Moving to Japan to do business for foreigners is a very difficult task. Most often, to obtain a business manager/investor visa, the minimum investment must be at least 5,000,000 yen, which is equivalent to 44.5 thousand dollars. Even though this rule of law was canceled in 2015. Besides, it is necessary to provide an office/storage space for doing business in Japan.
The field of activity should have a positive impact on the Japanese economy. This requires local authorities to provide a clear business plan. A visa may be refused if the foreign entrepreneur does not have relevant experience. It is imperative to provide jobs for residents. Sometimes this factor helps to reduce the required minimum investment amount.
If a foreigner already has own business, then it is best to ensure a presence in Japan by creating a representative office or branch. In the first case, it is allowed to collect and analyze information about the Japanese market, purchase local products and deploy advertising/marketing campaigns, but it is prohibited to carry out commercial activities. The branch allows you to conduct almost full-fledged business in Japan.
Under Japanese law, there are three main forms of ownership for a company:
- Joint Stock Company (JSC). Stock company (Kabushiki Kaisha)
- Limited Liability Company (LLC). Limited liability company (Godo Kaisha)
- Partnership (P). General partnership company (Gomei Kaisha) and Limited partnership company (Goshi Kaisha)
The choice of the type of company depends on the specific field of activity, the amount of investment, the need for tax optimization, and so on. The most popular form of business ownership in Japan is a joint-stock company. Unlike a partnership, members of JSCs and LLCs bear limited liability for the company’s activities, in proportion to contributions to the authorized capital.
Company registration in Japan. 12 Steps.
- Using the example of a joint-stock company, we will consider the main stages of company registration in Japan.
- Registration of a legal address, as well as preparation of documents and information about the new company, including name, business plan, capital size, share issue prices, reserve funds, names and powers of the board of directors, shareholdings of shareholders, and so on.
- Approval by the Japanese Bureau of Legal Affairs of the name of the company.
- Preparation of the charter.
- Notarization of the constituent documents of the company by a Japanese notary.
- Submission of an application to the bank for the contribution of the authorized capital and obtaining a corresponding certificate.
- Appointment of directors, auditors, and other officers, as well as preparation of additional documentation, including company seals.
- Applying to the Japan Legal Bureau to register a new company. The processing time is about 2 weeks.
- Obtaining a certificate of company registration in Japan.
- Opening a bank account under the name of the company.
- Additional procedures related to obtaining licenses for certain types of activities, registration with tax authorities, and social insurance services.
- Usually, the term of registration of a business (company) in Japan takes from 2-4 weeks to 3 months. It is almost impossible to cope with this procedure without specialized intermediaries.
Taxes in Japan
Companies incorporated in Japan are taxed worldwide, including income from foreign affiliates. In some cases, there is a reduction in liabilities to avoid double taxation. General corporate tax rates depend on the level of annual turnover and the size of the business.
Tax rates in Japan in 2021
Corporate income tax
For small and medium-sized companies:
- Turnover up to 4 million yen per year – 25.99%
- Turnover from 4 to 8 million yen per year – 27.57%
- Turnover over 8 million yen per year – 33.80% (from April 1, 2018 – 33.59%)
- For other companies (the authorized capital is more than 100 million yen and offices are located in several prefectures) – 29.97% (from April 1, 2018 – 29.74%).
Effective corporate tax rate (excludes some other taxes)
- For small and medium-sized companies – 34.81%, and from April 1, 2018 – 34.6%
- For large companies – 30.86%, and from April 1, 2018 – 30.62%
Income tax in Japan
- Annual income from 0 to 1,950,000 yen – 5%
- Annual income from 1,950,001 to 3,300,000 yen – 10%
- Annual income from 3,300,001 to 6,695,000 yen – 20%
- Annual income from 6,695,001 to 9,000,000 yen – 23%
- Annual income from 9,000,001 to 18,000,000 yen – 33%
- Annual income from 18,000,001 to 40,000,000 yen – 40%
- Annual income over 40,000,000 yen – 45%
Starting December 1, 2019, Japan’s special local corporate tax has been canceled. However, Japanese companies still pay city tax and standard local corporate tax.