Dear Customers.

This is inform that Japan payroll statutory is going to be updated next year.

This update applies to employees who resign from the company within 5 years of employments and the amount of retirement allowance minus exemption exceeds 3 million.

This update will be effective from 1 January 2022.

Please refer to the below example for the update.

Before update:
The taxable retirement allowance is half of the difference of the amount of retirement allowance and exemption.

For example, the amount of retirement allowance is 10 million and the employee has worked for 5 years.

The taxable retirement allowance
= 1/2 x (10 million – (400,000 x 5 years))
= 1/2 x 8 million
= 4 million

After update:
The amount of retirement allowance minus exemption will be split into two parts – 3 million and the rest. The taxable retirement allowance will be half of the 3 million (1.5 million) plus the remaining amount.

Using the same example, the amount of retirement allowance is 10 million and the employee has worked for 5 years.

The amount of retirement allowance minus exemption = 10 million – (400,000  x 5 years) = 8 million

Taxable retirement allowance
= 3 million x 1/2 +(8 million –  3 million)
= 6.5 million

There will be no change for the subsequent tax calculation.

For any further information, please feel free to contact us if you have any question.