Kakutei-shinkoku | Final Income Tax Return in Japan
The Final Income Tax Return, also known as Kakutei-shikoku 確定申告, is to report the amount of income tax due on total net income earned between January 1 and December 31 of each year.
If you live in Japan and work as a registered self-employed operator or freelancer*, you will receive a set of documents or notification from the Japanese National Tax Office, expected to arrive in late January. The filing process is to be completed at a designated tax office or online between February 16 and March 15.
* Self-employed individuals must file a notification when they start their business in Japan and the notification is called “Kaigyo Todoke 開業届” in Japanese.
Kakutei-shinkoku is basically not required for company employees
If you are an employee and your only source of income is the salary paid by your employer, you do not need to file a Kakutei-shinkoku (final tax return). This is because income tax is withheld from your monthly salary, and your employer is responsible for performing year-end adjustments on your behalf. Therefore, any documents or notifications for Kakutei-Shinkoku are not sent to company employees.
Filling can be necessary for some individual cases
Filling for deduction
In some cases, employees should file a Kakutei Shinkoku to submit their tax return and receive a refund. For example, suppose an employee suffers a severe injury and incurs high medical expenses for surgery, they may qualify for a tax deduction by filing. In this case, the person needs to get a necessary document at a tax office, or complete the filing online.
Filling for taxation
If a person earns extra income occasionally that exceeds 200,000 JPY, they need to file it for taxation. For example, a person who sold their car.
Filing Types for Kakutei-shinkoku (Final Tax Return)
Filing Types for Kakutei-shinkoku (Final Tax Return)
In Japan, there are two filing types for Kakutei-shinkoku; Aoiro-shinkoku 青色申告 (Blue Tax Return) and Shiroiro shinkoku 白色申告 (White Tax Return), that the self-employed operator can select when notifying the opening of business at the tax office. In most of the cases, Aoiro-shinkoku (Blue Tax Return) is selected as it gives benefits including special tax deduction. In the case that you once selected Shiroiro status when setting up business and want to change it later on, it is possible to make the change if you apply at the tax office. The application for changing the status from Shiroiro (White) to Aoiro (Blue) must be made by 15th of March on the year you wish to start with.
What is required to do for Aoiro-shinkoku?
The significant difference between Aoiro-shinkoku and Shiroiro-shinkoku is the documents to be required. For example, Balance Sheet B/S and Income Statement must be created for Aoiro-shinkoku. Also, regular bookkeeping is essential and you need basic knowledge about accounting. Even if you don’t have the knowledge, using a bookkeeping app will be of help. One of the most popular apps is Yayoi, that is available only in Japanese, unfortunately. In the first place, the set of documents for Kakutei shinkoku is all written in Japanese that is surely a problem... Hiring an English-speaking accountant will be a solution.
Official information by Japan National Tax Agency
Final tax return
https://www.nta.go.jp/english/taxes/individual/12011.htm
You can create a Final Tax Return at Home!
https://www.nta.go.jp/taxes/shiraberu/shinkoku/tebiki/2024/pdf/061.pdf
