Japan Payroll News
Increase of the Health and Nursing insurance taxes on salaries from March 2012
Japan Health Insurance Association announced that the Health insurance contribution rate will increase from March 2012. Each prefecture has a difference contribution rate.
For example, in Tokyo, the current rate is 9.48%, which will increase to 9.97 %.
A 50% / 50% Health insurance contribution is made between the company and the employee. As such, both company and employee will pay 4.985% (e.g. rates for Tokyo) of the total of the employee’s monthly salary and commuting cost.
For employees aged 40 to 64, an additional Nursing insurance will apply. There will also be an increase in the nursing insurance from the current 1.51% to 1.55% (nationwide uniform rate) from March 2012. As with the Health insurance, a 50% / 50% contribution between the company and the employee apply to the Nursing insurance. Therefore, for employees aged 40 to 64, the total Health insurance and Nursing insurance contribution will increase from the current 10.99% to 11.52% (Tokyo rate).
Please note that this contribution rate increase will appear in April payroll onward since there is an one month delay between the contribution due and actual deduction from salary.
Rise of the Pension payroll taxes on salaries from September 2011
Japan pension office announced that the pension deduction rate will be increased from 16.058% to 16.412% from September 2011 salaries.
As the total Japan Pension payroll tax is paid in a 50%/50% between company and employee. As such, company and employee both pay 8.206% each from the monthly salary plus commuting costs refunded to employee.
The pension payroll taxes will gradually increase by 0.354% every year until September 2017 to the target rate 18.300% set by the government.
Please note that this payroll tax raise will appear on October payroll since there is a one month lag between the payroll tax due and the date when it is actually deducted from salary.
Year End Approaches: Paying bonus
As the year approaches, many companies think about paying bonus to employees. We recommend that companies pay bonus in January instead of December. The reason is that since companies muast calculate employees tax liability during the year end withholding tax adjustment, nenmatsu chosei, in Japanese, late decision in attributing bonus can create issues for calculating the December payroll when tax liabilities must be calculated. A bonus paid in January can still be considered as a previous year tax deductible expense for foreign companies with a December year end.
Please also consult our payroll in Japan page