Income Tax Act

A person paying, in Japan, severance pay or other such compensation as prescribed in Article 30, paragraph (1) (Retirement Income) (hereinafter referred to as "severance pay or other such compensation" in this Chapter) to a Resident must withhold income taxes from that severance pay or other such compensation at the time of payment and pay them over to the national government by the 10th day of the month following the month in which the day of withholding falls.

Notwithstanding the provisions of the preceding Article, a person who pays salaries or other wages as prescribed in Article 28, paragraph (1) (Salary Income) only to not more than two domestic workers on a regular basis is not required to withhold and pay over income taxes on the severance pay or other such compensation that the person pays.

The amount of income taxes to be withheld pursuant to Article 199 (Obligation to Withhold Taxes) is the amount of tax that each of the following items prescribes for the case set forth in that item:

if the declaration on receipt of retirement income submitted by the Resident being paid severance pay or other such compensation states that there is no other severance pay or other such compensation that it was decided would be paid in the year in which it was decided that the severance pay or other such compensation would be paid and that has already been paid (referred to as "other severance pay already paid" in the following item): the amount of tax calculated by applying Article 89, paragraph (1) (Tax Rates) with the amount specified in each of the following for the case set forth therein deemed to be the amount of taxable retirement income:

if the severance pay or other such compensation being paid falls under general severance pay or other such compensation (meaning general severance pay or other such compensation as prescribed in Article 30, paragraph (7) (Retirement Income); the same applies in (a) of the following item and in Article 203, paragraph (1), item (ii) (Declaration on Receipt of Retirement Income)): the amount equivalent to one half of the balance remaining after deducting the amount of the retirement income deduction from the amount of the severance pay or other such compensation being paid (or, if that amount includes a fractional amount of less than 1,000 yen or the whole of that amount is less than 1,000 yen, the amount after rounding down that fractional amount or the whole amount; the same applies in (a) of the following item);

if the severance pay or other such compensation being paid falls under short-term severance pay (meaning short-term severance pay as prescribed in Article 30, paragraph (4); the same applies in (b) of the following item and in Article 203, paragraph (1), item (ii)): the amount specified in each of the following for the case set forth therein (or, if that amount includes a fractional amount of less than 1,000 yen or the whole of that amount is less than 1,000 yen, the amount after rounding down that fractional amount or the whole amount):

if the balance remaining after deducting the amount of the retirement income deduction from the amount of the severance pay or other such compensation being paid is three million yen or less: the amount equivalent to one half of that balance;

in cases other than the case set forth in (1): the total of 1.5 million yen and the balance remaining after deducting the amount arrived at by adding the amount of the retirement income deduction to three million yen from the amount of the severance pay or other such compensation being paid;

if the severance pay or other such compensation being paid falls under specified officers' severance pay (meaning specified officers' severance pay as prescribed in Article 30, paragraph (5); the same applies in (c) of the following item and in Article 203, paragraph (1), item (ii)): the amount equivalent to the balance remaining after deducting the amount of the retirement income deduction from the amount of the severance pay or other such compensation being paid (or, if that amount includes a fractional amount of less than 1,000 yen or the whole of that amount is less than 1,000 yen, the amount after rounding down that fractional amount or the whole amount; the same applies in (c) of the following item).

if the declaration on receipt of retirement income submitted by the Resident being paid severance pay or other such compensation states that there is other severance pay already paid: the amount of tax equivalent to the balance remaining after deducting the amount of income taxes withheld or to be withheld pursuant to Article 199 from the other severance pay already paid, from the amount of tax calculated by applying Article 89, paragraph (1) with the amount specified in each of the following for the case set forth therein deemed to be the amount of taxable retirement income:

if both the severance pay or other such compensation being paid and the other severance pay already paid fall under general severance pay or other such compensation: the amount equivalent to one half of the balance remaining after deducting the amount of the retirement income deduction from the sum total of the amount of the severance pay or other such compensation being paid and the amount of the other severance pay already paid;

if both the severance pay or other such compensation being paid and the other severance pay already paid fall under short-term severance pay: the amount specified in each of the following for the case set forth therein (or, if that amount includes a fractional amount of less than 1,000 yen or the whole of that amount is less than 1,000 yen, the amount after rounding down that fractional amount or the whole amount):

if the balance remaining after deducting the amount of the retirement income deduction from the total of the amount of the severance pay or other such compensation being paid and the amount of the other severance pay already paid is three million yen or less: the amount equivalent to one half of that balance;

in cases other than the case set forth in (1): the total of the balance remaining after deducting the amount arrived at by adding the amount of the retirement income deduction to three million yen from the total of the amount of the severance pay or other such compensation being paid and the amount of the other severance pay already paid, and 1.5 million yen;

if both the severance pay or other such compensation being paid and the other severance pay already paid fall under specified officers' severance pay: the amount equivalent to the balance remaining after deducting the amount of the retirement income deduction from the sum total of the amount of the severance pay or other such compensation being paid and the amount of the other severance pay already paid;

in cases other than those set forth in (a) through (c): the amount calculated pursuant to Cabinet Order.

