Fall Newsletter (No. 27) as of
Individual Income Taxes
Effective January 1, 2015, the highest income tax bracket will rise from 40% to 45% as announced in the last October newsletter (No. 025). As a result of this change, the effective highest income tax rate including inhabitant tax and special income tax for reconstruction will reach 55.945%.
Taxable income (Yen)
Monthly Collection of Inhabitant Tax
In general, employers are required to withhold inhabitant taxes monthly from employee’s salaries and remit the inhabitant taxes to the city/ward office where they reside. This procedure is similar to individual income taxes (referred to as “special collection of inhabitant tax”). There have been numerous cases where this rule was not respected. Some local wards and cities have begun to enforce compliance of this special collection.
Wider Applicability of Inheritance Tax
With the objective to close the gap between the rich and the poor, and maintain the balance of wealth in the economy, effective January 1, 2015, the tax base of inheritance tax and the structure of inheritance tax rates will be revised. This will reduce basic exemption of inheritance tax from “50 million yen + (10 million yen × the number of statutory successors)” to “30 million yen + (6 million yen × the number of statutory successors)”.
Inheritance tax in Japan is summarized as follows:
Payroll and Statutory Benefits
Update on Social Insurance Rates
Effective September 2014, the welfare pension insurance rates have increased as follows:
Employer contribution – from 8.560 % to 8.737 %
Employee contribution – from 8.560 % to 8.737 %
These rates increases were pre-approved and such rates are expected to continue to rise by 0.177% until it reaches 9.15% for both the employer and employee in 2017.
Review of Dependents for Health Insurance
Japan Health Insurance Association has been sending a questionnaire on dependents to companies from late May for a couple of months every year to confirm the current status of dependents. This effort is being carried out to reduce health insurance premium. Seventy thousand dependents have been removed from the system as a result of the 2013 review.
(Definition of dependents)
The scope of dependents for health insurance is defined differently from the income tax income tax definition. Lineal ascendants, spouse (including a de facto state of marriage), children, grandchildren, siblings who are dependent on an insured person to make a living have certain conditions to meet such as income, age, and whether they share the same domicile.
Employee Work Rules
Companies in which there are ten or more employees are required to prepare employee work rules (or handbook) and submit them to the Chief of the Labor Standards Inspection Office. Working conditions or regulations are part of the work rules. Regardless of the policy names, salary policies, retirement allowance policies, child-care and family-care leave policies, which are set up separately, all are regarded as a part of the work rules and are required to be submitted to the Labor Standards Inspection Office in preparing or revising these policies.
There is a fine of up to 300,000 yen if you fail to prepare and file the work rules.
Seasonal employees are exempted from the obligation. However, if you regularly retain ten or more employees, you are subject to the obligation. When you have contract workers or part-time workers who have different employment forms from full-time employees, you need to count them as a part of your employees. However, temporary workers (Haken shain) are excluded (Haken shain are counted under the temporary agency).
Work rules must specify: (1) mandatory matters (see below), (2) documentation of certain policies (see below), and (3) discretionary matters. Mandatory matters must be stated in the work rules and if partial matters are missing, the work rules themself are still valid, however, there is a violation of work rules.
（1） Mandatory matters
a) Work starting and finishing times, break times, days off, paid leave and work shift arrangements where work is to be performed by two or more teams of workers
b) The determination of wages, methods of calculation and payment, payroll closing date, timing of payment and wage rises
c) Retirement (including grounds for dismissal)
The following matters must also be specified in work rules if relevant arrangements are in place:
（2） Documentation of certain policies
a) Matters regarding the scope of workers eligible for retirement benefits, determination of retirement allowance, methods of calculation and payment, and timing of payment of retirement allowance
b) Special pay and minimum wage
c) Payment by workers of meal expenses and costs of supplies used in work
d) Health and safety
e) Vocational training
f) Accident compensation and non-occupational sickness allowances
g) Commendations and types and extent of punishments
h) Matters not covered by the above applicable to all workers at the business establishment concerned
(Flow of work rules submission)
Amendment Part-Time Employment Act
Starting from April 1, 2015, the Act on partial amendment of Part-Time Employment Act will become effective. Considering the current working conditions of part-time employees, the Act will require companies to provide fair working conditions, training and benefits, etc. for part-time employees in order to enable the part-time employees to expand on their potential. The Minister of Health, Welfare and Labor has the authority to issue a correction order to companies in violation of regulations. If they do not follow the order, a new provision will allow The Minister of Health, Welfare and Labor to publicly announce names of such companies.
This amendment includes the following points;
- Expand the scope of working conditions and benefits for part-time employees
- Set regulations for all part-time employees.
- Explain employment conditions to part-time employees at employment
- Set up an infrastructure to respond to inquiries from part-time employees when necessary
In October 2016, social insurance enrollment conditions for part-time employees will be relaxed. Current rules require the working hours to be at least 75% of full-time employees for enrollment.
(Companies with more than 501 employees will be applied first.)
In addition to CONTADor (accounting system) and webvacationmanager (vacation days tracking system), we will be rolling out two more cloud-based systems in November which can be used on your PC and/or smartphone. For those interested, please approach your in-charge for a demonstration. There is no charge to use either systems if we provide accounting and payroll services.
Expense Reporting System (“webexpensemanager”)
Each employee will submit expense report reimbursements through their portal. All receipts can also be uploaded. Originals will be mailed to us. Emails will automatically be sent to their supervisors for approval, which can be authorized by a click on the email response or access to the portal. The administrator and/or supervisors can constantly monitor each employee’s historical expenses for up to one year.
Attendance Management System (“webattendancemanager”)
At the end of each day, the employee will access their portal, confirm/change the time he/she came into the office as well as the time he/she left the office and then press the submit button. Such times will be logged into a system so you have an attendance log which is in compliance with Japanese Labor Laws. Email notices will be sent to supervisors if the number of overtime exceeds the preset hours.
If your company uses webvacationmanager, vacation days will automatically be reflected here.
Office Manager Seminar
We will be holding a seminar to highlight the topics of the 2014 tax reform and change in the welfare pension insurance premium ratios. If you are interested in participating, please send an e-mail to the following e-mail address by noon on Monday, October 6, 2014.
Date: Friday, October 17, 2014, 1:30 pm – 3:30 pm
Place: Training room at Okamoto & Company
This newsletter is for private circulation only. Although care has been taken in the preparation of this document, contents have been highly summarized and it may contain errors and/or ambiguities for which we cannot be held responsible. If you are concerned about a specific issue, we recommend you seek professional advice. The material contained in this newsletter may not be reproduced in whole or in part by any means, without the permission of Okamoto & Company, Hiroko Hanato CPTA Office, Michiya Akuzawa CPTA Office or Fumihisa Shimono CPTA Office.