"If your side job is ¥200,000 or less, you don't have to file a final tax return." This is half true and half false. The ¥200,000 rule is a special rule for income tax only; for residence tax, a declaration is required from the very first yen. On top of that, "people who file a final tax return for another reason" cannot use this rule. This article organizes, in the order side-job workers tend to stumble, the exact meaning of the ¥200,000 rule, the latest criteria for classifying income (business income or miscellaneous income), how residence tax works so your employer doesn't find out, and the risks of not filing.
The exact meaning of the "¥200,000 rule"
If an employee who receives salary from one place has total income other than salary and retirement (such as a side job) of ¥200,000 or less for the year, no income tax final return is required[NTA No.1900]. However, this is a treatment for income tax only, and there is no ¥200,000 special rule for residence tax. If you have even ¥1 of side-job income, in principle a residence tax declaration to your municipality is required.
What you judge is income, not revenue. Even if your side-job revenue is ¥300,000, if expenses are ¥150,000 then income is ¥150,000, and no income tax return is required (a residence tax declaration is still required). Conversely, if revenue is ¥180,000 with zero expenses, income is ¥180,000.
An easily-missed exception: people who "do" file a return must include everything, even ¥200,000 or less
The ¥200,000 rule is a special rule that says "you don't have to file a final return." Therefore, people who file a final return in the first place for reasons such as the medical expense deduction, Furusato Nozei (when the one-stop system is not used), the first year of the mortgage loan credit, or salary from two places must include side-job income of ¥200,000 or less in their filing. You cannot say "since I'm doing it just for the medical expense deduction, I'll leave out the side-job portion."
Correctly classifying the "type" of side-job income
Writing, affiliate marketing, video, spot gigs
A side job that is small in scale and where you keep no books. You cannot use the blue return, and losses cannot be offset against salary and other income.
A side job run continuously, repeatedly, and independently at scale
There is a real substance of keeping books and running it as a business. You can use the blue-return special deduction and loss offsetting.
A second part-time job
Something paid as salary from an employer. If you have salary from two or more places, a final return tends to become necessary.
The note to Article 35-2 of the Basic Circular on the Income Tax Act first says that whether income is business income is judged by "whether the activity carried out to earn that income is conducted to the extent that it is called a business under generally accepted social norms." It then provides that "where books and records recording the transactions for that income are not retained (excluding cases where the revenue for that income exceeds ¥3 million and there are facts recognizing it as business income), note that it falls under business-type miscellaneous income" (original text).
| Revenue | Books and records kept and retained | Not retained |
|---|---|---|
| Over ¥3 million | Generally business income | Generally business-type miscellaneous income |
| ¥3 million or less | Generally business income | Business-type miscellaneous income |
Source: National Tax Agency, explanatory note on the partial revision of the Basic Circular on the Income Tax Act (circular on interpretation of laws and regulations)[NTA explanation]
The NTA explanation says that even where books and records are retained, the following two cases are judged individually. (1) Revenue is trifling = where "in ordinary years the revenue is ¥3 million or less and accounts for less than 10% of the main income" ("ordinary years" means roughly a three-year period). (2) No profit-seeking nature is recognized = where "the income is in the red in ordinary years and no efforts are being made to eliminate the deficit"[NTA explanation]. For an employee, the main salary is the main income, so first check whether you fall under the "less than 10%" test in (1).
If you want to receive the merits of the blue return as business income, assume that keeping records by double-entry bookkeeping and retaining the books is the premise.
Concrete examples: judging whether filing is required
→ An income tax final return is not required. However, a residence tax declaration is required.
How your employer finds out about a side job, and how residence tax works
The main route by which a side job reaches your employer is a change in the residence tax amount. For salary earners, residence tax is in principle collected by special collection (withholding from salary): the municipality designates the employer as the special collection agent and notifies it of the annual tax amount[Local Tax Act Arts. 321-3 and 321-4]. Because the notified amount calculated on income including the side job rises, the accounting staff may notice. For the whole picture of the system, see special collection versus ordinary collection of residence tax.
"Pay it yourself" can only be chosen for income other than salary and public pensions
This is the decisive point. Article 321-3(2) of the Local Tax Act provides that the income-levy amount on a salary earner's income other than salary income may be added to the salary portion and collected by special collection. Its proviso, however, states that "this shall not apply where the return states that the income-levy amount on income other than salary income is to be collected by the method of ordinary collection"[Local Tax Act Art. 321-3(2)]. In other words, the option to pay it yourself is limited to income other than salary income and public pensions.
