About Kyuyo Shotoku Kojo
Kyuyo Shotoku Kojo (給与所得控除) is a tax exemption set for Japanese employees’ salary and bonus, that is permitted in both national and residence tax.
According to the amount of salary and bonus that an employee earns through one year, a certain percentage of the annual income is exempted. The income after this exemption is called Kyuyo Shotoku (給与所得, adjusted income for salary). After other exemptions such as social security payments are deducted from this Kyuyo Shotoku, Japanese national and residence tax is calculated.
The reason why Kyuyo Shotoku Kojo is set is that it is expected that employees are difficult to deduct their cost they pay through their working, so the tax system presets some exemption to their salary. Self-employed such as freelances are out of Kyuyo Shotoku Kojo because they are expected to be able to deduct their cost when they apply tax returns.
Expected revision of Kyuyo Shotoku Kojo, possibly leading to more taxation to employees
Some point out that the present Kyuyo Shotoku Kojo has become disproportionately disadvantageous for self-employed persons when compared with other OECD countries, that prevents Japanese employees from changing their job into freelances.
So Japanese government has started a discussion about whether Kyuyo Shotoku Kojo should be kept and how it should be revised.
However, if Japanese Kyuyo Shotoku Kojo is revised in pace with other OECD countries, then it will inevitably lead to much more taxation to Japanese employees.
So it is expected that the government cannot help adding another exemption if they set less Kyuyo Shotoku Kojo in the future.
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