freee
フリーCloud accounting software · freee K.K.
- Fees
- Varies
- English
- No
Beginner-friendly cloud accounting built around guided workflows, popular with sole proprietors for blue-return filing and e-Tax.
How freelancers are taxed in Japan
The four bills a sole proprietor pays — income tax, resident tax, pension, and health insurance — and how they connect.
Direct answers
A sole proprietor pays income tax (progressive, national), resident tax (~10%, billed the next year), plus National Pension and National Health Insurance — all on profit after expenses and deductions.
Key points
- Tax is on profit (revenue − expenses − deductions), not on revenue.
- Income tax is progressive and national; resident tax is roughly 10% and lags a year.
- National Pension is a flat monthly amount; National Health Insurance is income-based.
- The blue return and pension-type deductions are your main levers to lower the base.
The four bills, and the base they share
Almost everything you owe is calculated from one number: your business profit, which is revenue minus necessary expenses. From that, personal deductions (the basic deduction, the blue-return special deduction, social-insurance premiums, small-business mutual aid, and iDeCo, among others) are subtracted to reach taxable income. National income tax is charged on that at progressive rates, and local resident tax adds roughly 10% on a similar base.
The two social-insurance bills sit alongside the taxes. National Pension is a flat monthly premium set each year; National Health Insurance is calculated by your municipality from your prior-year income. Because resident tax and health insurance both look back at last year, your bills lag your income — a strong year is followed by higher bills the next, which catches many first-year freelancers off guard.
What actually lowers the bill
Three levers do most of the work. First, claim every legitimate business expense with evidence. Second, file a blue return so you can take the special deduction (up to ¥650,000 with double-entry books and e-filing) and carry losses forward. Third, use deductible retirement and pension schemes built for the self-employed — small-business mutual aid, iDeCo, and the National Pension Fund — which cut taxable income while building your own safety net.
Set aside a tax reserve from every payment rather than facing the total at filing. A common rule of thumb is 20–35% of profit across all four bills, rising as income grows because income tax is progressive. Confirm each year’s rates, brackets, and deduction amounts before filing — recent reforms have moved the basic deduction and the income thresholds, so last year’s numbers may be stale.
Who this is for
- New sole proprietors mapping their total tax cost
- Freelancers planning a tax reserve
What this is not
- Company (法人) taxation
- Individual filing advice for a specific case
Important cautions
- Rates, brackets, and deduction amounts change yearly — confirm the current year with the NTA or a 税理士.
Related products & services
Money Forward Cloud
マネーフォワード クラウドCloud accounting software · Money Forward
- Fees
- Varies
- English
- No
Cloud accounting with strong automation and integrations, popular with freelancers and small companies that value flexible bookkeeping.
Frequently asked questions
What taxes does a freelancer pay in Japan?
A sole proprietor pays national income tax (progressive) and local resident tax (~10%), both on business profit after expenses and deductions, plus National Pension and National Health Insurance premiums that you fund yourself. If your taxable sales pass ¥10 million — or you register for the invoice system — consumption tax is added. Resident tax and health-insurance premiums are based on the prior year, so bills lag income. Confirm current rates and deductions each year, as recent reforms have moved the basic deduction and thresholds.
How much should a freelancer set aside for taxes in Japan?
A common rule of thumb is to reserve 20–35% of profit for income tax, resident tax, national pension, and national health insurance combined — higher as your income rises, because income tax is progressive. Remember resident tax and health-insurance premiums are billed based on the prior year, so your bills lag your income. Set the reserve aside in a separate account each month rather than facing it all at filing time.
What about pension and health insurance when self-employed in Japan?
As a sole proprietor you generally enroll in National Health Insurance (国民健康保険) and the National Pension (国民年金), and you pay both yourself — there is no employer split. National Pension is a flat monthly amount; National Health Insurance premiums are income-based and billed by your municipality. You can add optional coverage (e.g. the national pension fund, iDeCo, or income-protection insurance) to close gaps. Budget these into your tax reserve.