"For residence tax on income other than income from salary and public pensions (for persons under 65 as of April 1, 2026, income other than salary income), you can choose the collection method. If you wish it to be deducted from salary, enter a circle in the 'special collection' box; if you wish not to have it deducted from salary and instead to pay it yourself separately at a counter or elsewhere, enter a circle in the 'pay it yourself' box"[NTA guide]. The same guide also states that residence tax on salary income, and on public pensions for persons aged 65 or over, "is deducted from the salary or the public pension respectively." If your side job is salary, the box on the return cannot stop it.
Five steps by which a salary side job is merged into your main job
- The side-job employer files a salary payment report. An employer that pays salary as of January 1 and is obliged to withhold income tax must file a salary payment report with the municipality of the employee's residence by January 31[Local Tax Act Art. 317-6(1)]. Osaka City states that this covers "all employees etc. (including short-term employees, part-timers and officers) regardless of the size of the salary paid"[Osaka City]. For what the document contains, see what a salary payment report is.
- The municipality matches the main job and the side job. It calculates a single annual tax amount from both salary payment reports.
- A special collection agent is designated. Where two or more persons pay salary to the same taxpayer, the municipality must designate all or part of them as special collection agents[Local Tax Act Art. 321-4(4)]. In practice, "special collection is in principle carried out by the workplace that pays the main salary"[Tokyo Bureau of Taxation].
- The notice reaches your main job by May 31. Notification of the special collection tax amount is made by May 31 of the year in which the first day of the fiscal year falls[Local Tax Act Art. 321-4(2)].
- From June, the side-job portion is added to the withholding. The special collection agent collects one twelfth of the annual tax amount every month from June to May of the following year[Local Tax Act Art. 321-5(1)].
The only route to ordinary collection for the side-job portion is for the side-job employer to submit, together with the salary payment report, a statement of reasons for switching to ordinary collection on the ground of "special collection at another business establishment." Arakawa Ward states that "if the statement of reasons for switching to ordinary collection is not submitted, special collection applies as a matter of principle"[Arakawa Ward]. Osaka City, on the other hand, states that "where municipal, prefectural and forest environment tax is specially collected from salary paid by another party, regardless of the reasons below (codes a to d), it is aggregated with the salary paid by that other party and specially collected"[Osaka City]. Note also that side jobs may be prohibited or require permission under your work rules, which should be checked separately.
The scope for allowing ordinary collection differs by municipality
The reasons for switching to ordinary collection are not uniform nationwide. Tokyo lists six categories (Fu-A to Fu-F)[Tokyo Bureau of Taxation], while Osaka City allows only four and states that "for reasons other than these, a person cannot be made subject to ordinary collection (self-payment)"[Osaka City].
| Reason for switching to ordinary collection | Tokyo | Osaka City |
|---|---|---|
| Two or fewer employees in total at the establishment | Fu-A | Not allowed |
| Special collection at another establishment | Fu-B | Allowed |
| Salary too small to deduct the tax | Fu-C | Allowed |
| Salary paid irregularly | Fu-D | Allowed |
| Family employee of a business (sole proprietors only) | Fu-E | Not allowed |
| Retired or scheduled to retire (by the end of May) | Fu-F | Allowed |
Materials of the Ministry of Internal Affairs and Communications study group on individual residence tax also show that the reasons for declaring ordinary collection differ among the 24 prefectures that carry out blanket designation of special collection. All 24 accept "retired or scheduled to retire," but only 18 accept "two or fewer employees" and only 19 accept "a salary earner who is a family employee of a sole proprietor"[MIC]. The materials also note that the codes for the same reason differ between bodies. If you want to be sure it is separated, confirm in advance with the municipality where you live.
