Before any tax applies, your gross salary is reduced by the employment income deduction, a scaling allowance unique to salaried employees that guarantees at least ¥740,000 off the bottom under the 令和8 reform, then steps down as a smaller percentage of gross the more you earn. A separate ¥620,000 basic deduction comes off next for most earners. What's left after both of those, and after your social insurance premiums, is your actual taxable income.
That taxable income runs through seven national tax brackets from 5% up to 45%, then picks up a 2.1% reconstruction surtax calculated on the tax itself, not your income, a legacy of the 2011 earthquake recovery effort that's legislated to keep running through 2037. Resident tax, a separate flat 10%, applies to the same taxable income base, but with an important twist: it's based on last year's earnings, not this year's, which is why many newcomers see almost nothing on that line in their first year.
Four social insurance premiums come out alongside all of this: health insurance, employees' pension, employment insurance, and, if you're between 40 and 64, nursing care insurance. Health and pension premiums stop growing once your monthly salary passes a ceiling, so very high earners see a smaller share of their pay go to social insurance than someone in the middle of the range.
