How to Register a Sole Proprietorship (個人事業) in Japan

Becoming an independent contractor in Japan—known locally as a Kojin Jigyo (個人事業)—is one of the most accessible ways to work for yourself. Japan stands out for its simple registration process: with no minimum capital requirements, you can often set up your business in a single visit to the local tax office.

Unlike forming a company, establishing a Kojin Jigyo is fast and low-cost, though it comes with some trade-offs. Sole proprietors face unlimited personal liability, and their businesses can sometimes be seen as less credible when working with larger clients or applying for loans. Still, for freelancers, consultants, and small business owners, the flexibility and independence are major advantages. Most of the process is administrative: filling out a short form, submitting it to the tax office, and registering for health insurance and pension contributions.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Japan?

In Japan, a sole proprietorship is officially called Kojin Jigyo (個人事業). It may also be referred to as a sole trader, self-employed worker, or independent contractor. All these terms describe the same business model: one person legally running a business without forming a company.

How does a sole proprietorship (Kojin Jigyo) work in Japan?

Kojin Jigyo (個人事業) vs. other business structures in Japan

A key alternative is forming a Godo Kaisha (GK) or Kabushiki Kaisha (KK), which are legal entities with limited liability.

Step-by-step guide: How to register a sole proprietorship in Japan

Step 1: Check your eligibility

In Japan, sole proprietorships (個人事業主, kojin jigyōnushi) can be established by Japanese citizens without restriction, followed by foreign residents with stable legal status, such as spouses of Japanese nationals, permanent residents, and long-term residents. Certain foreign nationals are also eligible, including holders of Working Holiday visas, as well as Student, Dependent, or Cultural Activities visa holders who have obtained permission for activities outside their visa status, typically limited to 28 hours per week. Additionally, foreigners with valid work permits, including freelancers employed full-time, may register as sole proprietors, provided their visa conditions allow such activities. For foreigners, eligibility always depends on visa type and permitted activities.

Step 2: Choose your business name

You may operate under your own name or choose a trade name. There is no formal central name search tool, but the name must be included in your registration form with your local tax office.

Step 3: Gather required documents

Required items typically include:

• Completed Notification of Commencement of Business (開業届 / Kaigyo Todoke) form—download via the National Tax Agency
• Optional Application for Blue Return (青色申告承認申請書 / Aoiro Shinkoku Shounin Shinseisho) for tax benefits
• Residence Card or passport (for foreigners)
• Personal seal (hanko) or signature

Step 4: Register with the tax office

You will need to register with your local tax office (zeimusho) within one month of commencing business operations. Find your local tax office using the government's online search tool. There’s typically no registration fee for a sole proprietorship.

(It’s only obligatory if you’re using Blue return status)

Step 5: Pay registration fees and contributions

There is typically no registration fee for sole proprietorships. You may choose to apply for Blue Return status within two months to enable deductions. Blue Return (aoiro shinkoku) is a special tax filing status, which, in exchange for adhering to more detailed accounting practices, such as double-entry bookkeeping, grants significant tax advantages. These benefits include a special income deduction of up to ¥650,000, the ability to claim salaries paid to family members as business expenses, the capacity to carry forward net losses for up to three years to offset future profits, and special depreciation allowances for certain assets.

Step 6: Complete post-registration obligations

After registering, you are responsible for filing an annual tax return (Kakutei Shinkoku) between February 16 and March 15. You must also enroll in National Health Insurance (Kokumin Kenko Hoken) and National Pension (Kokumin Nenkin) at your city or ward office. Keep detailed invoicing and bookkeeping for compliance and benefits, especially if using Blue Return status.

Financial and tax obligations for sole proprietors in Japan

You are responsible for:

• Income tax (所得税 / Shotokuzei): Sole proprietors are taxed as individuals, not companies. Profits are declared in the owner’s annual personal tax return (Kakutei Shinkoku) and taxed at progressive national rates from 5% up to 45% (2025). Filing is done with the NTA.
• Inhabitant tax (住民税 / Jūminzei): A local tax charged by your municipality and prefecture, usually totaling around 10% of the previous year’s taxable income (split 4% prefectural, 6% municipal).
• Consumption tax (消費税 / Shōhizei): This is Japan’s version of VAT, set at 10%. Sole proprietors must register and file if their annual taxable sales exceed ¥10 million over two years. Returns are filed with the NTA.
• Social insurance contributions: Sole proprietors must enroll in National Health Insurance (Kokumin Kenkō Hoken) and the National Pension scheme (Kokumin Nenkin) through their local city/ward office. Premiums vary by income and location.
• Record-keeping: You must maintain accurate records of invoices, receipts, and accounts. Under the Blue Return (青色申告) system, detailed bookkeeping can unlock deductions of up to ¥650,000. Documentation must generally be retained for seven years.

Launch your contracting career and stay compliant with Deel

Registering as a sole proprietor gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start a Kojin Jigyo in Japan?
There is none required—no capital investment is needed to register.

Do Kojin Jigyo need to register for VAT/GST?
Japan uses a consumption tax. You must register if your yearly income exceeds ¥10 million over two years. The rate is 10%.

How much are the standard monthly or annual contributions?
Contributions vary by income and location. For example, health and pension premiums are calculated by your municipality and income level; exact amounts are determined locally.

Can a Kojin Jigyo hire employees?
Yes. Sole proprietors can employ staff, including part-time or full-time workers.

How long does it take to register as a Kojin Jigyo in Japan?
The process can be completed in a single visit if you have all the documents ready.

Can foreign nationals register as Kojin Jigyo in Japan?
Yes. Foreign nationals may register as sole proprietors if they hold an eligible visa status that permits independent work. However, registering as a sole proprietor does not grant or extend a visa—your business activities must remain consistent with your existing immigration status.

Do Kojin Jigyo need a separate business bank account?
It's not required, but strongly recommended to help separate personal and business finances and aid in tax filing clarity.

What happens if I stop working as a Kojin Jigyo?
You must submit a “Notification of Business Cessation” to the tax office and settle final taxes. De-registration details are handled via local tax office procedures.

Are there any government incentives or reduced rates for new Kojin Jigyo?
Not specifically for sole proprietors, but Blue Return filers receive tax deductions. Certain startup and self-employment programs may apply locally.

Can I use Deel as a Kojin Jigyo to get paid by international clients?
Yes. Deel allows Kojin Jigyo and freelancers to receive payments from clients worldwide, in multiple currencies, with low fees and clear exchange rates.

Does Deel generate compliant invoices for Kojin Jigyo?
Absolutely. Deel automatically generates invoices that meet Japanese legal and tax requirements, helping you stay compliant.

Can Deel help me with taxes as a sole proprietor in Japan?
Yes. Deel provides downloadable tax reports and payment records that can be used when filing returns. While Deel doesn’t replace a tax accountant, it simplifies your record-keeping and compliance.

Does Deel offer contracts for freelancers and Kojin Jigyo?
Yes. Deel includes contract templates compliant with Japanese and international laws, so you can work with clients securely.

Can I access benefits through Deel as a Kojin Jigyo?
Yes. Deel offers optional perks like health insurance, retirement savings plans, and other benefits that are normally available only to employees, helping freelancers gain more security.