How Much Will the Special Defense Income Tax Increase Your Burden? Checking the "¥385,000 over 10 years" Estimate
Starting in January 2027, a new Special Defense Income Tax that adds 1% on top of your income tax amount will take effect. An estimate that "if you earn ¥7,000,000 a year, your burden will increase by ¥385,000 over 10 years" has been spreading, but this calculation multiplies the wrong number. The surtax is levied on the income tax amount, not on taxable income. This article shows the correct calculation method so you can work out your own increase from a single withholding tax statement. It then sorts out, in a timeline, exactly when the burden actually increases and by how much.
First, Check the Details of the System Against Primary Sources
The National Tax Agency's Q&A describes the details of the reform as follows[NTA].
| Item | Details |
|---|---|
| New tax created | The Special Defense Income Tax. An amount equal to 1% of the income tax to be withheld is collected and paid together with the income tax. |
| Special Reconstruction Income Tax | The rate is cut from 2.1% to 1.1%. The taxation period is extended by 10 years, to December 31, 2047 (previously December 31, 2037). |
| Application | Applies to income tax on income arising on or after January 1, 2027. |
| Combined rate | 2.1% before the reform; after the reform, defense 1% + reconstruction 1.1% still totals 2.1%. The method for calculating withholding tax amounts is also unchanged. |
| Legal basis | Act on Special Measures for Securing Financial Resources for Defense Capability Reinforcement (Act No. 69 of 2023) and the Act on Special Measures for Securing Financial Resources for Reconstruction (Act No. 117 of 2011). |
The Ministry of Finance's pamphlet likewise explains: "So that household burden does not increase for now, we are cutting the Special Reconstruction Income Tax rate by one point, from 2.1% to 1.1%. At the same time, to reliably secure the total reconstruction funding, we are extending the taxation period by 10 years"[MOF]. In other words, the design keeps the amount you pay now unchanged while extending the payment period by 10 years.
Funding for the defense budget rests on three pillars — income tax, corporate tax, and tobacco tax — and the corporate tax portion (the Special Defense Corporate Tax) already began in April 2026. We've mapped out the whole system in The Mechanics of the Defense Tax Increase and Its Effect on Take-Home Pay. This article focuses specifically on calculating your own income tax portion.
Where the "¥385,000 over 10 years" Estimate Goes Wrong
The estimate that has spread takes the form "taxable income of ¥3,500,000 × 1.1% × 10 years = ¥385,000." The multiplication itself is correct, but it applies the 1.1% to the wrong number.
Taxable income and the income tax amount are completely different numbers. With taxable income of ¥3,500,000, the income tax amount is roughly ¥280,000 — less than a tenth as much. The 1.1% should be applied there, but applying it to taxable income instead inflates the result more than tenfold.
The amount is different, but the underlying point — that this is a real tax increase — is correct. The Ministry of Finance itself writes that "the taxation period will be extended by 10 years," so a burden that was originally supposed to end in 2037 will continue until 2047. What's more, the Special Defense Income Tax itself has no defined end date (it applies "for the time being" from 2027 onward). Once the numbers are corrected, the underlying structure of an increasing burden still needs to be kept in view.
The Real Increase Happens in Three Phases
It isn't "1.1% for 10 years" either. Compared with a world where the reform never happened, here is how the difference in burden moves.
The key is the middle period. For the 10 years from 2038 to 2047, the full 2.1% combining defense and reconstruction is added where the surtax would otherwise have been zero if there had been no reform. That's 2.1%, not the 1.1% used in the estimate that has been circulating. And from 2048 onward, the Special Defense Income Tax's 1% continues with no defined end date.
An employee earning ¥7,000,000/year, single (assuming an income tax amount of ¥280,000)
2027–2037: No change (the combined 2.1% is the same as before the reform)
2038–2047: ¥280,000 × 2.1% = ¥5,880/year × 10 years = about ¥59,000
2048 onward: ¥280,000 × 1% = ¥2,800/year, indefinitely
→ Not the ¥385,000 figure in circulation, but roughly ¥60,000 over 10 years. That said, the ¥2,800 per year continues from 2048 onward, so over 20 years an additional ¥56,000 is added on top.
Check It With Your Own Numbers — Using Your Withholding Tax Statement
So this doesn't stay hypothetical, try calculating it from your own withholding tax statement. All you need is the single figure in the "withholding tax amount" box.
- Look at the "withholding tax amount" on your withholding tax statement. This figure already includes the Special Reconstruction Income Tax (2.1%).
- Divide it by 1.021. This gives you the base income tax amount. For example, ¥286,000 becomes ¥280,000.
- 1% of that is the annual Special Defense Income Tax. For ¥280,000, that's ¥2,800.
- The increase for the years 2038 through 2047 is 2.1 times that amount, over 10 years. For ¥280,000, that's about ¥59,000.
We cover how to read a withholding tax statement itself in How to Read a Withholding Tax Statement, and how to calculate take-home pay in Calculating Take-Home Pay From a Withholding Tax Statement.
| Annual income tax amount | Special Defense Income Tax (annual) | Increase for 2038–2047 | 2048 onward (annual) |
|---|---|---|---|
| ¥50,000 | ¥500 | ¥10,500 | ¥500 |
| ¥100,000 | ¥1,000 | ¥21,000 | ¥1,000 |
| ¥200,000 | ¥2,000 | ¥42,000 | ¥2,000 |
| ¥300,000 | ¥3,000 | ¥63,000 | ¥3,000 |
| ¥500,000 | ¥5,000 | ¥105,000 | ¥5,000 |
| ¥1,000,000 | ¥10,000 | ¥210,000 | ¥10,000 |
| ¥3,000,000 | ¥30,000 | ¥630,000 | ¥30,000 |
Because the surtax is proportional to the income tax amount, the effect of progressive taxation carries straight through. Someone with an income tax amount of ¥3,000,000 bears 10 times the burden of someone with ¥300,000. Despite the modest impression the "1%" figure gives, the actual distribution skews toward higher earners.