Summary of whether a final return is required
| Case | Income tax final return | Residence tax declaration |
|---|---|---|
| Employee, side-job income ¥200,000 or less (no other reason to file) | Not required | Required (to the municipality) |
| Employee, side-job income ¥200,000 or less + filing for the medical expense deduction, etc. | Required (include the side job) | Reflected via the final return |
| Employee, side-job income over ¥200,000 | Required | Reflected via the final return |
| Salary from two or more places | Tends to be required | Reflected via the final return |
| Sole proprietor (filing regardless of amount is the basic rule) | Required | Reflected via the final return |
The risks of not filing or under-reporting
If you leave it alone thinking "they won't find out," penalties are later added on top of the base tax. For income tax there can be the additional tax for non-filing and delinquent tax, and for residence tax as well a delinquency charge (up to 14.6% per year) can arise. It is not rare for under-reporting to come to light because a client submitted a payment record, or because you were identified from a platform's payment data. Correct filing within the deadline is the lowest-cost option. The deadline for filing and payment is in principle March 15 of the following year, and filing opens on February 16 of the following year[NTA No.2020]. For the 2026 tax year (Reiwa 8), the deadline is Monday, March 15, 2027[NTA payment deadlines].
FAQ
If side-job income is ¥200,000 or less, is it really okay to do nothing?
No. Even if no income tax final return is needed, a residence tax declaration is in principle required. Also, if you file a final return for something like the medical expense deduction, you include that ¥200,000-or-less side-job income in the filing too.
Is income from flea-market apps and point-earning activities also covered?
Profit from selling movable property for daily life (clothing, furniture, etc.) is in principle non-taxable, but continuous selling for resale purposes, and points and rewards, can be taxable. Check whether it exceeds ¥200,000 on a profit (income) basis.
How do business income and miscellaneous income differ?
Since the circular revised on October 7, 2022, the main criterion is whether you prepare and retain books and records. If you keep books and continue it as a business, you can use the blue return as business income (up to ¥650,000 deduction, loss offsetting). Without books it is business-type miscellaneous income, except where revenue exceeds ¥3 million and there are facts recognizing it as a business. Even with books, revenue of ¥3 million or less and under 10% of the main income in ordinary years, or chronic losses with no effort to fix them, are judged individually.
Can I choose "pay it yourself" even if my side job is a part-time job?
No. The second table of the final return form only lets you choose the collection method for residence tax on income other than salary income and public pensions. If the side job is salary, the side-job employer files a salary payment report with the municipality by January 31, it is matched with your main job, and the tax is withheld from your main salary. The only chance of separation is if the side-job employer submits a statement of reasons for switching to ordinary collection on the ground of "special collection at another business establishment."
I want to pay the tax on my side job without my employer finding out.
There is a method of choosing "pay it yourself (ordinary collection)" for residence tax on the second table of the final return form. However, that box can only be used for income other than salary and public pensions (proviso to Article 321-3(2) of the Local Tax Act). If the side job is a part-time salary, the side-job employer files a salary payment report with the municipality and it is merged into the special collection at your main job. The scope for allowing ordinary collection also differs by municipality, so confirming in advance is safest.
Summary
Reference links (sources)
This article is prepared based on materials from the following public bodies (neutral, primary sources). Because rules may be revised, please check the latest content before filing.
- National Tax Agency No.1900 Salary earners who must file a final return (in Japanese)
- National Tax Agency No.1500 Miscellaneous income (in Japanese)
- National Tax Agency No.1350 How business income is taxed (business income) (in Japanese)
- National Tax Agency No.2070 The blue return system (in Japanese)
- Ministry of Internal Affairs and Communications — Individual residence tax (overview of the system) (in Japanese)
- National Tax Agency No.2020 Final tax return (in Japanese)
- National Tax Agency — Main national tax payment deadlines and transfer dates (in Japanese)
- National Tax Agency — Step 6: entering matters concerning residence tax and enterprise tax (in Japanese)
- National Tax Agency — Partial revision of the Basic Circular on the Income Tax Act, October 7, 2022 (in Japanese)
- e-Gov — Local Tax Act (Arts. 317-6, 321-3, 321-4, 321-5) (in Japanese)
- Tokyo Metropolitan Bureau of Taxation — Special collection promotion station (in Japanese)
- Osaka City — Filing salary payment reports and special collection (in Japanese)
- Arakawa Ward — On filing salary payment reports (in Japanese)
- Ministry of Internal Affairs and Communications — Study group on individual residence tax, material 6 (in Japanese)
* This article is general information, not tax advice. For judging the income category or individual procedures, please confirm with the tax office, the municipality where you live, or a tax accountant.
