Tax deduction available for employee retirement-plan contributions to in Japan

Employee contributions to an employer-sponsored defined contribution plan in Japan will be allowed on a tax-deductible basis, effective Jan. 1, 2012. Currently, employee contributions are not allowed. Employer contributions to DC plans are not taxable income as long as they don't exceed:

* 25,500 Japanese yen ($326.72 USD) per month if the employer also sponsors a defined benefit plan.

* 51,000 yen per month ($653.43 USD) if the employer does not sponsor another retirement plan.

Tax treatment of employer contributions is unchanged.

The new law also changes the rules for the National Pension (the equivalent of Social Security) system, extending the contribution period from age 60 to 65, and allowing individuals up to 10 years to make up contributions.

For several years, there has been a push for tax-deductible employee contributions, particularly from the Japanese financial community. The new law somewhat accomplishes this, but not completely, since the law simply rearranges the existing deduction limits but fails to provide any additional deductions.

 

Korea amends retirement legislation

On July 1, 2012, a new amendment to Korea's Employee Retirement Benefit Security Act will impose new restrictions on internal severance pay systems and introduce new options for providing defined benefit pension plans, defined contribution plans or individual retirement products.

This is part of the government's push to encourage employers to set up retirement plans and move away from the old practice of internal severance pay systems.

IBIS eVisor is an electronic news and compliance alerts service covering the area of international employee benefits news in more than 40 countries. eVisor is a service of IBIS Advisors.

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