For Investors: Only the Breakdown of the 20.315% Changes
The 20.315% rate levied on dividends from listed shares and capital gains in specified brokerage accounts is also a figure made up of withheld income tax plus a surtax. Here too, only the breakdown changes — the overall rate itself won't move for the time being.
| Period | Breakdown | Total |
|---|---|---|
| Through 2026 | Income tax 15% + Reconstruction 0.315% + Resident tax 5% | 20.315% |
| 2027–2047 | Income tax 15% + Defense 0.15% + Reconstruction 0.165% + Resident tax 5% | 20.315% |
| 2048 onward | Income tax 15% + Defense 0.15% + Resident tax 5% | 20.15% |
Without the reform, the rate would have dropped to 20% starting in 2038, so the way to look at it is that the rate stays 0.315 points higher for the following 10 years, and 0.15 points higher from 2048 onward. Investments inside an NISA account are tax-exempt, so none of this applies there (see our New NISA Utilization Guide).
The National Tax Agency's Q&A states that when a tax treaty's limited tax rate applies, or when income tax is exempted, neither the Special Defense Income Tax nor the Special Reconstruction Income Tax is levied. Accounting staff who handle payments to non-residents should confirm that this treatment remains unchanged.
For Employees, There's Basically Nothing to Do
As a system, this is a significant change, but the procedures for salaried employees don't change.
- Monthly withholding — Using the withholding tax table and the method for calculating the tax amount both stay the same, because the combined rate remains 2.1%.
- Year-end adjustment — Income tax, the Special Defense Income Tax, and the Special Reconstruction Income Tax are settled together, so employees don't need to submit any additional paperwork.
- Payment — The three withheld taxes are paid together as a single total on one payment form.
- Withholding tax statement — How to enter it on statutory reporting forms is laid out in the National Tax Agency's Q&A. This is about the only point that requires checking on the practical side.
What to do today
- Take the "withholding tax amount" on your own withholding tax statement and divide it by 1.021. That gives you your income tax amount — 1% of it is your Special Defense Income Tax from 2027
- Multiply that amount by 2.1, then by 10. That gives you a rough estimate of the total increase from 2038 through 2047
- If you see a figure like "hundreds of thousands of yen over 10 years," check whether it was calculated by multiplying taxable income instead
Frequently Asked Questions
When does the Special Defense Income Tax start?
It applies to income tax on income arising on or after January 1, 2027. For salaries, this covers payments whose payment date falls in or after January 2027. When the withholding agent collects income tax, it also collects an amount equal to 1% of that tax at the same time.
Will my take-home pay decrease starting in 2027?
No, it won't decrease. At the same time, the Special Reconstruction Income Tax rate is cut from 2.1% to 1.1%, so the combined rate stays at 2.1%. The National Tax Agency also states that the method for calculating withholding tax amounts does not change. The burden increases later because the Special Reconstruction Income Tax's taxation period, originally supposed to end in 2037, is extended to 2047, so the surtax continues from 2038 onward.
Is the estimate of "a ¥385,000 increase over 10 years for someone earning ¥7,000,000 a year" correct?
It uses the wrong figure. Because the surtax is levied on the income tax amount rather than taxable income, multiplying a taxable income of ¥3,500,000 by 1.1% is incorrect. For a single employee earning ¥7,000,000 a year, the income tax amount is roughly ¥250,000–300,000, and the total increase from 2038 through 2047 comes to about ¥60,000. That said, the Special Defense Income Tax's 1% continues with no end date from 2048 onward.
When does the Special Defense Income Tax end?
No end date has been set. It is to be levied "for the time being" from 2027 onward. The Special Reconstruction Income Tax, on the other hand, has an explicit deadline of December 31, 2047, so from 2048 onward only the Special Defense Income Tax's 1% remains.
Will the tax rate on stock dividends and sale gains go up?
Not for the time being. The 20.315% breakdown simply changes from income tax 15% + reconstruction 0.315% to income tax 15% + defense 0.15% + reconstruction 0.165%. Without the reform, the rate should have dropped to 20% starting in 2038, but instead 20.315% continues through 2047, and 20.15% continues from 2048 onward. Investment gains inside an NISA account are tax-exempt and unaffected.
Do year-end adjustment or tax return procedures change?
The paperwork salaried employees submit doesn't change. The withheld income tax, Special Defense Income Tax, and Special Reconstruction Income Tax are paid together as a single total on one payment form. What needs checking on the practical side — such as how to enter these on statutory reporting forms — is an accounting matter, and it is covered in the National Tax Agency's published Q&A.
References (Sources)
This article was prepared by checking the following published materials. Because details of the system may change with future reforms, please check the latest official information for practical use.
- National Tax Agency, "Special Defense Income Tax and Special Reconstruction Income Tax (Withholding) Q&A" (May 2026)
- National Tax Agency, "Overview of Withholding for the Special Defense Income Tax and Special Reconstruction Income Tax" (withholding from January 2027 onward)
- Ministry of Finance, "Tax Measures for Securing Financial Resources for Defense Capability Reinforcement" (FY2026 tax reform pamphlet)
- Ministry of Finance, "Outline of the FY2026 Tax Reform"
- National Tax Agency, "Various Forms and Information Regarding the Special Reconstruction Income Tax"
* This article provides general information and does not guarantee individual tax amounts. Because your income tax amount varies with your deductions, please check the actual figures on your own withholding tax statement or tax return. For specific decisions, please consult your tax office or a tax accountant.
