This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
For a company employee, resident tax (住民税) is as a rule withheld from your salary, which is called special collection (特別徴収). The Local Tax Act says so, and the option of "I will pay it myself if I want to", that is ordinary collection (普通徴収), does not exist for salary income. You can choose to pay it yourself only on income other than salary, such as business income or real estate income from a side job. If your side job is a part-time job paying a salary, that part is added to the withholding at your main employer. Your employer can switch you to ordinary collection only in the exceptional cases each municipality allows, such as people about to leave the company or people whose salary is too small to withhold from, and the range of those exceptions differs from one municipality to another. This article sorts out the difference between the two methods, the exceptions that allow a switch, what the "pay it myself" box on the tax return really means, and how the month you resign changes things, using the Local Tax Act and primary sources from Tokyo and the City of Osaka.
The short answer: the two collection methods, and who gets which
| Special collection (withheld from salary) | Ordinary collection (you pay it yourself) | |
|---|---|---|
| How you pay | 12 instalments from June to May of the following year, withheld from your salary. The employer pays it over by the 10th of the next month | Four instalments a year using payment slips from your municipality (usually June, August, October and January), paid by you |
| Who it covers | Salary earners, as a rule (Local Tax Act, Article 321-3) | Sole proprietors, pensioners and people with no job, plus any non-salary income for which "pay it myself" was chosen |
| Can you choose? | No. The Tokyo Metropolitan Bureau of Taxation states plainly that "ordinary collection cannot be chosen at the employee's request" | |
| Can the employer opt out because of the paperwork? | No. "Not carrying out special collection for reasons such as increased paperwork or the absence of an accounting officer is not permitted under the law" (same source) | |
| Amount of tax | Identical. The collection method does not change the amount | |
Sources: Local Tax Act, Articles 321-3, 321-4 and 321-5[e-Gov law search]; Tokyo Metropolitan Bureau of Taxation, "Station for promoting special collection of individual resident tax"[Tokyo Metropolitan Bureau of Taxation]
Article 321-3, paragraph 1 of the Local Tax Act provides that the resident tax of a person who received a salary in the previous year and is still receiving one on the first day of the tax year "shall be collected by the method of special collection". Employers are covered too: a business that withholds income tax is designated as a special collection agent and "must collect" the tax (Article 321-4). Tokyo and its municipalities have enforced special collection strictly since fiscal 2017, and refusing to pay past the due date exposes you to delinquency proceedings.
The exceptions an employer can use, and how they differ by municipality
Every January, employers file a salary payment report (給与支払報告書) with each municipality. If they attach a reason form for switching to ordinary collection (普通徴収切替理由書), only the people who fit a reason the municipality accepts can move to ordinary collection. The list of accepted reasons differs by municipality.
| Reason | Tokyo (codes 普A to 普F) | City of Osaka (codes a to d) |
|---|---|---|
| The workplace has two employees or fewer in total | 普A: accepted | Not accepted |
| Already under special collection at another employer (Column B workers) | 普B: accepted | Accepted (but added to the other salary and collected there) |
| The salary is too small for the tax to be withheld | 普C: accepted | Accepted |
| The salary is paid irregularly, not every month | 普D: accepted | Accepted |
| A full-time family employee of a sole proprietor | 普E: accepted | Not accepted |
| People who have left, or will leave by the end of May | 普F: accepted | Accepted |
Sources: Tokyo Metropolitan Bureau of Taxation[Tokyo Metropolitan Bureau of Taxation]; City of Osaka, "Filing the salary payment report"[City of Osaka]
According to materials from the Ministry of Internal Affairs and Communications, among the 24 prefectures that designate special collection across the board, 18 accept "two employees or fewer" as a reason and 19 accept "full-time family employee", while "people who have left or are about to leave" is the only reason accepted by all 24[MIC, Study group on individual resident tax, document 6]. Which municipality your employer files with therefore changes the answer.
If no reason form is filed, special collection applies as the default rule. Arakawa Ward, for instance, advises that "where no reason form for switching to ordinary collection is filed, special collection applies as a matter of principle"[Arakawa Ward].
The "pay it myself" box on the tax return only works on non-salary income
Page two of the final tax return has a box headed "method of collecting resident tax on income other than salary and public pensions", where you circle either "special collection" or "pay it myself". As the heading says, you can choose to pay it yourself only on the income other than salary and pensions. The National Tax Agency's guide states that "resident tax on salary income is deducted from the salary in each case"[National Tax Agency, guide to filing, step 6]. The legal basis is the proviso in Article 321-3, paragraph 2 of the Local Tax Act.
