Aggregate or Separate Taxation: The Line Is ¥6,949,000

The short answer: the line is ¥6,949,000, and on National Health Insurance "do not file" is an option

The table compares a ¥300,000 dividend on listed shares under aggregate taxation against separate taxation and no filing. Which one is lighter flips from one income-tax band to the next.

Note: this site's calculation. A ¥300,000 dividend out of retained earnings, received by a holder other than a major shareholder. The ¥60,945 already withheld is ¥45,945 of income tax with the special reconstruction income tax plus ¥15,000 of the residents' tax dividend levy. Rates from NTA No.2260; the dividend credit is taken as 10% for income tax and 2.8% for residents' tax (5% above ¥18 million); the residents' tax income levy is assumed to be 10%.

Note how small the gap is in the band on the border. Separate taxation wins in the 23% band, but on a ¥300,000 dividend the gap is ¥474. In that band there is no point deciding on tax. Your National Health Insurance premium, or a family member's dependent deduction, moves far more money.

Only dividends on listed shares give you three choices (major shareholders excepted)

Dividend income is taxed on an aggregate basis as a rule. Only a dividend on listed shares received by someone other than a major shareholder (大口株主等) can be put under separate self-assessment taxation on a tax return[NTA No.1330]. Withholding is 15.315% income tax plus 5% residents' tax. You may also leave it alone under the no-filing rule (確定申告不要制度), which makes three options in all.

A dividend on unlisted shares, and a dividend on listed shares paid to a major shareholder (holding 3% or more), is aggregate taxation only[NTA No.1331]. Withholding there is 20.42% with no residents' tax taken at source.

Source: the summary table in NTA No.1331[NTA No.1331]. The premium row follows Art. 29-7(2)(iv) of the Order for Enforcement of the National Health Insurance Act[e-Gov].

Why "aggregate taxation wins up to ¥9 million" comes down to ¥6.95 million

The dividend credit (配当控除) is 10% for income tax and 2.8% for residents' tax[NTA No.1250][e-Gov, Local Tax Act, Supp. Art. 5]. So the real residents' tax burden is 10% minus 2.8%, or 7.2%. On the income tax side, the marginal rate less 10% carries the 2.1% special reconstruction income tax on top. That 2.1% moves the dividing line by more than ¥1 million.

Note: this site's calculation. Bands from NTA No.2260; the dividend credit rates from No.1250 and Supp. Art. 5 of the Local Tax Act. The residents' tax income levy is taken as 10%, and taxable income is assumed to be the same for income tax and residents' tax.

Once taxable aggregate income passes ¥10 million, the dividend credit on the part above that line is halved to 5% (1.4% for residents' tax)[NTA No.1250]. The higher your income, the worse aggregate taxation gets.

Separate taxation and no filing cost the same tax; loss offsetting is the difference

Here is the point people miss: separate self-assessment taxation and no filing produce the same tax. The only differences are whether you can offset losses and whether the amount counts in your total income.

So the reason to choose separate taxation is, in practice, loss offsetting and nothing else. In a year with a capital loss on listed shares, report under separate taxation, set the loss against the dividend, and carry the remainder forward for the next three years[NTA No.1474].

The carry-forward has two traps. A loss inside a NISA account can neither be offset nor carried forward, and you must file every year to keep the carry-forward alive, even in a year with no trades[NTA No.1474]. The procedure is set out in filing a tax return for shares and NISA.

The National Health Insurance trap: separate taxation raises the premium too

You often read that "aggregate taxation raises your National Health Insurance premium, so choose separate taxation." That is wrong. Art. 29-7(2)(iv) of the Order for Enforcement of the National Health Insurance Act puts "income calculated separately from other income" into the base for the income levy[e-Gov].

That phrase means income under separate self-assessment taxation. Choose separate taxation and it still enters the calculation. The premium only stays put if you do not file at all. The line is not "aggregate or separate" but "file or do not file".

Note: the income levy rate, the per-capita levy and the cap are set by municipal ordinance, so 10% is an assumption. Work out the real figure from your municipality's rate table. The method is explained in how National Health Insurance premiums are calculated.

Choosing no filing for residents' tax only has been impossible since FY2024

It used to be possible to split the choice - aggregate taxation for income tax, no filing for residents' tax - and hold down the effect on the National Health Insurance premium. The FY2022 tax reform closed that door. The outline required the assessment method for individual residents' tax to be "brought into line with income tax"[MIC, Outline of the FY2022 Tax Reform, p.76]. It applies to individual residents' tax from FY2024 onward.

There is a side effect. Report a dividend and your total income rises, which feeds through to the dependent and spousal deduction tests, the National Health Insurance premium and nursery fees. None of that happens if you do not file[NTA No.1331]. Burdens are tightly linked by design, so deciding on tax alone tends to cost you money.

A map of the methods by income: retirement pay, property, futures, crypto

Income falls into ten categories, taxed on an aggregate basis, under separate self-assessment, or by separate withholding at source[NTA No.1300]. Dividends on listed shares are the only thing you choose; the rest is fixed by statute.

Sources: NTA No.1300, No.1330 and No.1463[NTA No.1463], with No.3208, No.3211, No.1420 and No.1310. The crypto entry follows Art. 38-2 of the Act on Special Measures Concerning Taxation as amended for FY2026.

The sale of land and buildings is where people most often read the rule wrong. The "five years" that divides long-term from short-term is not counted from the day you bought. It is judged on whether you had held the asset for more than five years as of 1 January of the year of sale[NTA No.3202]. Get it wrong and the rate jumps from 20.315% to 39.63%, about 1.95 times as much.

The "one half" on retirement income has two exceptions of its own. There is no halving for a specified officer's retirement allowance, paid to a director with five years or less of service. For a short-term retirement allowance after five years or less of service, the part above ¥3 million after the deduction is also outside the halving[NTA No.1420]. The timing for crypto assets is set out in when crypto tax becomes 20%.

Summary

• In practice, the only case where you can choose your own taxation method is dividends from listed stocks (excluding major shareholders).
• The threshold is total taxable income of ¥6,949,000. Above that, the 20.315% separate self-assessment taxation becomes more advantageous.
• The claim that "comprehensive taxation is better up to ¥9 million" drops to ¥6.95 million once the 2.1% special reconstruction income tax is factored in.
• For those on National Health Insurance, premiums rise even with separate self-assessment taxation. They stay the same only if you do not file at all.
• First, check your own taxable income and whether your health insurance is National Health Insurance or employer-based.

Sources

• NTA No.1330, receiving a dividend - what the three choices cover, and withholding rates
• NTA No.1331, separate self-assessment taxation of dividends on listed shares - the table by method
• NTA No.1250, dividend income and the dividend credit - the 10% and the 5%
• NTA No.2260, income tax rates - the quick calculation table
• NTA No.1300, outline of income categories - the ten categories
• NTA No.1463, taxation on the sale of shares - the basis for 20.315%
• NTA No.1474, offsetting and carrying forward capital losses - the three-year carry-forward
• NTA No.1420, receiving retirement pay - exceptions to the halving
• NTA No.3202, calculating capital gains - judged as of 1 January
• e-Gov, Order for Enforcement of the National Health Insurance Act, Art. 29-7 - the base for the income levy
• e-Gov, Local Tax Act (Art. 313, Supp. Art. 5) - bringing the methods into line
• MIC, Outline of the FY2022 Tax Reform (p.76) - the wording of the reform

Note: the calculations here apply the NTA quick calculation table and the dividend credit rates as this site reads them. National Health Insurance rates differ by municipality. For an individual decision, ask a tax accountant, your tax office or your municipality.