TAX NEWS - January 2010

Japan: Visa renewal from April 2010 – Proof of enrollment in Japanese health insurance program to be requested

Background

In 2009, the Japanese Ministry of Justice issued a guideline stating that from April 2010, as part of the visa renewal process, applicants will be asked to present their Health Insurance cards as proof of enrollment in the Japanese Health Insurance program.


Foreign nationals' enrollment in Japanese health insurance program

All residents of Japan are required to enroll in the Japanese social insurance system, including health insurance, unless exempt by means of a valid Certificate of Coverage. However, in practice, many foreign employees on assignment in Japan do not make Japanese social insurance contributions. This is because there is no collection mechanism for employees' contributions when an individual is paid from a payroll outside Japan. Therefore, assignees paid offshore do not pay Japanese employees' social insurance and even though they should enroll for the National Health Insurance, which primarily exists to cover the self-employed, to date, no real effort has been made by the local authorities to pursue such contributions from assignees on temporary secondments to Japan.


Implications for foreign employees on assignments in Japan

Since the guideline was released, clarification of the implications for an applicant who cannot show proof of health insurance contributions has been sought. The current understanding is that failure to show the Health Insurance card will not be, in itself, grounds for refusal of a visa renewal application and that those who fail to present the card will then be "encouraged" to make contributions toward the program. It is also understood that a valid Certificate of Coverage will be accepted as proof that participation in the Health Insurance program is not required.

While the current guideline does not include language suggesting a rigorous compliance regime, it could be seen as an initial attempt to implement stricter compliance with regards to the Health Insurance program, as the Government seeks ways to finance the social insurance system in light of Japan's aging population which is bringing about rising health costs and a shrinking workforce.

In light of this revised guideline to be implemented in April 2010, employers with assignees in Japan should consider:
- Consulting their immigration advisor for updates when additional clarification of its implementation is made available.
- Reviewing whether assignees have a valid Certificate of Coverage in place or otherwise are enrolled in Japanese Health Insurance program.