The Journal The Authority on Global Business in Japan

A full year has passed since the introduction of the Individual Social Security and Tax Identification Number, more commonly known as My Number. The number system is very similar to the Social Security Number in the United States, in that social security and tax authorities will use My Number to manage the records of individuals. Beginning in October 2015, My Number Notification Cards were sent out by municipal government offices around Japan. These were mailed to all individuals with a registered address in the jurisdiction of the respective municipal government office, and this included foreign nationals with a Residence Card.

My Number is already required for various social security filings, reporting, and other forms. It is required for tax purposes beginning with the 2016 tax year, filing and reporting for which will begin as soon as January 31, 2017, for the following:

  • Withholding tax certificate filed with the National Tax Office and municipal offices
  • Various information reporting made to the National Tax Office
  • Individual income tax return filed with the National Tax Office

The astonishing fact is that—even after a year—many businesses are still unprepared. Numerous seminars on My Number continue to be held across Japan, and quickly become fully booked. Due to the strict security requirements and noncompliance penalties imposed by the Act on the Use of Numbers to Identify a Specific Individual in the Administrative Procedure (the “Act”) on the handling of My Number, businesses have become hesitant to directly handle employees’ and contractors’ numbers. The act also imposes penalties on overseas personnel and businesses who inappropriately handle My Number. Risk averse attitudes and shying away from responsibility by those in a position to handle the ID numbers has caused much delay in the system’s implementation.

The ultimate solution reached by many businesses, in an attempt to shield themselves from the direct handling of My Number was to outsource the collection, maintenance, and use of My Number to information technology companies and professional service firms.

Unfortunately, these efforts have caused further delays due to a lengthy vendor selection process, information security review of the services being offered, and legal review of contracts. Delays aside, the solution itself is not perfect because information technology companies will not take full ownership and responsibility for employee and contractor My Number data collected and stored in their secure portal. Companies with ISO certification and strict information security policies need to be attentive to the details of their contracts with service providers.

Continued delay in the collection, maintenance, and use of My Numbers is still expected as many businesses have not yet begun the collection process. Couple this with the authorities’ view that reasonable effort should be made during this first year, and it is likely that many businesses will omit My Number from their social security and tax filing and reporting. This practice requires considerable analysis and thinking, and whether it meets internal quality standards depends on each business, with reference to trust and reputation afforded by respective authorities.

There is no doubt that My Number has created more work for businesses. Risks are inherent, but compliance needs to be met. As Nike says, “Just Do It.” This may be the push in the back Japan needs.

For more information, please contact your Grant Thornton representative at +81 (0)3 5770 8829 or email us at tax-info@jp.gt.com

Tosh Kamii is a partner at Grant Thornton Japan’s Human Capital Services, providing payroll, compensation, and benefits solutions to foreign businesses in Japan. He is also a practice leader for Global Mobility Services, providing income tax and social security solutions for international assignees and global businesses.
The astonishing fact is that—even after a year—many businesses are still unprepared.