Japanese Pension Refund for Foreigners | SBC Group

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Japanese Pension Refund for Foreigners

A recurring question for foreign workers in Japan is the question of the Japanese Pension contributions.

Contribution to the Japan Pension Service, along with Social Security contributions and Labour Insurance contributions, are compulsory for anyone working in Japan and those contributions are directly collected and paid by the employer.

For those who are in Japan for a determined period, or who plan not to retire in Japan, then the question of the fate of their contributions to the Japanese national pension system often remains unclear once they decide to leave Japan.

Japan has signed over the years several social security agreements with different countries to avoid for a foreign national to have to contribute in both Japan and his own country, and to totalize period of employment in both Japan and the other country. As of February 2017, those countries are Germany, United Kingdom, Republic of Korea, United States, Belgium, France, Canada, Australia, Netherlands, Czech Republic, Spain, Ireland, Brazil, Switzerland, Hungary, India. In addition, agreement have been signed and are in the process of being implemented with Italy, Luxembourg, Philippines, Slovak Republic.

For a foreign passport holder after having been employed and contributing to the Japanese public pension for more than 6 months the choice would be to either:

          Leave pension contributions in Japan. This can leave a door open if the foreigner plans on returning to work in Japan. For a passport holder of one of the above-mentioned countries, those contributions would then count under the conditions determined by the social security agreement.

          Claim for a Lump-Sum Withdrawal Payment under certain conditions. This would close the door to application of any other Japanese benefits.

On leaving Japan permanently, it is required to both file a tax return before leaving and settle tax amounts due, or appoint a Tax Representative.

To make the claim for the Japanese Pension Contributions it is advisable to appoint a Tax Representative, who can also make the Pension refund application.

The Pension refund will have 20% withholding income tax deduction taken before the balance is transferred overseas, and the Tax Representative can then file an annual tax return the following year to claim back the 20% tax deducted and remit this to the leavers overseas bank account.

The amount of the Lump-Sum Withdrawal Payment varies depending on the length of the contribution period with a limit of 36 months. For a foreigner having worked in Japan for more than 36 months the payment will be calculated up to 36 months and the rest of the period of contributions will be lost. It cannot be taken account in the case of a return to employment and contribution to the Japan Pension Service in the future and the benefits would then restart from zero.

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