This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
The year you reach retirement age is an unusual one: salary, a retirement lump sum, pension payments and premiums you pay yourself all fall into the same twelve months. Once you leave the company there is no longer anyone to run your year-end adjustment, so the income tax withheld from your monthly pay each month stays at its rough estimate. Most people end up in the group that has no duty to file but gets money back by filing. Conversely, if you never submitted the declaration form for your retirement lump sum, or you have income other than re-employment pay or pension, you are required to file. This article sorts out which group you fall into and roughly how much comes back, using National Tax Agency (NTA) materials.
Conclusion: the year you retire splits people into three groups
| Group | Your situation | Tax return |
|---|---|---|
| A No duty, but a refund | You left mid-year, did not take another job and received no year-end adjustment. You submitted the declaration form for your retirement lump sum | File a refund return (allowed for 5 years) |
| B Filing required | You did not submit the declaration form and had 20.42% withheld / after leaving you have non-pension income over 200,000 yen (business, real estate, private annuity, etc.) / salary over 20 million yen / pension over 4 million yen | Required |
| C Not needed | You left at the end of December or were re-employed and received a year-end adjustment, submitted the declaration form for the lump sum, and have no other income | Not needed (optional if you have medical expense deductions or hometown tax donations) |
People who retire in the month they turn 60 or 65 are most often in Group A, and "there is no duty, so I will do nothing" is exactly how tens of thousands of yen go unclaimed in the year of retirement.
Salary: leaving mid-year means no year-end adjustment, so you have overpaid
The income tax withheld from your monthly pay is a rough estimate that assumes the same salary continues for a full year. If you leave mid-year and do not take another job, you cannot receive a year-end adjustment, and the NTA states that "income tax and special income tax for reconstruction may have been overpaid," so you may file a refund return for five years starting from 1 January of the following year[NTA No.1910].
There are two reasons for the overpayment. One is that your annual income fell, yet tax was withheld using the higher monthly withholding table. The other is that premiums you paid yourself after leaving were never deducted by the company.
Rough figures for someone who retires at the end of June (monthly salary 400,000 yen, no bonus, no dependants) and does not work again
Income tax withheld from 2.4 million yen of salary for January to June: about 55,000 yen (rough figure from the monthly table, zero dependants)
Annual tax recalculated on 2.4 million yen of income: 1.6 million yen after the employment income deduction minus a 950,000 yen basic deduction minus about 360,000 yen of social insurance premiums = taxable income of about 290,000 yen, giving income tax of about 15,000 yen
Expected refund: about 40,000 yen (more once you add the National Health Insurance and National Pension premiums paid after leaving)
Note: for 2026 the basic deduction is 580,000 to 950,000 yen depending on total income (950,000 yen if salary income is in the 2 million yen range). Special income tax for reconstruction is omitted. Amounts are approximate.
What you need for the return is the withholding statement for salary, not the one for retirement income. The company issues it within one month of your leaving, so ask for it if it does not arrive. For the whole sequence in a year you change or leave jobs, see taxes and procedures when changing or leaving a job.
The lump sum: everything depends on whether you submitted the declaration form
A retirement lump sum is taxed separately. If you gave your employer the Declaration for Receiving Retirement Income (taishoku shotoku no jukyu ni kansuru shinkokusho), tax is withheld after the retirement income deduction is applied, and that settles the tax. No tax return is needed.
If you did not submit the form, your employer withholds income tax of a flat 20.42% of the gross payment. The NTA states that "in this case the recipient of the retirement allowance files a tax return, performs the same calculation as if the Declaration for Receiving Retirement Income had been submitted, and settles the income tax and special income tax for reconstruction"[NTA No.2732].
38 years of service, a 20 million yen lump sum, and no declaration form submitted
Tax withheld: 20 million yen x 20.42% = 4,084,000 yen
The correct calculation: retirement income deduction of 8 million yen + 700,000 yen x (38 years - 20 years) = 20.6 million yen, so taxable retirement income is zero
Amount returned by filing: the full 4,084,000 yen
Even in less extreme cases, anyone who did not submit the form should settle up through a tax return. For how the retirement income deduction is calculated see tax on retirement lump sums, and for the order of withdrawal when you receive both a lump sum and iDeCo, plus the ten-year rule from 2026, see the order for receiving iDeCo and a retirement lump sum.
Pension: no return needed under 4 million yen, but adding it to a refund return settles it
If you started drawing a pension after leaving, "no tax return is required where public pension income for the year is 4 million yen or less and income other than miscellaneous income from public pensions is 200,000 yen or less"[NTA No.1600]. In the year you retire you usually receive only a few months of pension, so this condition is normally met.
Watch out for one point: the "other income of 200,000 yen or less" test looks at pension and salary together. If income other than salary and pension - a private annuity, real estate, business, or share sales in an account without withholding - exceeds 200,000 yen, you must file[NTA No.1900].
