Taxable and Nontaxable Commuting Allowance

You must track the amount of taxable and nontaxable commuting allowance for income tax calculations. The statutory nontaxable amount (limit of the tax exemption) for the total commuting allowance (fare and toll) is the same for all employees. The amount is contained in variable CM VR NTAX ALW MX.

If the pay frequency is three or six months, the system calculates the maximum nontaxable amounts for the full term and applies those limits to the commuting allowance amounts for the full term.

Total Amount Input Method

The maximum nontaxable toll compensation varies by employee. You enter the value on the Commuting Allowance JPN page.

Global Payroll for Japan separately tracks amounts for fare and toll. The system first calculates the nontaxable toll amount by applying the individual limit. It then uses that figure to derive the total amounts of taxable and nontaxable commuting allowance compensation.

Route Input Method

When the commuting allowance input method of route is used, the system assumes that all allowances are nontaxable. It is your responsibility to determine whether the monthly totals are nontaxable. If an employee's commuting allowance nears the monthly nontaxable limit, or contains taxable commuting allowances such as first class passes, you should use the amount input method.