What are 'Year-End Adjustment' (Nenmatsu Chōsei) and 'Final Tax Return' (Kakutei Shinkoku)? Do I need to file taxes myself?

Hey there! I totally get why you're confused about these terms – I was in the same boat when I first came to Japan. Don't worry, it's actually simpler than it sounds. Let me break it down for you in plain language.

Basically, both are about "settling the books" for your personal income tax. The government has you (or your company) pay estimated taxes throughout the year. Then, at year-end, they calculate the final amount based on your actual annual situation and settle up – you either get a refund or pay the difference. "Nenmatsu Chōsei" (Year-End Adjustment) is done for you by your company, while "Kakutei Shinkoku" (Final Tax Return) is something you do yourself.

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What is "Nenmatsu Chōsei" (Year-End Adjustment)?

Think of it as a "simplified tax filing" handled by your company.

• Who is it for? The vast majority of company employees (called 「会社員」/ "kaishain" in Japanese).

• How does it work?

  1. Withholding Tax During the Year: Each month when you get paid, your company estimates and deducts an approximate amount of income tax from your salary. This withheld tax is called 「源泉徴収税」/ "Gensen Chōshūzei". It's like making "prepaid" tax payments throughout the year.
  2. Year-End Reconciliation: Towards the end of the year (usually November or December), your company will give you some forms to fill out about your personal situation, such as:
     • Did you buy life insurance or earthquake insurance this year? (Tax deductible)
     • Do you have dependents (spouse, children, parents)? (Tax deductible)
  3. Company Calculates the Final Tax: Using the information you provide, your company recalculates the exact amount of tax you should have paid for the whole year. They then compare this to the total amount you "prepaid" via withholding.
     • Overpaid: Congratulations! The extra amount will be refunded to you, usually visible as extra money on your December or January payslip.
     • Underpaid: You'll need to pay the difference, which your company will deduct from your salary.

• What do you need to do? You simply need to fill out the forms your company provides and submit any required proof (like insurance certificates) when asked. Your company handles all the calculations and filing. For most salaried employees with only one job source, completing the "Nenmatsu Chōsei" means you're done with your taxes for the year.

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What is "Kakutei Shinkoku" (Final Tax Return)?

Think of this as the "official, comprehensive personal annual tax filing", which you must do yourself.

• Who needs to do it?

  1. Freelancers, Self-Employed Individuals: No company withholds tax for you; you must calculate and report all your income yourself.
  2. Salaried Employees Earning Over 20 Million Yen Annually: Legally required to file their own return.
  3. People with Side Income: If you have income from side jobs (e.g., freelance work, reselling, content creation) and the annual profit (revenue minus costs, not just sales) exceeds 200,000 yen, you must declare this income yourself.
  4. People Who Changed Jobs or Left Employment Mid-Year: If you left your job before year-end and your new company cannot incorporate your previous income into their Year-End Adjustment, you must file a Final Return.
  5. Salaried Employees Claiming Specific Deductions: Even if your company did your Year-End Adjustment, some deductions require you to file a Final Return to claim them. The most common are:
     • Medical Expense Deduction: If you or your family had significant medical/dental expenses in a year (usually exceeding 100,000 yen / approx. $700 USD), you can claim a deduction.
     • Mortgage Loan Deduction (住宅ローン控除): If you bought a home with a mortgage, you must file a Final Return yourself in the first year to claim the deduction.
     • Furusato Nozei (Hometown Tax Donation): This popular donation-based tax reduction scheme also requires you to file a Final Return to claim the benefit.

• What do you need to do? Between February 16th and March 15th of the following year, gather all your income documents (like your company's 「源泉徴収票」/ "Withholding Tax Slip"), receipts for expenses and deductions, and file your return either in person at your local Tax Office (税務署 / Zeimusho) or online.

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So, do I need to file a tax return myself?

It's pretty straightforward. Ask yourself:

• Scenario A: Probably Not Needed If you are a regular salaried employee, working for only one company, earning less than 20 million yen annually, with no side income, and none of the specific deduction situations mentioned above apply to you. ➡️ Then, the "Nenmatsu Chōsei" done by your company is sufficient. You don't need to do anything else.

• Scenario B: You Must File If you fall into any of the categories listed under "Kakutei Shinkoku" (e.g., freelancer, side income profit > 200,000 yen, want to claim medical expenses, etc.). ➡️ Then, you must file your own "Kakutei Shinkoku" within the designated period.

Summary

Hope this explanation gives you a clearer picture of Japanese tax filing! For most new salaried employees in Japan, just remember to submit the documents your company asks for on time and complete your "Nenmatsu Chōsei" – that should cover you, so no need to stress too much.