If you are filing a refund return, include the withholding statement for your pension as well. Income tax is withheld from pension payments too, so recalculating them together with your salary settles the tax on the pension as well. For how pensions are taxed, see tax on pensions and filing a return.
Premiums: what you paid yourself after leaving comes back only if you file
While you were employed the company handled social insurance premiums in the year-end adjustment, but the National Health Insurance, National Pension, voluntary continuation health insurance and long-term care premiums you paid yourself after leaving are unknown to the company. You have to add them yourself as the social insurance premium deduction on your tax return.
If premiums you paid from July to December were 300,000 yen of National Health Insurance plus 100,000 yen of National Pension, for 400,000 yen in total
At a 5% income tax rate: 400,000 yen x 5% = an extra 20,000 yen refunded
Resident tax the following year: 400,000 yen x 10% = a 40,000 yen reduction (it is calculated from the income you declare)
Premiums vary widely depending on whether you choose National Health Insurance, voluntary continuation, or cover as a family dependant. For a comparison, see the three health insurance options after leaving a job. In the year you retire your income is large because of the lump sum and salary, so National Health Insurance premiums for the following year tend to be high as well. The retirement lump sum is not counted for National Health Insurance premiums (separately taxed retirement income is outside the calculation).
Resident tax: next year you get a bill based on "last year's salary"
Resident tax is levied in the following fiscal year on the previous year's income, so in the year after you retire you receive a resident tax bill based on the salary from your final year at work. It arrives once you are living on a pension alone, so you need to keep money aside. Resident tax on the lump sum is levied separately and is settled by special collection at the time of payment, so it is not part of the following year's bill.
The month you leave also changes how the remaining resident tax already being deducted from your pay is handled. As a rule, leaving between January and May means the balance is collected in a lump from your final pay, while leaving between June and December switches you to ordinary collection with payment slips. For the full picture of the costs that appear in the year after retirement, see the money roadmap around retirement.
Other points that come up often in the year of retirement
- Unemployment benefits and continued employment benefits for older workers are tax-free - do not put them on your return. They are also excluded from National Health Insurance premium calculations.
- Hometown tax donations (furusato nozei) - your income is high in the year you retire, so the deduction ceiling is high too. But if you file a tax return you cannot use the One-Stop Exception, and every donation has to go on the return.
- Medical expense, life insurance premium and earthquake insurance premium deductions - with no year-end adjustment, you enter these yourself on your return. The certificates arrive in October and November, so do not throw them away.
- If you were re-employed and worked through December - you can receive a year-end adjustment, so as long as you submitted the declaration form for the lump sum, no tax return is needed. If your re-employer changed mid-year, give the previous employer's withholding statement to the new one so the two can be combined.
What to do today
- Ask HR whether the Declaration for Receiving Retirement Income was submitted. If it was not, the tax field on the withholding statement for retirement income will be 20.42% of the gross payment.
- Put the receipts and deduction certificates for premiums you paid after leaving into one envelope. National Health Insurance, National Pension, voluntary continuation and long-term care insurance.
- Once the salary and pension withholding statements arrive in the new year, enter them in the NTA online return preparation page and see your refund. A refund return can be filed from January without waiting for 16 February.
Frequently asked questions
I retired at the end of March and have only a pension since. Do I need to file a tax return?
As a duty, no, provided you submitted the declaration form for your lump sum and your pension is 4 million yen or less. But your salary for January to March did not go through a year-end adjustment, so the income tax withheld is very likely an overpayment, and the National Health Insurance and National Pension premiums you paid after leaving have not been deducted either. Filing a refund return normally gets money back.
I forgot to submit the declaration form when I received my lump sum. What should I do?
Since 20.42% of the gross payment was withheld, you file a tax return, redo the calculation properly using the retirement income deduction, and settle up. Attach the withholding statement for retirement income to your return and the overpaid amount is refunded. For people with long service it is not unusual to get all of it back.
By when do I have to file a refund return?
You can file for five years starting from 1 January of the year after you retire. There is no need to wait for the filing period (16 February to 15 March); once your withholding statements are in hand in January you can submit right away. The sooner you file, the sooner the refund is paid.
Does the lump sum affect next year's resident tax or National Health Insurance premiums?
No. Resident tax on the lump sum is settled by special collection when it is paid and is not included in the following year's resident tax calculation. Retirement income is also outside the National Health Insurance premium calculation. What affects the following year is the employment income from your final year at work.
Reference links (sources)
This article is based on the materials below. Rules change, so please check the latest version before you file.
Note: this article is general information, not tax advice. The calculations are approximate and change with dependants and other deductions. For individual cases, check with a tax office or a tax accountant.
