News Details


Revision of Retirement Income Taxation

List of news

1. Introduction
Due to the Tax Reform 2021, the taxation of retirement income will be amended from January 1, 2022. In this News, we will mention the details of the reform including the revised calculation of taxable retirement income announced by the NTA.

2. Background
In Japan, retirement income is taxed separately from ordinary income because of its nature as rewards to employees for long-term performance or the source of living for retirees.
In recent years, there are some cases where employees receive the payment for short-term performance as the retirement income in favor of its tax advantage. Therefore, in the 2021 tax reform, not only directors but also certain employees are no longer qualified for the 50% taxation. However, in consideration of the current labor fluidity, in cases where employees’ income up to JPY3 million is still qualified for the 50% taxation.

3. Details
【Current law】
The retirement income is imposed on the amount after deducting the retirement income deduction calculated based on the employee’s length of service, and the application of the 50% taxation is classified as follows.

Employees whose length of service is five years or less are not eligible for 50% exclusion as follows.

Please note that the tax return format for retirement income will also be amended.

4. Conclusion
In this News, we mentioned the revision of retirement income taxation. 
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.

(References / in Japanese)
Summary of Revision of Retirement Income  April 2021
Accessed on October 29, 2021

Partial Revision of the “Form of Applications and Notifications related to Corporate Taxation” (Notification of Statutory Interpretation) 
Accessed on October 29, 2021