What is the Year-end adjustment?
Are you an employee working for a company in Japan? Do you know your income tax is withheld from your monthly salary?
Many Salarymen, “a Japanese white-collar worker who shows overriding loyalty to the corporation where he works (Wikipedia)”, actually don’t need to file their individual income tax return. According to the National Tax Agency report 2018, there were approximately 65 million workers in Japan in 2017 but only 21 million workers filed their individual tax returns. Your company pays your tax on behalf of you so you can just ignore the tax return. But your company is not your tax adviser and may not tell you something important to you. Your tax is what you have to care.
Anyway, the year-end adjustment is a kind of individual tax return that your company prepares and files on behalf of you. This usually happens in December as the individual tax year is the calendar year. Income tax is deducted from your monthly salary but this is just an estimate, so there should be a tax adjustment at the end of a year. You company needs to understand your tax situation and ask you to provide information relating your dependents, health insurance, pension, life insurance, earthquake insurance, home loans, etc. And then the company tells you the final tax amount for a year and also this is deducted from your salary in December or January of the following year.
You still need a tax return?
The year-end adjustment is not a perfect tax return and some people are not covered by this adjustment. Thus, you need to know if your tax can be handled by your company or not. For example, you have to prepare your tax return if your salary exceeds JPY 20 million. Also, you would still need the tax return (to get a refund) after the adjustment if you have a lot of medical expenses, donations, taxes paid in foreign countries, etc.
More about the Year-end adjustment
If you are interested to know more about the year-end adjustment, you can see the below information provided by the Japan National Tax Agency.