Severance pay (退職金) in Japan: who gets it and how it is taxed

Severance pay in Japan (退職金, taishokukin) is not required by law, but if your employer has a severance rule it applies to you whatever your nationality or visa. The tax is light: the payment minus a deduction of ¥400,000 per year of service (at least ¥800,000, up to 20 years) is halved before tax. Give your employer the 退職所得の受給に関する申告書 before payment, or 20.42% of the whole amount is withheld. All as of October 2026.

Does my employer have to pay severance in Japan?

No. Tokyo Metropolitan Government’s guide for employers says severance is not something that must always be paid. It is a company choice.

If a company does have a severance system, the Labor Standards Act (労働基準法) Article 89 says its work rules (就業規則) must state:

• which workers are covered
• how the amount is decided, calculated and paid
• when it is paid

Article 89 applies to employers with 10 or more workers. Where reasons for reducing or withholding severance are set, such as disciplinary dismissal, the guide says those must also be written in the work rules.

Ask for the rules. Your employment contract and work rules show whether you qualify, and the minimum years of service, if any.

Do foreigners get severance in Japan?

Yes, on the same terms as Japanese staff. Article 3 of the Labor Standards Act bans differences in wages or working conditions because of nationality. Your visa (work visa, spouse visa, permanent resident) does not decide it. What decides it is the written rule: your contract type, your years of service, and the reason you leave.

Two foreigner-specific points:

• Language. The work rules are usually written in Japanese. Ask HR to explain the severance section if you can’t read it.
• Leaving Japan. If you are returning home, ask HR how and when the payment will be made and to which account, before your last day. See the tax section below for what changes once you are a non-resident.

How is severance taxed in Japan?

Severance is “retirement income” (退職所得), taxed separately from your salary and usually far more lightly. The National Tax Agency gives this formula:

(Severance before withholding - retirement income deduction) x 1/2 = taxable retirement income

The deduction (退職所得控除額) depends on your years of service:

Years are rounded up, so 10 years and 2 months counts as 11 years, a deduction of ¥4,400,000. If you retire because of a disability, ¥1,000,000 is added.

When the 1/2 rule does not apply

The National Tax Agency lists two short-service exceptions:

• Officers (特定役員退職手当等) with 5 years or less of service as an officer: the deduction is subtracted but the 1/2 rule does not apply.
• Short-service severance (短期退職手当等) for non-officers with 5 years or less of service: the 1/2 rule does not apply to the part above ¥3,000,000 after the deduction.

If you are on a short fixed-term contract, check with HR or a tax accountant (税理士) whether this applies to you.

What form do I give my employer?

Give the 退職所得の受給に関する申告書 (retirement income receipt declaration) to the payer, your employer, before you receive the payment. The National Tax Agency says it goes to the employer, not the tax office, unless asked.

You may still file a return after submitting the form, for example to claim a medical expense or donation deduction. The severance must then be entered on the return. See tax returns for foreigners.

What if I leave Japan?

The 20.42% rate also appears in the National Tax Agency’s list of withholding on non-residents: severance (退職手当等) is listed as domestic-source income withheld at 20.42%. Its page does not say which part of a non-resident’s severance counts as domestic-source, so we can’t say how a payment made after you leave would be taxed.

What you can do:

• Ask HR before your last day whether the form can be submitted and when the payment will be made.
• Ask a tax accountant (税理士) about your case if the amount is large.
• Read tax residency for foreigners for how residency is decided.

Severance is separate from the pension refund (脱退一時金) you may claim when leaving. See the pension refund guide.

Where do I get help if my severance isn’t paid?

If your work rules promise severance and it isn’t paid, you can use the labor ministry’s hotlines. The Telephone Consultation Service for Foreign Workers is 0570-001-701 (English, weekdays 10:00 to 15:00, closed noon to 1 p.m., call charges apply, 13 languages). The Labour Standards Advice Hotline is 0120-531-401 (free, weekdays 17:00 to 22:00, weekends and holidays 9:00 to 21:00). Both are closed December 29 to January 3.

For more on your rights, see labor rights for foreign workers and quitting a job on a work visa.