Paying Taxes While Unemployed in Japan?

[DaddyMulk]

First of all, I apologize for some of the vagueness/lack of solid information in this post; I'm posing this query based solely on the information I have available, and will update it once I have more.

A friend of mine (U.S. citizen) has been living in Japan for several years now, and lived there several times previously (roughly ~13 years altogether). Unfortunately, he lost his job as a translator for a law firm last November, and has been looking for work over there ever since. His visa is set to expire shortly, and he will be returning home in about a week.

During his time without a job, he has been asked to pay taxes (local? federal? Sorry, I'm not sure) to the tune of about 40,000 Yen per month. He was told that this was based on how much he would be liable for in taxes based on his previous income. He has apparently been making these payments for some time, though he did not mention it to myself, nor to his parents in the states, until recently. (sadly, my friend has a lot of pride and doesn't like asking others for help; otherwise, he'd likely ask about this himself, instead of his parents asking me to do so)

Now that it has come time for him to leave, he's recently let us know that he still owes about 80,000 Yen in taxes for the past couple of months. His parents are the ones who will have to lend him the money to pay for this, and they're skeptical about why someone should be paying this much in tax (or paying at all!) when they've been out of work for over a year. I spent 3 years in Japan myself, but never had any tax issues like this arise in that time.

So has anyone ever heard of/had experience with paying taxes in Japan while unemployed? I don't want to see my friend get into any sort of legal trouble for not paying, but I also don't want to see him throwing money away if this is some kind of mistake. As I said, I'll try to get more specifics out of him and will update this posting accordingly. Any information you could provide (and soon!) would be greatly appreciated.

[Nyororin]

If he has been out of work for *over* a tax year, then he shouldn't be paying. However, this sounds like he has leftover payments from when it was less than a year since tax calculations...

Basically, the taxes are calculated in April based on your income during a certain period of time the previous year. I forget the months, specifically, but I think it is April, May, and June (June might not be included... I can't remember).

Even of you lose your job the following day, your taxes the following April are set based upon the income you had during that period in the previous year. Basically, they are taxing your income for the *previous* year, not the current.

The first year of working, your friend will have paid no taxes. His income for the year before that would have been zero - so the tax would have been set on that scale (paying nothing).

Even if he lost his job in November of last year, he had an income in April, May, and June, so the taxes for this tax year from April are based on that income. He is expected to pay until the following April.
If family and friends have any complaints, tell them that he paid zero taxes during his first year of working and basically has to pay back taxes on that....

[DaddyMulk]

Thank you for your quick reply. That's actually very logical; I have no information from him on whether or not he paid taxes during his first year of his most recent employment, but I would assume he falls under this category if this is the norm.

Just out of curiosity, are there instances where an employer makes other arrangements with the government on tax payments? I worked there for nearly three years, and I don't recall any difference in what I paid in Year 1 versus Years 2 and 3. (I'd have to check through my old pay stubs, but I certainly don't recall bringing home a significant amount more during that first year)

[Nyororin]

From my understanding, there are several ways to handle your taxes. You can pay it yourself at town hall in a lump sum each year, pay it in a set of installments yourself, or let your company take care of it.

Most people let their company take care of it, and have so much extracted from their pay each month (including the first year). The company does the paperwork and pays in April.

It sounds like your friend is paying his taxes himself - this is pretty common when someone starts out freelancing or with work split between multiple companies. The catch is, however, that while it feels like you pay no taxes the first year... You can forget and end up having a year due after losing your job, like what has happened to your friend.

For shorter term stays in Japan (English teaching), companies are very careful to take more than enough from the paycheck as an employee that has left the company will have basically left them with the bill.

I imagine there are some people out there who take a bit out each month and set it aside to pay for their taxes in April, but I would say that most people either let their company do that or pay in a flat fee come April.
As an example, my husband's company takes out a flat amount from his paycheck each month to cover taxes. I, on the other hand, am freelance - so file my taxes myself and pay the bill in segments.

[samokan]

In the past 2 years, I paid the city and prefectural tax by myself because my previous company does not want to do it. Basically they just took the income tax per month and I pay the other taxes every 3 months.

If your friend is going home already , he can file the income tax return in advance.

I got this information from Nagoya's HP:
Filing Income Tax Returns

Let him try to go his/her City Tax Office and try to explain his/her situation.