The Journal The Authority on Global Business in Japan

When leaving Japan, many expats are unsure how much money paid into government services can be reclaimed and how to make the request. If you have been paying into the national pension system and have been paying taxes in Japan, here is some guidance on making a smooth transition back to your home country.

PENSION PAYMENT
A non-Japanese person who meets certain conditions may claim lump-sum withdrawal payments under the Employees’ Pension Insurance system after departing Japan and ceasing to be a resident of the country.

These conditions include:

  • Not having eligibility to claim any other Japanese statutory pension benefits
  • Having paid into the Employees’ Pension Insurance system for at least six months

English guidance for completing the Application for Lump-sum Withdrawal Payments is available from the Japan Pension Service (JPS) website. (See box for links.)

INCOME TAX
A Lump-sum Withdrawal Payment under the National Pension system is not subject to income tax. A Lump-sum Withdrawal Payment under the Employees’ Pension Insurance system, however, is subject to income tax of 20.42 percent. This tax is withheld at the source when JPS arranges payment.

Because a Lump-sum Withdrawal Payment is recognized as retirement income among the 10 income classifi­ca­tions under the Japan Income Tax Act, it is eligible for tax-favorable treatment. In general, a ¥400,000 income deduction is available for each year worked to offset the gross amount of Lump-sum Withdrawal Payment. Irrespective of the number of years worked in Japan, an ¥800,000 deduction is available to all taxpayers as the statutory minimum.

Further, in general, the gross amount of the Lump-sum Withdrawal Payment less the total income deduction is then halved to arrive at the taxable income. In many cases, the effective tax rate is reduced to zero or a single digit. Hence, the rate of 20.42 percent results in excessive withholding. A refund of this excess may be claimed.

REFUND PROCEDURES
After leaving Japan, you may receive a tax refund by filing a return pursuant to Article 171 of the Japan Income Tax Act with a tax office in Japan.

To claim the refund, you need to designate the tax agent who will represent you to administer your tax matters in Japan. In general, the designation must be made prior to your departure by completing and filing the Declaration Naming a Person to Administer the Taxpayer’s Tax Affairs for Income/Consumption Tax (Nozei Kanrinin no Todokedesho) with the tax office that has jurisdiction over your final place of residence in Japan. Anyone, including a non-Japanese national or corporation, may be designated as your tax agent as long as they live or are based in Japan. You may also designate your tax agent after departure.

When JPS remits the Lump-sum Withdrawal Payment to your designated bank account, which may be your overseas bank account, a Notice of Lump-sum Withdrawal Payments detailing the amount of payment and income tax withheld will be sent to you by airmail. Please send the original notice to your tax agent in Japan and ask the agent to prepare and file your tax return claiming the refund.

If you wish to dismiss your tax agent after receiving your tax refund, you are required to complete and file the Notification of Dismissal of Tax Agent (Nozei Kanrinin Kainin Todokedesho) form with the tax office.


DOWNLOADS
English guidance for the Application for Lump-sum
Withdrawal Payments
www.nenkin.go.jp/service/jukyu/sonota-kyufu/dattai-ichiji/20150406.files/A.pdf

Declaration Naming a Person to Administer the
Taxpayer’s Tax Affairs for Income/Consumption Tax
www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/shinkoku/pdf/h28/08.pdf

English guidance for the Declaration Naming a Person
to Administer the Taxpayer’s Tax Affairs for Income/Consumption Tax
www.nta.go.jp/english/taxes/individual/pdf/a-26.pdf


For more information, please contact your Grant Thornton representative at +81 (0)3 5770 8822 or email me at takehiko.hara@jp.gt.com

www.grantthornton.jp/en

Takehiko Hara is a director at Grant Thornton Japan’s Global Mobility Service, providing tax solutions to global mobile employees, global business and high-net-worth individuals with overseas assets. Hara joined Grant Thornton Japan in 2018 after having 35 years of experience at the Tokyo Regional Taxation Bureau, Tokyo Regional Tax Tribunal, National Tax College, and National Tax Agency. Hara specializes in international taxation for Japanese and non-Japanese nationals.