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Taxation for non Japanese as Applied on Salary and Stock Dividends

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One of the frequent questions being asked is, “What kind of taxation applies to salary and stock dividends?”

In fact, there is no difference as to the law applied between a Japanese and a foreign worker under the Japanese taxation law. However, the difference lies between a person residing in Japan and a person who is outside the country.

If you are living in Japan and receiving a salary or stock dividends coming from a company established under Japanese company law, you are expected to follow the Japanese taxation law accordingly.

With regard to salary, a certain amount of money will be deducted from your salary after applying the employment income exemption, and it shall be properly included in the yearly income tax. In such case, you don’t need to file it yourself because that is your employer’s responsibility. Moreover, your employer should also calculate the applicable tax and file it accordingly on your behalf.

About the stock dividends, the taxes may vary depending on its type – open market or non-open market. As mandated by the law, a stockholder will be deducted 10% from the stock profits in an open market type. On the other hand, 20% is to be deducted from the non-open market. Depending on the situation, there might also be some instances when you will be required to file your income tax personally.

In case you are living outside Japan, salary and stock dividends from a company established under the Japanese company law should be deducted by 20%, which will be taken from the amount of money received. (Note that in this case, you must pay 20% of your salary without employment income exemption).

You may also get some special benefits or privileges that may reduce the taxable percentage. When you file your income tax in your home country, you may get a reduction for paying the appropriate taxes to the Japanese government. However, this still depends on the treaty or agreement made between your home county and Japan.

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