This article is contributed by LOOK UP ACCOUNTING.

In Part 3 of “A Guide to Taxes in Japan for Freelancers,” we’ll walk you through the process of preparing and submitting your tax return. There are five key steps to completing this process, which we will outline below.

1. Keep records of annual transactions and prepare necessary documents

Start by ensuring you have the right records and documents. This is a good time to review what you have and determine if additional documents are needed. You might also consider consulting with a tax advisor or professional.

Required Documents:

1. Bank Account and Loan Balance Certificates (Issued by the bank. Applies if you are receiving a loan for business funds or applying for a mortgage loan deduction.)
2. Inventory Sheet
3. Various Account Statements (Receipts or proof of payment such as receipts or invoices are also required when expenses are paid.)
• Bank Deposits
• Accounts Receivable (Uncollected Income)
• Receivable Bills
• Prepaid Expenses
• Payable Bills
• Accounts Payable
• Loans
• Accrued Expenses
• Payment details and amounts for office rent, land rent etc.

Other certificates to prepare if applicable:

1. Deduction Certificates for Life Insurance and Property Insurance
2. Payment Certificates for National Health Insurance and National Pension (issued by the ward or city office)
3. Withholding Tax Slip (Gensen choshu hyo 源泉徴収票) from every company you have worked for this year, showing how much tax you have prepaid
4. Payment Certificates for Small and Medium Enterprise Mutual Aid
5. Receipts if medical expenses exceed 100,000 yen
6. Various certificates if you have built a new house and if a mortgage loan deduction is applicable

Categorize your expenses to help manage your data:

• Utilities (energy, gas, water)
• Rental for business purposes (if applicable, this includes co-working office space or your house if you have a specific location for your home office that meets a certain size requirement known as kaji anbun 家事按分)
• Business expenses (hardware like laptops, printing, or mailing for business purposes)
• Travel expenses (including trains, flights, or hotels that have been used for a business trip)

Regarding your identification documents, you’ll need to have the following on hand:

1. Your “My Number” card (Mainannba マイナンバー)
2. Your ‘foreign resident’ card (Zairyuu kaa do, 在留カード) if you have one

Note that a stamp or seal is no longer required. 

2. Calculate your net income and taxable income

Refer to Part 1: What is the Japanese Tax Return for more information on these calculations. 

1. Gross Income − Expenses, etc. = Net Income (A)
2. Net Income (A) − Deductions = Taxable Income (B)

As of October 2023, there are 15 types of deductions, each with different criteria and methods of calculation. After calculating each applicable deduction, subtract the total deductions from your total income. Below are a selection of some of the available deductions: 

Comparing the White Tax Return vs. Blue Tax Return

→ Source: National Tax Agency "No. 1100 Overview of Income Deductions"

3. Calculate the income tax amount and tax payment amount

Next, calculate your income tax amount and tax payment amount using the following formulas:

3. Taxable Income (B) × Tax Rate = Income Tax Amount (The tax rate gradually rises along with the increased taxable income (B))
4. Income Tax Amount - Tax Credit Amount = Tax Payment Amount

Here’s a table for the relevant tax rates:

→ Source: “National Tax Agency "No. 2260 Income Tax Rates”

4. Prepare your tax return

You can either prepare your tax return yourself or hire a tax agent, such as a tax accountant, to do it for you. The three main preparation methods are:

1. National Tax Agency website: Create your return online.
2. Accounting software: Recommended for ease and speed.
3. Pen and paper: Manually create your return.

If you use accounting software, your tax agent can review your data and file your return online, offering a quick and accurate method. If you are preparing it yourself, use this link (in Japanese) to start. 

5. Submit your prepared tax return

Once your tax return is ready, submit it along with any supporting documents such as identity verification and deduction certificates. You can submit via:

 

Notes: 

• E-tax is the e-filing system by The National Tax Agency of Japan that allows declarations and tax payments to be made online. Note that the site is mostly in Japanese with some English references.
• E-tax is different from eLTAX which is a system for filing and paying local taxes. 
• When filing online, ensure you have your My Number card and e-Tax login credentials handy.

 

Who to consult for your tax return

If you have questions, consult a tax accountant, or the local tax office. Customer support for accounting software (e.g., MoneyForward or freee) can assist with platform-related questions, but they won’t be able to help with tax-related inquiries. During tax season, you can also request a calculation check at the local tax office.

After you file your taxes

Keep copies of all your documents for future reference. For instance, accounting firms may request these before proceeding with your case. Digital storage is recommended.

If eligible for a tax refund, the amount will be deposited into the account specified in your submission. If you owe taxes, you can pay via direct payment, internet banking, credit card, convenience stores, account transfer, or over-the-counter at financial institutions or your district tax office.

→ Source: NTA 「Methods of national tax payment」

In Summary

To submit your tax return, follow these five steps: keep records of transactions, calculate your net income and taxable income, calculate your income tax amount and tax payment amount, prepare your return, and submit it. Don’t hesitate to seek help from the tax office or a tax professional if needed.