🇯🇵💼 Retirement Allowance Received After Leaving Japan
🔁 Election for Taxation of Retirement Income (for Non-Residents)
1️⃣ 📌 Basic Rule
If you receive a retirement allowance after leaving Japan and becoming a non-resident,
the portion attributable to services rendered in Japan is subject to Japanese income tax.
💰 As a general rule,
👉 20.42% income tax (including the Special Reconstruction Income Tax) is withheld at source.
2️⃣ ❓ What Is the “Election for Taxation of Retirement Income”?
Even if you are a non-resident, you may elect to have your retirement allowance taxed in the same manner as if you were a resident of Japan.
🗳️ This is referred to as the
👉 Election for taxation of retirement income.
⚠️ This election must be made by filing a tax return; it is not applied automatically.
3️⃣ ✨ Why This Election Can Be Beneficial
When the election is applied, the retirement allowance is calculated as follows:
① 🧾 Deduction for Retirement Income
A retirement income deduction, based on years of service, may be applied.
This deduction is available only if the retirement allowance qualifies as retirement income under the Income Tax Act.
📈 The longer your service period in Japan, the larger the deduction may be.
② ➗ One-Half Taxation
After the deduction, only one half (1/2) of the remaining amount is treated as taxable income.
③ 💸 Possible Tax Refund
As a result, the final tax liability is often lower than the 20.42% tax withheld, and a refund may be available.
4️⃣ 📝 Filing a Tax Return and Appointment of a Tax Agent
A non-resident who needs to file a quasi-final tax return or a final tax return in Japan may:
👤 Appoint a Tax Agent (納税管理人) in Japan, and
💴 File the return and receive any tax refund through the Tax Agent.
✅ Summary (One Sentence)
📌 Retirement allowance received after leaving Japan is generally subject to 20.42% withholding, but by electing taxation of retirement income,
🧾 the retirement income deduction (where applicable) and ➗ one-half taxation may significantly reduce the tax burden and
💸 result in a refund.
