Introduction
Direct payment refers to the procedure of electronically paying state taxes through account debit from a savings account in the taxpayer's name, either immediately or on a specified date, after submitting tax returns and other documents via e-Tax (National Tax Electronic Filing and Payment System).
Once the taxpayer registers with both the tax office and the bank in advance, tax payments can be made easily from the registered account, either immediately or on a specified future date.
1. Differences from Internet Banking
A common question is: “How is Direct Payment different from electronic payment through Internet Banking?” The key differences are summarized below:
| item | Direct Payment | Internet Banking |
|---|---|---|
| Contract with Bank | Not required | Required |
| Ease of Operation | Can directly use e-Tax filing data; no need to re-enter payment details | Payment details must be entered manually |
| Payment Date | Future dates (up to approx. one month) can be specified | Usually same-day payment; reservation depends on bank |
2. Advantages of Direct Payement
While essentially a “Direct Debit for tax payment", "Direct Payment" offers several features:
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Prompt-based type or a continuous automatic type
- Direct Payment: On e-Tax, you can specify the tax type, amount, and payment date each time for withdrawal. Immediate or scheduled payments are possible at the same time as submitting the tax return. Proxy processing by a tax accountant is also available. (Applicable to income tax, consumption tax, etc.)
- Direct debit: Based on the pre-registered request, the withdrawal is made "automatically" on the transfer date set by the other party.
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Flexibility of Payment Dates
- Direct payment: You can specify an immediate or future date (within the legal payment deadline). Effective for cash flow management during busy periods.
- Direct debit: A lump sum withdrawal on a date set by the other party. Optional designation is not allowed.
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Cancellation/Amendment
- Direct payment: If it is before the specified date, cancellation or changes can be made on e-Tax (deadlines and procedures must follow the guidance of e-Tax).
- Direct debit: In principle, changes cannot be made as the transfer date approaches.
3. Detailed process of the procedure
Verification of Financial Institutions
It is necessary to confirm whether the financial institution you are using supports direct payment. A list of supported financial institutions is available on the National Tax Agency's website.
Preparation
- Procedures for starting the use of e-Tax (submission of the start notification form, acquisition of user identification number, etc.)
- Submission of Notification: Submit the "Direct Payment Utilization Notification" to the tax office that has jurisdiction over the tax payment location (individuals can also submit online).
After Registration
- Electronic filing through e-Tax
- Selection of Payment Method (Immediate Payment / Payment by Specified Due Date)
- Automatic withdrawal from designated account
4. Practical Considerations
While there are many advantages, there are also practical considerations to keep in mind. I have summarized the points that are often consulted in the field of international taxation.
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Checking Account Balance
If there is insufficient balance on the payment date, an error will occur. When making a deposit via international remittance, it is important to check in advance as fluctuations in exchange rates may also lead to insufficient funds (an account with a bank that supports direct payments in Japan is required). -
Restrictions on Applicable Taxes
Limited to national taxes (such as income tax, corporate tax, consumption tax, etc.) and local taxes (such as resident tax, etc.). -
System Errors and Troubleshooting
e-Tax is unavailable during maintenance or network failures. The National Tax Agency FAQ advises using "internet banking as an alternative." There may also be access restrictions from overseas IPs, so domestic VPN usage is recommended. -
Barriers to Initial Registration
Account registration requires approval and takes several days. In small and medium-sized enterprises, a lack of IT literacy can also be a barrier to implementation. -
Limitations of International Support
It is not available for residents living abroad who do not have a Japanese bank account. In such cases, it is common to utilize a domestic tax representative, and in cross-border taxation, it is also difficult to adopt due to language support issues.