Article
3 min read
Author
Anja Simic
Published
August 12, 2021
Last Update
June 25, 2024
Table of Contents
Sole proprietors in Japan
Who can become a sole proprietor in Japan?
How to establish a sole proprietorship
Special permits for sole proprietorships
Taxes in Japan
Japanese language speaker
Japan, sometimes referred to as the Land of the Rising Sun, is an island country in East Asia, located in the northwest Pacific Ocean. It has a highly developed economy and it attracts thousands of investors each year. If you're looking to run a business in Japan by yourself, a sole proprietorship can be an attractive option.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
Japan has the legal concept of sole proprietorship (個人事業 - kojin jigyo), under which you and your business are the same entity (though it is possible to use a different name for your business). It means that you own all profits/losses and assets/debts of the business. Because you're the same entity as your business, taxation is simpler, and can be advantageous over having a company. Other benefits include being able to expense a portion of your apartment rent (if you work out of it) and no need to hire an accountant.
First, your business needs a name. You can use your family name, and it must be reserved and registered with the Companies Registrar. Then, it needs to have a legal address. The home address can be used.
After that, you only need to file an application form with the Companies Registrar and one with the tax authorities.
Depending on the type of business you decide to establish you will require one or few permits. Since the most common businesses which foreign residents in Japan decide to establish are, export-import trading companies, restaurants and language schools, below only related permits to those activities are referred to.
All you need to do is to submit certain notifications to the tax office within 2 months after the beginning of the business activities, and file a tax declaration (kakutei shinkoku) once a year, between February and March for the income earned during the previous year.
You will be required to pay sole proprietor tax (kojin jigyo-zei), income (shotoku-zei), and residential tax (jumin-zei). These taxes are paid on a self-assessment basis and are imposed at progressive rates, based on the annual income reported with the tax authorities. The lowest rate is 5% and the highest is set at 45%. The other taxes to be paid are the municipal tax which is applied at a rate of 6%, the prefectural income tax which is levied at a flat rate of 4% and the enterprise tax which is levied at rates ranging between 3 and 5%. The residential tax is a 10% flat rate local tax on ordinary income imposed by prefectures and municipalities.
You will find more information in English on the National Tax Agency's website.
Unless your business is a niche business targeting foreigners who speak your language, a working level understanding of Japanese is vital. Tax related procedures are all done in Japanese. It is highly recommended to hire a translator.
Solutions
© Copyright 2024. All Rights Reserved.