Side income where "pay it myself" is available
- Fees from contract or freelance work (business income or miscellaneous income)
- Rent from property you let out (real estate income)
- Writing fees, speaking fees, profits from online selling (miscellaneous income)
- Dividends declared under aggregate taxation
Side income where it is not available (added to withholding at your main job)
- Wages from a part-time job
- Director's remuneration from a second company
- Daily wages (Column C workers)
When the side job pays a salary, that employer also files a salary payment report, so the municipality tells your main employer a tax amount that already combines both. The City of Osaka states that "where special collection is made from a salary paid by another employer, the tax is added to that other salary and collected there, regardless of reasons a to d"[City of Osaka]. The route a salary payment report takes is explained in what a salary payment report is, and how a side job relates to your employer in filing a tax return for a side job.
One more thing: if you forget to circle "pay it myself" in the online return preparation tool, even the non-salary income is rolled into special collection. Check the box before you file.
The month you resign changes things: leave between January and April and the rest is taken in one go
Once you resign, the monthly instalments from the following month onwards fall outside your employer's duty to collect. The timing of your resignation, however, decides what happens to the balance[Local Tax Act, Article 321-5, paragraph 2].
| Month you resign | What happens to the remaining resident tax |
|---|---|
| June to December | Collected in one go from your final salary or retirement allowance if you ask for it. If you do not ask, payment slips for ordinary collection arrive |
| January to April | Even without a request from you, everything up to the May instalment is taken in one go from your final salary or retirement allowance (where the salary or allowance exceeds the balance) |
| May | The May instalment is withheld and that is the end of it |
Someone who leaves in January has five months, January to May, pulled out of the final pay packet at once, so take-home pay drops sharply. If you already have your next job lined up, filing an "application to switch to special collection" through the new employer lets the withholding carry over (Local Tax Act, Article 321-4, paragraph 5). The actual amounts by month of resignation are worked through in how the month you leave changes your resident tax bill.
Due dates under ordinary collection, and whether either method is cheaper
Sole proprietors and people who have left a job are on ordinary collection. The due dates are set by municipal ordinance, and in most places they are the ends of June, August, October and the following January, four times in all (this varies by municipality). You can also pay the whole year in June.
- The amount is the same. The collection method does not change the tax. The only difference is 12 instalments versus four.
- Ordinary collection arrives in bigger lumps. At 120,000 yen a year, each slip is 30,000 yen. In your first year after leaving employment to go independent, resident tax on the previous year's salary arrives in these lumps, so set the money aside.
- The employer's side can be eased by the special due-date rule. A workplace that regularly has fewer than 10 employees can apply to the municipality and, once approved, pay the tax over twice a year instead of 12 times[Tokyo Metropolitan Bureau of Taxation].
How resident tax itself is calculated is covered in how resident tax works and how it is calculated, and how to read the notice that arrives in June in reading your resident tax assessment notice.
Frequently asked questions
I do not want my employer to know about my side job. Can I switch my resident tax to ordinary collection?
If the side job is non-salary income, such as contract work, circling "pay it myself" on the tax return puts that part on ordinary collection. If the side job pays a salary, such as a part-time job, you have no choice and it is added to the withholding at your main job.
My employer told me "we use ordinary collection here". Is that lawful?
A company that withholds income tax is designated as a special collection agent, and opting out because of the paperwork is not permitted under the law. Ordinary collection applies only where an exception the municipality accepts fits, such as an imminent resignation or a salary too small to withhold from.
I work for two companies. Which one withholds the tax?
As a rule the employer paying your main salary, with the tax on both jobs combined into one special collection. A municipality may also split the designation between the two employers.
I resigned in March. What happens to my resident tax?
For resignations from January to April, the balance up to the May instalment is taken in one go from your final salary or retirement allowance, even without a request from you. If the salary or allowance does not cover the balance, payment slips for ordinary collection arrive instead.
Reference links (sources)
- Local Tax Act (e-Gov law search) — Article 321-3 (the rule of special collection and the proviso on non-salary income), Article 321-4 (special collection agents), Article 321-5 (lump-sum collection)
- Tokyo Metropolitan Bureau of Taxation, Station for promoting special collection of individual resident tax — how enforcement came about, codes 普A to 普F, the special due-date rule
- City of Osaka, Filing the salary payment report — switching reasons a to d
- MIC, Study group on individual resident tax, document 6, "Promoting special collection" — how the reasons differ across 24 bodies
- National Tax Agency, guide to filing, step 6: items concerning resident tax
