Withholding Tax on Invoices in Japan: Fees, 10.21% and an Example

Article 204(1) of the Income Tax Act (所得税法) requires anyone paying certain fees to a resident of Japan (居住者) to withhold income tax at the time of payment and pay it to the government. Only the fees listed in the items of that paragraph are covered^[1]. These are the categories most relevant to freelancers.

Other categories cover models, sales agents (外交員), performers and more. The NTA page "Fees that require withholding" (源泉徴収が必要な報酬・料金等とは) has the full list^[4].

The same design job can be withheld or not depending on who pays. An individual who has no duty to withhold tax on salaries does not withhold on fees such as writing, design, lecture or professional fees^[1][2].

When the payer is an individual, whether they have a salary withholding duty is judged as of the day the fee is due to be paid^[12]. If your client is a sole proprietor, ask whether they will withhold before you issue the invoice, so you don't have to redo the net amount.

When the recipient is a corporation, the only fee or charge subject to withholding is horse racing prize money paid to a corporate horse owner^[4]. Design or writing fees received by a corporation are not withheld.

• Drop any fraction of a yen from the result^[6].
• The ¥1,000,000 test is applied to each payment to the same person. Only the part above ¥1,000,000 is taxed at 20.42%, not the whole amount^[1][6].
• 10.21% is income tax of 10% plus the special income tax for reconstruction (2.1% of the income tax). From January 1, 2027 it becomes a 1% special income tax for defense plus a 1.1% reconstruction tax, but the combined rate and the calculation stay the same^[7].
• Fees of judicial scriveners (司法書士), land and house investigators and maritime procedure agents are calculated differently: subtract ¥10,000 from each payment, then apply 10.21% to the rest^[14].

When a fee includes consumption tax, withholding is in principle calculated on the tax-inclusive amount. If the recipient's invoice or similar document clearly separates the fee and the consumption tax, the payer may withhold on the fee alone^[8][6].

This did not change when the qualified invoice system started. Any invoice or delivery note will do; it does not have to be a qualified invoice. Even a business that is not a registered issuer, such as a tax-exempt business (免税事業者), can have withholding calculated on the fee alone by showing the fee and the tax separately^[9].

The figures are ¥185,000 × 10.21% = ¥18,888.50 and ¥203,500 × 10.21% = ¥20,777.35, both with the fraction dropped^[6]. In this example, showing the tax separately reduces the amount withheld by ¥1,889.

Japanese income tax law does not require you to show withholding on your invoice^[15], because the obligation is the payer's^[1]. Showing it still lets you and the client agree on the deduction and the amount to be paid when you bill.

If you show it, the usual approach is a separate withholding line (源泉徴収税額) next to the fee and the amount billed^[15]. Placing it under the tax-inclusive total, with the net amount due (差引ご請求金額) below it, is standard practice.

小計（税抜）　185,000円
消費税（10%）　18,500円
合計（税込）　203,500円
源泉徴収税額　−18,888円
差引ご請求金額　184,612円

1. Confirm with the client whether they withhold, and which lines are subject to it.
2. Show the fee on each line, and show the consumption tax separately from the fee.
3. Multiply the amount subject to withholding by the rate and drop the fraction of a yen^[6].
4. Subtract the withholding from the tax-inclusive total and show the result as the net amount due. That is the amount that will be transferred.

• Rounding to the nearest yen: withholding drops the fraction. ¥18,888.50 becomes ¥18,888, not ¥18,889^[6].
• Applying 20.42% to the whole fee once it passes ¥1,000,000: only the part above ¥1,000,000 is at 20.42%. On ¥1,200,000 the withholding is ¥142,940, not ¥1,200,000 × 20.42% = ¥245,040^[6].
• Leaving out travel and hotel costs you paid yourself: travel and accommodation are in principle part of the fee. They can be left out only when the payer pays the transport company or hotel directly and the amount is within what is normally needed^[6][12].
• Assuming a different label changes the answer: a payment that is in substance a fee is subject to withholding even if it is called an honorarium, research costs, materials or travel allowance^[12].
• Showing withholding when you bill as a corporation: payments to a corporation are generally not withheld^[4].
• Showing withholding on fees from a sole proprietor who pays no salaries: an individual with no salary withholding duty does not withhold from fees^[1][2]. A sole proprietor who pays a family member a 青色事業専従者給与 salary does withhold^[3].

• The payer pays the tax: tax withheld from writing fees and similar is paid by the payer by the 10th of the month after payment. These fees are not eligible for the semiannual payment option (納期の特例)^[6].
• Payment statement (支払調書): the payer files a "statement of payments of fees, charges, contract money and prizes" with the tax office by January 31 of the following year. For writing and lecture fees and similar, it covers payees who received more than ¥50,000 in total that year^[16].
• Tax return (確定申告): tax withheld from your fees is settled in your final income tax return^[17]. Keeping a yearly tally from your invoices and bank records makes the amounts easy to check.