Tax Planning
Navigating Japan’s Tougher Tax on Ultra-High Incomes: What You Need to Know
New 2026 reforms curb tax thresholds for top earners — understand who’s affected, how it’s calculated, and what steps you can take to manage your liabilities in Japan.
By NomadicTax Research Team • 5-8 min read • September 13, 2026
## What’s Changing for Ultra-High Earners
Under the 2026 tax reform in Japan (令和8年度税制改正大綱), one of the most significant changes is the overhaul of the **“特定の基準所得金額の課税の特例”** — a special taxation rule for extremely high incomes. The special deduction floor is lowered from **¥330 million** to **¥165 million** and the surcharge rate on income above that floor is raised from **22.5%** to **30%**. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai)) These changes take effect for income in 令和9年分 (fiscal year 2026 for calendar-year taxpayers).
## Who’s Affected & How It’s Calculated
- You’re subject to the surcharge if your **基準所得金額 (standard income amount)** exceeds ¥165 million per year.\
- The surcharge only applies to the **portion exceeding ¥165 million**.\
- For comparison, under the previous rule, the threshold was ¥330 million, with surcharge above that at 22.5%. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_01.htm?utm_source=openai))
## Examples to Illustrate
| Situation | Annual Standard Income | Old Surcharge | New Surcharge |
|---|---|---|---|
| Person A – Income: ¥200 million | Exceeds ¥165 million by ¥35 million | No surcharge (below old ¥330M floor) | ¥35 million × 30% surcharge (¥10.5 million) |
| Person B – Income: ¥500 million | Exceeds both thresholds | (¥500M-¥330M)=¥170M × 22.5% = ~¥38.25M | (¥500M-¥165M)=¥335M × 30% = ~¥100.5M |
| Person C – Income: ¥160 million | Below both thresholds | None | None |
## Strategic Takeaways ─ Tax Planning Tips
- **Shift income timing:** If your income is projected to cross the ¥165 million threshold in a year, see whether certain income (bonuses, asset sales, etc.) can be deferred into a later year.
- **Diversify income types:** Since “standard income amount” includes most personal income streams (business, dividends, capital gains), exploring investments or income classified under separable taxation might help (depending on treaty and regime rules).
- **Offset through deductions:** Ensure you fully utilise available deductions (life insurance, medical expenses, etc.), though note these won’t exempt you from the surcharge once above threshold.
- **Tax-efficient investment vehicles:** NISA expansions, tax credit-oriented research investments, and other special vehicles may help soften the net burden. The reform package promotes options here. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
## Points to Monitor
- Effective date: Applies starting with income earned in fiscal year **2026 (令和9年分所得税)**. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_01.htm?utm_source=openai))
- Ensure accurate calculation of **基準所得金額**, including all qualifying income categories.
- Check for any updates to related deductions, exemptions, or credits — the reform also expands NISA, adjusts baseline deductions, and tweaks payroll deductions. ([mof.go.jp](https://www.mof.go.jp/tax_policy/tax_reform/outline/fy2026/08taikou_gaiyou.htm?utm_source=openai))
**Bottom line:** The net tax burden on ultra-high incomes is steeply increasing. For those close to or exceeding the new threshold of ¥165 million, early planning is essential to mitigate surprises.