2 Form here in Japan is the Statement of Income (Withholding Tax), better known as the Gensen Choushuu-hyou (源泉徴収票).

For foreign workers here in Japan, the Statement of Income (Withholding Tax), or Gensen Choushuu-hyou is one of the most important documents they will ever need to see. It’s a key document needed in many Immigration application procedures. Among them are applications for (1) Extension of Period of Stay or Zairyuu Kikan no Koushin, (2) Change of Status of Residence or Zairyuu Shikaku no Henkou, and (3) Permanent Residency or Eijyuu Kyoka. It is also used to certify your income in Japan to tax authorities back home.

When you receive this document, make sure to keep it in a safe place and make photocopies immediately. Do not hand this document over to anyone lightly without a clear explanation, and expected date of return. Although this document is issued by your company, it has a standard, official format and is basically a legal document. It is a white itemized form about the size of a postcard. usually printed on carbon copy but not always. It should have your name and current home address (top) as well as that of your employer (bottom). Check all entries and figures for accuracy. In most cases, and especially for Immigration procedures, make sure your company has "cleanly" stamped it with a special "Japanese" company stamp/seal in red ink. By custom, it should be assumed that seals are stamped "cleanly." If it is blemished, faded, or clumsily stamped as to be unreadable or double stamped, it is not only taken to be unseemly, but may even void the document. This can be true with Immigration. You must remember, in Japan impressing a seal on a document is the equivalent to signing a document in other countries.

When processing one of the Immigration procedures above, you will hand in an original Gensen Choushuu-hyou to Immigration which will not be returned. In the case of a Renewal of Stay "Visa Renewal," request this document at least 2 months before the expiration date of your current Period of Stay. While some companies may have the administrative strength to produce this document in an instant, others will need to contact their corporate accountant. Request early and it might be a good idea to query clerical staffers and managers politely but regularly about the status of this document. Assuming your company decides to renew your labor contract you should receive a Gensen Choushuu-hyou for Immigration procedures. There have been cases where abusive employers will "stall" the issuance of this document until only a minimal amount of time is left to apply for a Renewal of Stay or will purposefully issue a document which is not acceptable (i.e. illegible, no company seal, misspelled name, etc.). If the document is rejected by Immigration, it will mean a second trip to Immigration to completely process the application, plus a follow-up trip to have your passport stamped, if your application is approved.

As stated above, this document will also be issued when Year-end Adjustments are calculated based on your total gross income for the year and total taxes paid during the year. All employed persons should receive this document from every employer, including for part-time work. A third case where this document will be issued is when you leave your company for ANY reason. Upon written request, companies in Japan are required under penalty of law to issue this document to the employee who is leaving, regardless of the reason for leaving. It must be issued within 10 days. This particular issue is under the jurisdiction of the Labor Standards Board (Roudou Kijun Kantoku-sho)

Among the many foreign laborers in Japan, are those who lack adequate Japanese language skills, have only minimal work experience back home as well as here in Japan. A majority have only a minimal understanding of Japan’s labor standards, depending wholly on employers who do not always act in the best interests of employees. Every bit of information empowers you and protects you from becoming a victim, discouraging those who would take advantage of employees who are vulnerable. Understanding this tax document will help you establish a "paper trail" of your income and any "tax" deductions. Since non-tax payroll deductions are usually not included in the figures, in order to verify them, you would need all of your salary payment slips/certificates. If taxes were not deducted from your salary, there is a possibility you might not receive your Gensen Choushuu Hyou. Here’s an unofficial translated list of items on your Gensen Choushuu Hyou. Only items for which figures are normally entered are included here. It is commonly the practice for many items to be left blank.

Vocabulary

Topics: Taxes
Relevant for: Residents

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