The amount of the retirement income deduction prescribed in the items of the preceding paragraph is based on the amount of the retirement income deduction set forth in Appended Table VI according to the years of service corresponding to the years of service prescribed in Article 30, paragraph (3), item (i), and to whether the case falls under the case set forth in paragraph (6), item (iii) of that Article, as they stand at the time it was decided that the severance pay or other such compensation from which income taxes are to be withheld under the preceding paragraph would be paid (or, if the case falls under the case set forth in item (i) of paragraph (6) of that Article, the amount calculated in accordance with that paragraph).

If a Resident being paid severance pay or other such compensation has not submitted a declaration on receipt of retirement income by the time of being paid, the amount of income taxes to be withheld pursuant to Article 199 is the amount of tax equivalent to the amount calculated by multiplying the amount of the severance pay or other such compensation being paid by a tax rate of 20 percent.

If a lump-sum payment deemed to be severance pay or other such compensation pursuant to Article 31, item (iii) (Lump-Sum Payments Deemed to Be Severance Pay or Other Such Compensation) is paid and the contributions made under the plan rules prescribed in that item include an amount borne by the participant prescribed in that item (including cases specified by Cabinet Order as similar to this), for the purpose of applying the preceding Article, severance pay or other such compensation is deemed to have been paid in an amount equivalent to the amount remaining after deducting the amount so borne (including any amount specified by Cabinet Order) from the amount of that lump-sum retirement payment.

A Resident paid severance pay or other such compensation in Japan must, by the time of being paid, submit a declaration stating the following particulars to the competent district director for the locality for paying over taxes under Article 17 (Locality for Paying Over Withholding Tax) (or, if a designation has been made under Article 18, paragraph (2) (Designation of Locality for Paying Over Taxes), the locality so designated) for the income taxes on that severance pay or other such compensation, via the person paying that severance pay or other such compensation. In such a case, when submitting a declaration stating that there is other severance pay or other such compensation already paid as prescribed in item (ii), the Resident must attach to that declaration the withholding receipt issued pursuant to Article 226, paragraph (2) (Withholding Receipts) for that other severance pay or other such compensation already paid.

the name of that person paying the severance pay or other such compensation;

whether there is other severance pay or other such compensation already paid as prescribed in Article 201, paragraph (1), item (i) (Amount of Taxes Withheld), and, if there is, whether that other severance pay or other such compensation already paid falls under general severance pay or other such compensation, short-term severance pay, or specified officers' severance pay, and its amount;

the years of service that form the basis for calculating the amount of the retirement income deduction prescribed in Article 201, paragraph (2);

whether the Resident falls under the case set forth in Article 30, paragraph (6), item (iii) (Retirement Income), and, if so, the facts on which that is based;

any other particulars specified by Ministry of Finance Order.

Severance pay or other such compensation from which income taxes are not required to be withheld and paid over pursuant to Article 200 (Person Paying Severance Pay or Other Such Compensation Exempt from Withholding at the Source) is not included in the severance pay or other such compensation prescribed in the preceding paragraph.

In the case referred to in paragraph (1), if a declaration under that paragraph is accepted by the person paying the severance pay or other such compensation via whom it is to be submitted, the declaration is deemed to have been submitted to the district director prescribed in that paragraph at the time it was accepted.

If the person paying the severance pay or other such compensation via whom a declaration under paragraph (1) is to be submitted meets the requirements specified by Cabinet Order, including having taken measures that enable it to properly receive, by electronic or magnetic means (meaning the electronic or magnetic means prescribed in Article 198, paragraph (2) (Special Provisions on the Time of Submission of Declarations by Salary Income Earners Concerning Withholding and Related Matters); the same applies in this paragraph), the particulars to be stated in that declaration (referred to as the "required particulars" in this paragraph), a Resident paid severance pay or other such compensation referred to in that paragraph may, in lieu of submitting that declaration, provide the required particulars to that person paying the severance pay or other such compensation by electronic or magnetic means. In such a case, the second sentence of paragraph (2) of that Article applies mutatis mutandis.

For the purpose of applying paragraph (3) in a case where the preceding paragraph applies, the phrase "a declaration" in that paragraph is deemed to be replaced with "the particulars to be stated in a declaration"; the phrase "is accepted by the person paying the severance pay or other such compensation" is deemed to be replaced with "are provided to the person paying the severance pay or other such compensation"; and the phrase "at the time it was accepted" is deemed to be replaced with "at the time they were provided".

A declaration under paragraph (1) is referred to as a declaration on receipt of retirement income.