Are you aware of the government’s tax cut policy called “TEIGAKU-GENZEI 定額減税( Fixed amount tax cut )“that will be implemented from this June?

The government has decided to implement a measure to cut taxes for citizens by a certain amount in light of the current situation where wage increases are not keeping pace with high prices.
Fixed amount tax cut is a method of tax reduction that reduces the amount of taxes by a certain amount.

It scheduled to be implemented in June 2024 will reduce per capita income tax by 30,000 yen and inhabitant tax by 10,000 yen, for a total of 40,000 yen.

(1) Tax reduction eligibility

The tax reduction is available to the taxpayer and his/her dependents (residents only).

“Dependents” are family members who make a living together with you and have a net income of 480,000 yen or less (salary income of 1,030,000 yen or less).
Net income means Income after deducting expenses.
(Whether or not a person is a dependent is determined as of December 31, 2024.)
Of course, foreign nationals are also eligible if they are residents.

For example, a household consisting of a married couple and two children will receive a total tax reduction of 160,000 yen for both income tax and inhabitant tax.
This means that the amount of taxes to be paid will be reduced, thus increasing the take-home pay.

However, wealthy individuals with a total net income of over 18.05 million yen (in the case of salary income only, 20 million yen) are not eligible.
(The standard for income tax is for the year 2024 income and that of inhabitant tax is for the year 2023 income)

(2) How to reduce Income tax

A. For salaried workers
That system directly reduces the amount of income tax withheld from wages by 30,000 yen per person for the seven-month period from June to December 2024.
If the monthly income tax amount is less than 30,000 yen, the tax reduction will be carried over to the following month or later.
In principle, the payer (company) will do this, so you do not have to do anything.

B. For sole proprietors
In principle, sole proprietors are required to deduct this tax reduction from their own income tax return for the year 2024 (tax return filed between 2/16 and 3/15, 2025).

(3) How to reduce inhabitant tax

A. For salaried workers
The local government (city hall, etc.) will not collect inhabitant tax for the month of June 2024, but will collect it over the 11-month period from July to June 2025 by evenly distributing the amount of tax due after the tax reduction.

B. For sole proprietors
The tax reduction will be implemented from the June 2024 tax payment, and the portion not fully deducted will be taken from the August tax payment and thereafter.

Whether you are a salaried employee or a sole proprietor, in principle you do not need to do anything.

The difference between the inhabitant tax reduction and the income tax reduction is that the income tax reduction is applied to income tax for the year 2024, while the inhabitant tax reduction is applied to inhabitant tax for the year 2023.

(4) Other points to keep in mind

A. What happens if your original income tax and inhabitant tax are less than the amount of tax reduction?
In that case, the difference between the amount of tax reduction and your tax amount will be paid as a “benefit” later by the local government.
For example, if you receive the FURUSATO-NOZEI or Housing loan deduction, your tax bracket is less than Fixed amount tax cut, the difference will be paid to you later.

B. “Dependents” for purposes of calculating the fixed amount tax cut include dependents under the age of 16, but do not include overseas dependents since they are “non-residents” of Japan.

Although various explanations of Fixed amount tax cut Program have been released by the government, many aspects of the program’s operation are still in question and have not been fully explained.
I will update this site with any new information as it becomes available.

I am a tax accountant in Nagoya.
If you need help with accounting or taxation issues, please contact me.

Certified Tax accountant　 Motohiko Aoyama
e₋mail: bemyself8314@gmail.com