The Japanese Income Tax Act defines deductible social welfare contributions, referred to as “social insurance premiums,” as follows:
- premiums for health insurance paid by the resident as an insured under the provisions of the Health Insurance Act (Act No. 70 of 1922);
- premiums for national health insurance under the National Health Insurance Act (Act No. 192 of 1958) or national health insurance tax under the provisions of the Local Tax Act;
- premiums under the provisions of the Act on Assurance of Medical Care for Elderly People (Act No. 80 of 1982);
- premiums for long-term care insurance under the provisions of the Long-term Care Insurance Act (Act No. 123 of 1997);
- labor insurance premiums paid by the resident as an insured of employment insurance under the provisions of the Act on the Collection, etc. of Insurance Premiums of Labor Insurance (Act No. 84 of 1969);
- premiums for national pension to be paid by the resident as an insured under the provisions of the National Pension Act and premiums to be paid by the resident as a member of the National Pension Fund;
- premiums for farmers pension paid by the resident as an insured under the provisions of the Act on the Farmers Pension Fund, Independent Administrative Agency;
- premiums for Employees’ pension insurance paid by the resident as an insured under the provisions of the Employees’ Pension Insurance Act;
- premiums for Mariners” insurance paid by the resident as an insured under the provisions of the Mariners’ Insurance Act;
- premiums under the provisions of the National Public Officers Mutual Aid Association Act;
- premiums (including special premiums) under the provisions of the Local Public Officers, etc. Mutual Aid Association Act;
- premiums paid by the resident as a member under the provisions of the Private School Personnel Mutual Aid Association Act; and
- payment under the provisions of Article 59 (Pension payment) of the Public Officers Pension Act (including the cases where applied mutatis mutandis pursuant to other laws).
Essentially, the above provisions clarify that only contributions to Japan’s public social welfare funds are considered deductible expenses for income tax purposes.
However, there are exceptions under tax treaties. For example, Article 18 of the Japan-France tax treaty, as modified by Article 12 of its Protocol, specifies that social insurance premiums paid to the social security system of one contracting country by individuals from the other contracting country who are working in the host country, as stipulated by the Japan-France Social Security Agreement, are mutually recognized as deductible in the country of employment.
Therefore, in very exceptional cases outlined in tax treaties and social security agreements, contributions to foreign social welfare systems may also qualify as deductible.