The special due-date rule for withholding income tax: the July 10 payment and the sources it does and does not cover
When you pay salary to employees or family members (dedicated business employees), or pay fees to a tax accountant, you become a withholding agent. The income tax you withhold must in principle be paid by "the 10th of the following month," but if you are small in scale you can use the "special due-date rule," which lets you pay half a year's worth at once, twice a year. The payment deadline for the January–June portion is July 10. This article organizes, based on primary sources from the National Tax Agency, how the special rule works, which sources it covers and which it does not (this is the biggest pitfall), the timing of the application, and the penalties for forgetting to pay.
・Who qualifies: businesses whose number of salary recipients is fewer than 10 on an ongoing basis (an application is required).
・Deadlines: January–June portion = July 10 / July–December portion = January 20 of the following year.
・The special rule covers only the withholding on salary, retirement allowances, and fees to licensed professionals such as tax accountants. Manuscript fees, design fees, and the like are not covered and stay on "the 10th of the following month."
What the special due-date rule is (half a year at once, twice a year)
Withheld income tax and special income tax for reconstruction must in principle be paid by the 10th of the month following the month of collection[NTA No.2505]. However, a withholding agent whose number of salary recipients is fewer than 10 on an ongoing basis can, upon application, pay half a year's worth at once, twice a year. This is the "special due-date rule."
* The January–June portion is due July 10, and the July–December portion is due January 20 of the following year (this one is the 20th, not January 10). Payment is made using the "Income Tax Collected Statement (payment slip)."
[Most important] Sources that are covered and sources that are not
This is the biggest point to watch. Only a limited set of sources can be bundled under the special due-date rule. Everything else is outside the special rule and must be paid, as a general rule, on the 10th of the following month[NTA No.2505].
◯ Covered by the special due-date rule
- Salary (employees, part-timers, dedicated business employees)
- Bonuses
- Retirement allowances
- Withholding on fees to licensed professionals such as tax accountants, lawyers, and judicial scriveners
✕ Not covered (the 10th of the following month, as a general rule)
- Manuscript fees, design fees, illustration fees
- Lecture fees, appearance fees
- Sales agent fees and other fees to non-professionals
- Dividends, interest, etc.
For example, the amount you withhold from a fee paid to a freelance designer is not covered by the special due-date rule. It must be paid on the 10th of the month following the month of payment. If you include it in the special rule and leave it for half a year, it becomes a forgotten payment — a late payment — and creates the risk of the additional tax and delinquent tax described later. Remember: professional fees (tax accountants, etc.) are covered, but other outsourcing fees are treated separately[NTA No.2798].
The application procedure and timing
To use the special due-date rule, you submit the "Application for Approval of the Special Due-Date Rule for Withholding Income Tax" to the tax office[NTA A2-8]. If no notice of rejection is issued by the last day of the month following the month of submission, it is deemed approved.
(e.g., apply in July → covers the withholding on the amount paid in August)
* The withholding on salary paid in the month you apply (due the 10th of the following month) is not yet covered by the special rule and is paid as a general rule. Also, if your number of salary recipients reaches 10 or more on an ongoing basis, you submit the "Notification That the Requirements for the Special Due-Date Rule Are No Longer Met."
Even for a period with no source to pay, submit a "zero-yen payment slip"
Even if there is no withholding income tax to pay during that half-year (for example, only months when a dedicated business employee's salary has zero withholding), as a general rule you submit an Income Tax Collected Statement (payment slip) showing "tax amount 0" by the deadline. If you do not, the tax office may contact you. You can also submit it via e-Tax.
Penalties when payment is late
If payment of withholding income tax is late relative to the statutory deadline, as a general rule an additional tax for failure to pay and a delinquent tax are imposed[NTA No.9205].
| Penalty | Details |
|---|---|
| Additional tax for failure to pay | As a rule, 10% of the principal tax. If you pay voluntarily before the tax office's notice, 5% |
| (Example where it does not apply) | If you pay within 1 month of the statutory deadline and have had no late payment in the past year, etc., the additional tax for failure to pay is not imposed |
| Delinquent tax | Added on a daily-rate basis according to the number of days from the day after the deadline to the day of payment |
Because the special due-date rule bundles half a year into a single payment, the amount per payment is large. If you carelessly miss July 10 (or January 20), the additional tax and delinquent tax are imposed on that large principal tax. Fix the deadlines on your calendar and secure the funds in advance.
Advantages and disadvantages
◯ Advantages
- Payment and preparing the payment slip are done twice a year (from 12 times a month to 2)
- The administrative burden drops greatly
✕ Disadvantages / cautions
- The amount per payment is large, so watch your cash flow
- Leaving it for half a year makes forgotten payments more likely
- It's easy to confuse in sources that are not covered (manuscript fees, etc.)
Who becomes a withholding agent in the first place?
A business that hires people and pays salary, a sole proprietor who pays salary to a blue-return dedicated business employee to a family member, or a business that pays fees to a tax accountant and the like becomes a withholding agent[NTA No.2110]. For the mechanism of withholding itself, please also see How to read a withholding tax statement.
* There are also cases with no withholding obligation, such as when you pay salary only to no more than two household employees on an ongoing basis. For procedures around starting a business, see the Guide to starting a business as a sole proprietor.
Summary
FAQ
What is the special due-date rule for withholding income tax?
It is a system that lets a business whose number of salary recipients is fewer than 10 on an ongoing basis pay withheld income tax in half-year bundles upon application. The January–June portion is due July 10, and the July–December portion is due January 20 of the following year.
Which sources are covered by the special due-date rule?
Only salary, bonuses, retirement allowances, and the withholding on fees to licensed professionals such as tax accountants, lawyers, and judicial scriveners. Fees to non-professionals such as manuscript fees, design fees, and lecture fees are not covered and are paid, as a general rule, by the 10th of the following month.
From when can you use it after applying?
It covers the withholding on salary and the like paid in the month after the month you submit the application (e.g., apply in July → from the amount paid in August). If no notice of rejection is issued by the last day of the month following the month of submission, it is deemed approved.
Is the procedure needed even in months with no source to pay?
As a general rule, even if the tax amount is 0 yen, you submit the "Income Tax Collected Statement (payment slip)" by the deadline. If you do not submit it, the tax office may contact you.
What happens if payment is late?
As a general rule, an additional tax for failure to pay (10% of the principal tax, or 5% if paid voluntarily before the tax office's notice) and a delinquent tax are imposed. However, if you pay within 1 month of the statutory deadline and have had no late payment in the past year, the additional tax for failure to pay is not imposed. Because it is a half-year bundle, note that the amount tends to be large.
Reference links (sources)
This article is based on the following materials published by the National Tax Agency (neutral, primary sources). Because rules and deadlines are revised, please check the latest information before filing and paying.
- NTA No.2505 Payment deadlines and the special due-date rule for withholding income tax and special income tax for reconstruction (in Japanese)
- NTA A2-8 Application for approval of the special due-date rule for withholding income tax (in Japanese)
- NTA No.2798 Fees and rewards paid to lawyers, tax accountants, and the like (in Japanese)
- NTA No.2110 Withholding that a business owner must carry out (in Japanese)
- NTA No.9205 About delinquent tax (in Japanese)
* This article is general information, not tax advice. For decisions on whether withholding is required, what it covers, and how to pay, please confirm with a tax office or a tax accountant.