Japan is a great place for people who want to launch and grow a business internationally. Japan is one of the most advanced countries in the world, and its economy is unique in many respects. The nation has developed into one of the most stable financial powerhouses in the Asia-Pacific region due to its industrial workforce’s strong will and high level of education.
Being a sole proprietor in Japan is easier than founding a new business; it is simple to run and exempt from many taxes.
The following can start a sole proprietorship in Japan:
- Japanese citizens
- Married to a Japanese national, a permanent resident, or someone having a long-term resident permit
- Those who entered on a working holiday visa
- Immigrants who are currently employed full-time and have work permits
- immigrants who have a visa for study, a dependent visa, or a visa for cultural activity. The Immigration office must allow the holders of these visas to work up to 28 hours each week.
Refer to our page Japan business registration, for more information.
HOW TO REGISTER A SOLE PROPRIETORSHIP IN JAPAN?
Selecting the right structure
To accommodate the business model of the company, a suitable structure should be constructed. It needs to be adaptable and accessible to all types of decision-making abilities.
It should be noted that a GK makes profit sharing comparably quicker, simpler, and less expensive. However, KK is a better choice if the applicant wants to hold shares with several different companies. KK favours a conventional framework, while GK introduces new possibilities first made available in 2006.
Selecting a business name
Choosing a proper name for the firm is one of the primary objectives. The name shouldn’t be misleading or thrown together, and it shouldn’t go against the official guidelines for the trademark. Employers should pick a unique name to incorporate faster.
Preparing the documents
Documents like the articles of incorporation should be properly designed and include all the relevant data. Employers are required to highlight important details including the organizational structure and internal rules. To schedule appointments, further requirements include money deposits and company seal notifications. They need to write an application letter as well.
Opening a corporate bank account
A corporate account needs to be opened, even if the minimum paid-up capital is only 1 yen. To avoid confusing the finances with the income, the applicant should open a separate bank account for their business.
The company must be registered and have a business registration number and certificate. The director must register the corporate seal. Another important aspect is annual financial reporting, which must be distributed to shareholder meetings at the year-end.
The business must complete a Japanese Company Tax Registration form. The National Tax Agency should be informed sooner to enable the payment of salaries as well as taxes like enterprise taxes. All of these actions should be performed using the registration number.
Applying for Visa and licences
If the applicant wants to work more closely with international businesses, a business manager visa can be useful. However, in order to apply for such a visa, they must have a physical office. To strengthen the ties, it’s also important to take into account licenses related to labour laws, public employment security, and pensions.
Taxes for sole proprietorships in Japan
In Japan, if you operate as a sole proprietor, you must submit specific notifications to the tax office within two months of the start of your business operations and file a tax declaration (kakutei shinkoku) once a year between February and March for the income you received the previous year.
A sole proprietor must pay a sole proprietor tax, income tax, and residence tax (kojin jigyo-zei, shotoku-zei, and jumin-zei). These taxes are applied at progressive rates based on the annual income reported to the tax authorities and are paid on a self-assessment basis.
The rates range from 5% to 45%, with 5% being the lowest charge. Other taxes include the enterprise tax (levied at rates between 3% and 5%), the prefectural income tax (applied at a flat rate of 4%), and the municipal tax (applied at a rate of 6%).
Reach out to us at Relin Consultants for further assistance with your sole proprietorship registration in Japan.