Japan Tax Bulletin
Lump-sum Withdrawal Payment from Employees’ Pension Insurance
June 2023
Expatriates residing in Japan for a limited duration may findthemselves ineligible for old-age pension benefits, despite having
made premium payments during their assignment in the country.
To address such cases, the Japan Pension Service offers a Lumpsum Withdrawal Payment from Employees' Pension Insurance.
1.

Eligibility to Claim Lump-sum Withdrawal Payment

Individuals can request a Lump-sum Withdrawal Payment if theymeet all of the following four requirements:(i) The person does not have Japanese nationality.
(ii) The person does not have an address in Japan.
(iii) The number of months of the Employees’ Pension Insurance
enrollment period is six months or more.
(iv) The person was never eligible to receive a pension (including
disability allowance).
The claim form must be submitted within two years from the datewhen the person no longer had an address in Japan.
To receive the Lump-sum Withdrawal Payment, it is necessary tosubmit the "Lump-sum Withdrawal Payment Claim Form" and therelevant documents to Japan Pension Service.
If the total period of premium payment is 10 years or more, theindividual is entitled to receive the old-age pension and cannot
claim the Lump-sum Withdrawal Payment.
Moreover, it should be noted that even if Japan has established abilateral social security agreement allowing the aggregation ofpension coverage periods, receiving Lump-sum Withdrawal
Payments from Employees’ Pension Insurance will result in theinability to include that relevant period as a pension coverage
period under the agreement.
2.

Income tax on Lump-sum Withdrawal Payment(a)Withholding Income Tax

The Lump-sum Withdrawal Payment is considered income
sourced in Japan and is classified as retirement income. Nonresidents receiving this payment from the Japan Pension Service1

Starting from 2022, for taxpayers with five years of service orless, the 1/2 deduction only applies to the first JPY 3 million ofare subject to a withholding income tax rate of 20.42% at thetime of payment.
(b)Elective Tax Return for Retirement Income

Non-resident recipients have the option to file an elective tax
return for the retirement income, which allows them to claim arefund of the withholding income tax.
By filing the elective tax return, the Lump-sum Withdrawal
Payment is treated as if it were received by a resident, and thetaxpayer becomes eligible for tax-favorable treatment.
Generally, taxpayers can deduct JPY 400,000 for each year ofservice (with a minimum deduction of JPY 800,000, regardless ofthe number of years) from the Lump-sum Withdrawal Payment
amount (referred to as “Retirement Deduction”). Additionally, theremaining amount after the Retirement Deduction is halved(referred to as “1/2 Deduction”), except in certain cases1 to arrive
at taxable income. Taxpayers can claim a tax refund for any
excessive withholding by filing the elective tax return.
(Example)Lump-sum Withdrawal Payment: JPY 2,000,000
Withholding Income Tax: JPY 408,400
Years of Service: 3 years(i)Retirement Deduction
JPY 400,000 × 3 = JPY 1,200,000(ii)Taxable Income after Retirement Deduction and 1/2Deduction(2,000,000-1,200,000) × 1/2 = JPY 400,000(iii) Income Tax (including special income tax for reconstruction
at 2.1%)(JPY 400,000 × 5%) ×102.1% = JPY 20,420(iv) Tax Refund
JPY 408,400 – JPY 20,420 = JPY 387,980

Lump-sum Withdrawal Payment after the Retirement Deduction.
Amounts exceeding JPY 3 million after the Retirement Deduction
is no longer be eligible for the 1/2 Deduction.

An elective tax return for the retirement income can be filed on
or after 1 January of the year following the year in which theretirement allowance is paid. If the total amount of the retirement
allowance is determined before 1 January in the following year, it
can be filed on or after the date of determination.
When filing an elective tax return, the taxpayer should attach a"Notice of Lump-sum Withdrawal Payment Determination" issued
by the Japan Pension Service.
Furthermore, the taxpayer is required to appoint a tax agent andsubmit a 'Notification of Income Tax Agent' (Nozei Kanrinin
Todokedesho) to the tax office with jurisdiction over the taxpayer's
place of tax payment.
(Downloads)
English guidance for the Application of Lump-Sum
Withdrawal Payment
https://www.nenkin.go.jp/service/jukyu/todokesho/sonota-kyufu/20150406.files/A.pdf

Declaration of Naming a Person to Administer Taxpayer’s
Tax Affairs for Income / Consumption Tax
https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/shinkoku/pdf/h28/08.pdf

English guidance for the Declaration Naming a Person toAdminister the Taxpayer’s Tax Affairs for Income /Consumption Tax
https://www.nta.go.jp/english/taxes/individual/pdf/incom
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