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1. Employment Income Deduction |
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A． Limitation of employment income deduction
A new ceiling has been introduced for employment income deductions. For individuals with gross income in excess of 15 million yen, the employment income deduction is capped at 2.45 million yen. |
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For example, income taxes for an individual with 17 million yen of gross salary would be computed under the following method: |
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(Unit : in thousands of yen) |
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Current (A) |
Amended (B) |
Diff (B) – (A) |
| Gross employment income |
17,000 |
17,000 |
- |
| Employment deduction |
（2,550） |
（2,450） |
（100） |
| Taxable income |
14,450 |
14,550 |
100 |
| Income tax (33%) |
3,232.5 |
3,265.5 |
33 |
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B．Directors’ remuneration |
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In addition to A above, employment income deduction for directors will decrease when the employment income exceeds 20 million yen as shown at the table below: |
| Gross employment income (in Yen) |
New deduction computation |
| 20 M – 25M |
2.45 M - (Gross salary―20 M) ｘ 12％ |
| 25 M – 35M |
1.85 M |
| 35M – 40M |
1.85 M - (Gross salary―35 M) ｘ 12％ |
| Over 40M |
1.25 M |
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For example, employment deduction for a director with 40 million yen of gross salary would be: |
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(Unit : in thousands of yen) |
| Previously |
Amended |
Decrease |
| 40,000 ｘ 5％ + 1,700 ＝ 3,700 |
1,250 |
2,450 |
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2．Severance Pay |
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A．Severance pay to directors |
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For severance paid to directors who served under five years, the calculation of taxable retirement income has changed for national individual tax purposes. Before the amendment, taxable retirement income was multiplied by 50% of the paid benefits after the retirement income deduction. Under the new rule, the 50% reduced rate can no longer be applied. This amendment is effective from January, 2012. |
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B．Inhabitant taxes for severance pay |
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The tax rate of local individual taxes for retirement income will return to 10% from 9%. This change applies to all employees and directors who receive benefits. |
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3．Dependency Deduction |
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| Age |
Previously |
2010 Amendment |
2011 Amendment |
| 70 and over |
480,000 |
480,000 |
480,000 |
| 65 - 70 |
380,000 |
380,000 |
380,000 |
| 23 - 65 |
380,000 |
380,000 |
380,000* |
| 19 - 23 |
630,000 |
630,000 |
630,000 |
| 16 - 19 |
630,000 |
380,000 |
380,000 |
| Younger than 16 |
380,000 |
- |
- |
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*- If a taxpayer’s income is above four million yen, there is no dependency deduction. |
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