Hello, this is SN from Sayu Certified Public Accounting Firm. As we enter the latter half of 2025, it is time to begin preparing for the year-end tax adjustment. This article summarizes the fundamental points you need to know for the 2025 (Reiwa 7) year-end tax adjustment.

What Is the Year-End Tax Adjustment?

Salaries are paid after deductions such as income tax, resident tax, and social insurance premiums. Among these, income tax is withheld each month based on an estimated amount, which may differ from the actual tax owed for the year. The purpose of the year-end tax adjustment is to reconcile this difference at year-end, refunding any overpaid tax or collecting any underpaid tax.

Difference Between Year-End Tax Adjustment and Tax Return Filing

The year-end tax adjustment is a procedure in which the employer calculates and reconciles an employee’s income tax on their behalf.
On the other hand, filing a final tax return is a process in which an individual calculates and reports their annual income and tax liability themselves.
Most employees do not need to file a tax return because their taxes are settled through the year-end adjustment.

Who Is Eligible for the Year-End Tax Adjustment?

In principle, employees who are still employed at the company as of December are subject to the year-end tax adjustment.
However, the following individuals must file a tax return instead:
1. Those with income other than employment income
2. Those receiving salaries from multiple employers
3. Those with annual income exceeding 20 million yen
4. First-time applicants for the mortgage loan deduction
5. Those claiming medical expense deductions
There are other circumstances requiring a tax return, so it is important to confirm in advance whether you fall into any applicable category.
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Forms Required for the Year-End Tax Adjustment

• 2025 (Reiwa 7) Declaration of Exemptions for Dependents of Employment Income Earner
Continuing employees submitted this form during last year’s (2024) year-end adjustment. New employees submit it upon joining the company. If there are changes regarding dependents or spouse, the form must be submitted again. This form is used to calculate dependent-related deductions for 2025.
• 2025 (Reiwa 7) Basic Exemption Declaration / Spouse Exemption Declaration / Special Exemption for Certain Dependents / Income Adjustment Deduction Declaration
This consolidated form is used to declare the following:
1. Basic Exemption
2. Spouse Exemption
3. Special Exemption for Certain Relatives
4. Income Adjustment Deduction
Most employees qualify for the basic exemption, so this form is typically submitted every year.
• 2025 (Reiwa 7) Insurance Premium Deduction Declaration
This form is used to declare:
1. Life Insurance Premium Deductions
2. Earthquake Insurance Premium Deductions
3. Social Insurance Premium Deductions
4. Small Enterprise Mutual Aid Premium Deductions (including iDeCo)
Social insurance premiums deducted directly from payroll (health insurance, employees’ pension insurance, employment insurance, etc.) do not need to be written on this form.
• 2026 (Reiwa 8) Declaration of Exemptions for Dependents of Employment Income Earner
This form is used for next year’s payroll calculations and is submitted during the 2025 year-end adjustment.
If there are no changes in dependents, this form continues to be used for the following year’s adjustment.
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Documents Required in Addition to the Forms

• Insurance Premium Deduction Certificates / Payment Certificates
Required when applying for insurance premium deductions.
• Certificate for Housing Loan Deduction
For the mortgage loan deduction (from the second year onward), this certificate must be submitted during the year-end adjustment. The first year requires a tax return.
• Other Certificates
Depending on the type of deduction—for example, claiming a disability deduction—additional documents such as a copy of a disability certificate may be required. Be sure to check in advance.
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How to Fill Out the Forms

On the Declaration of Exemptions for Dependents, you must enter the estimated income of your spouse or dependents.
Here, “income” refers to the amount remaining after subtracting necessary expenses or applicable deductions from various types of earnings such as salary, pension, or rental income.
For example:
If someone has a salary of 1.2 million yen, their income is not the full amount. After subtracting the salary income deduction of 650,000 yen, the income becomes 550,000 yen — this is the amount to be entered on the form.
If the person also has rental income or pension income, those amounts must be added as well.
Incorrect or missing entries may affect the application of deductions, so accuracy is essential.
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When Submission of Forms Is Not Required

Generally, submitting the forms is necessary to complete the year-end tax adjustment.
However, companies that have digitized the process may allow employees to complete everything online, eliminating the need for paper submissions.
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Typical Year-End Tax Adjustment Schedule

Although the timing varies by company, year-end tax adjustment notices are usually issued from late October to early November, with submission deadlines typically set between mid-November and early December.
Our firm sends out notices to clients in late October. We also offer year-end tax adjustment outsourcing services, so please feel free to contact us if you need assistance or have any interest.