- How special collection works
- Four ways it differs from income tax
- Why payroll holds two kinds of deduction
- Handling joiners and leavers mid-year
The short answer
Employees' resident tax is normally *specially collected*: the employer deducts it from salary and pays it to the municipality. The key point for payroll is not to confuse it with income tax. The employer calculates income tax; resident tax is an amount the municipality decides and notifies, deducted exactly as notified.
How it works
The municipality sets each person's resident tax from the previous year's income and sends the employer a notice of the amounts. Under Article 321-5 of the Local Tax Act, as the Tokyo Metropolitan Government's tax bureau explains, the amount is collected from salary in twelve instalments from June to the following May and paid to the municipality by the 10th of the month after collection. Employers paying salary to fewer than ten people on a regular basis (officers included) can apply to pay twice a year instead (by 10 December and 10 June; Article 321-5-2 of the Local Tax Act).
So special collection runs from the June instalment to the following May: new notices arrive around May, and June's salary switches to the new amounts.
How it differs from income tax
| Income tax | Resident tax | |
|---|---|---|
| Who sets the amount | The employer calculates it | The municipality notifies it |
| Based on | This month's pay | Last year's income |
| Switches | January (new tables) | June (new notices) |
| Settled by | Year-end adjustment | Next year's assessment |
Two kinds of deduction
Payroll needs deductions calculated from tables or rates (income tax, employment insurance) and deductions of notified amounts (resident tax). Hold resident tax as month-by-month amounts from June to May — June's instalment often differs — and allow for mid-year change notices.
Joiners and leavers
Mid-year joiners either carry over special collection from their previous employer or switch from paying it themselves. For leavers, decide how the remaining tax is paid and notify the municipality; depending on the timing, a lump-sum deduction may be required. Forms differ by municipality.
Summary
Resident tax is the municipality's figure, deducted in twelve instalments from June and paid by the 10th of the next month. Keep it separate from the income tax payroll calculates.