Japan Tax Guide

Year-end tax adjustment for salary income (Nenmatsu-chosei)

Creation date2016/11/15 Last updated2022/07/19


What is Nenmatsu-chosei (year-end tax adjustment)?

Answer: Nenmatsu-chosei is the process of income tax adjustment for employees and directors, which is performed by salary payer in December or January every year.

  In Japan, Income Tax Law provides that the salary payer (a sole proprietor or a company) has to withhold income tax from salary of employee/director. However, monthly payroll calculation is made using the tentative number of dependents and estimated amount of annual salary income. The withheld tax amount is often different from final annual income tax to be paid. In addition, tax might be decreased if the employee/director has paid certain life insurance premiums, earthquake insurance premiums, etc.

  Salary payer is required to make an adjustment of income tax with the last salary calculation of the year, i.e. in December, it is called Nenmatsu-chosei. It can also be performed with the first salary calculation of the following year, instead of December salary. After the adjustment, the salary payer issues a certificate of income and withholding tax (Gensen-choshu-hyo) to each employee/director.

  The process of adjustment above is not applied to individuals who have annual salary of over 20 million yen, since they have to file the income tax return by themselves.

 For more detail, please feel free to contact TOMA Consultants Group.

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Question: 年末調整とは何ですか?

Answer: 年末調整とは、給与支払者が役員や従業員のため毎年12月又は1月に行う所得税の調整の手続きです。