What Is the Residence Tax Determination Notice? Why Does It Arrive in June?

If you're an employee in Japan, you may have noticed your take-home pay drops noticeably every June. The main cause is the annual update of residence tax (jūminzei / 住民税)—a local tax separate from national income tax.

Japan's residence tax is calculated based on your previous year's income (January through December) and collected over 12 months, from June of the following year through May. Every June, employees receive a "Special Collection Inhabitant Tax Determination Notice," and deductions begin at the newly calculated rate.

Self-employed individuals and freelancers receive their "Municipal/Prefectural Inhabitant Tax Determination Notice" by mail in June and pay in four installments (June, August, October, and the following January) through "ordinary collection (futsū-chōshū)."

How Residence Tax Works

Two Components of Residence Tax

Residence tax consists of two parts:

① Income-proportional portion (shotoku-wari)

Taxable income × 10% (Prefectural: 4% + Municipal: 6%)

② Flat-rate portion (kintō-wari)

From 2024 onward, the standard combined flat-rate amount is 5,000 yen per year (Prefectural: 1,000 yen + Municipal: 3,000 yen + Forest Environment Tax: 1,000 yen). The post-earthquake reconstruction surtax (1,000 yen total, 2013–2023) has ended and been replaced by the Forest Environment Tax (1,000 yen) starting in 2024, so the effective total burden remains the same.

Calculating Your Taxable Income

Taxable income = Employment income − Social insurance premium deduction − Basic deduction − Other deductions

A critical difference to note: the basic deduction for residence tax is 430,000 yen, compared to 480,000 yen for national income tax. This 50,000 yen gap results in a slightly higher taxable base for residence tax purposes.

Example: A single employee earning 5,000,000 yen annually, with social insurance premiums of approximately 720,000 yen:

Item	Amount
Gross salary	¥5,000,000
Employment income deduction	¥1,440,000
Employment income	¥3,560,000
Social insurance deduction	¥720,000
Basic deduction (residence tax)	¥430,000
Taxable income	¥2,410,000
Income portion (×10%)	¥241,000
Flat-rate portion	¥5,000
Annual residence tax	¥246,000
Monthly amount (÷12)	≈¥20,500

How to Read Your Notice: 3 Key Points

For Employees: The Special Collection Determination Notice

The notice contains these key items:

Salary income amount: Your total gross income for the prior year
Deductions breakdown: Social insurance, basic deduction, spouse deduction, dependent deduction, etc.
Taxable income: Income after all deductions
Tax amount (income portion + flat portion): Total annual residence tax
Monthly withholding amounts: What will be deducted from each paycheck

When you receive the notice, first confirm that the listed salary income matches your actual prior-year income. Errors can arise from unreported side income or administrative mistakes. Contact your company's payroll department or your local municipal office with any questions.

Common Reasons Tax Increases Year Over Year

Salary raises or larger bonuses in the previous year
Side income, stock gains, or rental income
Fewer deductions (lower medical expenses, less furusato nōzei than last year)
Change in dependent status (e.g., spouse began earning income)

Why Take-Home Pay Drops in June

National income tax is withheld during the same year you earn the income. Residence tax, however, is collected the following year, from June through May. This lag is why your take-home pay feels like it suddenly drops every June.

For example, a salary increase in 2025 leads to a higher residence tax bill starting in June 2026. Conversely, if your income fell significantly in 2025, your residence tax will decrease starting in June 2026.

Be aware that employees who resign may have their remaining residence tax deducted as a lump sum from their final paycheck. Verify the amount with your payroll department before leaving.

Take-home Pay CalculatorEstimate your exact take-home pay after taxes and social insurance deductions.

Legal Ways to Reduce Your Residence Tax

1. Furusato Nōzei (Hometown Tax Donations)

Donations to furusato nōzei are credited against the following year's residence tax (income portion). Using the One-Stop Special System (for donations to five or fewer municipalities) lets you skip filing a tax return entirely. Your effective out-of-pocket cost is just 2,000 yen.

2. iDeCo (Individual-type Defined Contribution Pension)

iDeCo contributions are fully deductible from taxable income, directly reducing both your national income tax and residence tax. At the 10% residence tax rate, every 10,000 yen in monthly contributions saves you 12,000 yen in residence tax per year.

3. Medical Expense Deduction

If your annual out-of-pocket medical expenses (for yourself and dependents living with you) exceed 100,000 yen—or 5% of total income, whichever is lower—you can claim a deduction by filing a tax return. This reduces your taxable income and, in turn, the following year's residence tax.

FAQ

Q. When and where do I receive my residence tax determination notice?

Employees (special collection) typically receive their notice from their employer in early to mid-June—sometimes bundled with the pay stub, sometimes as a separate document. Self-employed individuals and retirees (ordinary collection) receive theirs by mail at home in early June.

Q. Can residence tax ever be zero?

Yes. If your prior-year total income falls below the municipality's non-taxable threshold—roughly below ¥1,000,000–¥1,250,000 annually, depending on the number of dependents and municipality—you may be fully exempt. Contact your local municipal office for the exact threshold.

Q. I'm in my first year of employment and no residence tax is being withheld. Why?

Residence tax is based on the prior year's income. If you had no income the previous year (e.g., a student transitioning to employment), no residence tax applies in your first year of work. Withholding typically begins in your second year, starting in June—a common reason new employees feel their pay suddenly shrinks in their second year.

Summary: Use Your June Notice to Plan Your Household Budget

The residence tax determination notice lays out your 12-month tax schedule, calculated from the prior year's income. When it arrives, check three things: ① the listed salary amount, ② the deductions breakdown, and ③ the monthly withholding amount. With those three figures confirmed, you'll know your full residence tax burden for the year ahead.

Tax-reduction strategies like furusato nōzei and iDeCo apply to this year's income and will be reflected in your June residence tax the following year. Starting now is the most effective way to protect your household finances.