Corporate Service

How to start businesses in Japan

(1) Individual vs Company

You can start your own business as an individual or as a company owner. They each have their own strengths and weakness. Therefore, please consider both the strengths and weakness, then decide in which type you will start your own business.

Since our firm has Licensed tax accountant, Attorney at law and Certified public accountant all in house (which is very unique in Tokyo, Japan and differentiate from other firms), we can provide not only initial set-up services but also the post set-up services such as tax compliance, bookkeeping and legal consulting services with reasonable costs.
For more information, please contact us (from here

1.Individual
(1)Strengths:
①Lower cost for set-up and maintenance
②Shorter time for set-up(Just filing an application with tax office)

(2)Weakness:
①Fewer social credibility
②Fewer chances for loans from banks
③Fewer chances for better office locations
④Restrictions for internet business

2. Company
(1)Strengths:
①More social credibility
②More chances for tax saving (if the transactions volume exceed to certain extent)
③Efficiency in transferring of business

(2)Weakness:
①Higher cost for set-up and maintenance
②More time for set-up

3. Type of companies
As a company type used frequently, there are Kabushiki Kaisha(” K.K.”) and Godo Kaisha (“G.K.” or “LLC”) in Japan. They have advantages and disadvantages as follow:

(A) Kabushiki Kaisha(” K.K.”)
K.K. is a joint stock company with limited liability created under Companies Act. K.K. allows shareholders to limit liability obligations up to the individual invested amount. Companies Act. separates an ownership from directors, executive officers and management that run K.K.

(1)Advantages:
①More social credibility
②More familiarity

(2) Disadvantages
①Higher cost for set-up
②More legal procedures for maintenance

(B) Godo Kaisha (“G.K.”)
G.K. is a a member-oriented company and its nature is located between K.K. and partnership. The Companies Act. allows G.K. members to limit liability obligations up to the individual contributed amount. The Companies Act. does not separate an ownership from managing members that operate G.K.
Even though G.K. was originally legislated on US LLC model, however, Japan ministry of Finance did not permit the pass through tax system at the time in order to avoid increasing of administration costs and burdens. Therefore, please carefully note that Japanese G.K. is taxed at the level of corporate income dislike US LLC, which is taxed at the level of LLC members.

(1)Advantages:
①Lower cost for set-up
②Fewer legal procedures for maintenance

(2) Disadvantages
①Fewer Social credibility
②Fewer familiarity

(2) How to incorporate K.K.

1. Cost for set-up
(1) Notarized of article of incorporation:
Stamp tax JPY 40,000+Fee JPY 50,000+ Issuing fee JPY 2,000
(2) Registration tax JPY 150,000
(3) Registration issuing fee JPY 600
(4) Our standard service fee: JPY 50,000 (There is discount for clients who engage with retainer agreements with our office)
(5) Total (1)-(4): approximately JPY 250,000(excluding corporate seal charges)

2. Deciding necessary items for set-up
(1) Premise for an office
(2) Company name
(3) Company’s business purposes
(4) Company’s paid-in capital
(5) Company’s member

3. Governing bodies of companies
As the simplest model, a K.K. with one director can be created.

4. Preparation of articles of incorporation
The articles of incorporation set out 2. Necessary items for set-up and 3. Governing bodies of companies in the articles of incorporation.

5. Notarized of articles of incorporation

6. Application of commercial registration
Apply for the registration with the notarized articles of incorporation and other documents.

(3) How to incorporate G.K.

1. Cost for set-up
(1) Article of incorporation:
Stamp tax JPY 40,000+ Issuing fee JPY 2,000
(2) Registration tax JPY 60,000
(3) Registration issuing fee JPY 600
(4) Our standard service fee: JPY 50,000 (There is discount for clients who engage with retainer agreements with our office)
(5) Total (1)-(4): approximately JPY 160,000(excluding corporate seal charges)

2. Deciding necessary items for set-up (Same as the above K.K.)
(1) Premise for an office
(2) Company name
(3) Company’s business purposes
(4) Company’s paid-in capital
(5) Company’s member

3. Governing bodies of companies
As the simplest model, a G.K. with one member can be created.

4. Preparation of articles of incorporation
The articles of incorporation set out 2. Necessary items for set-up and 3. Governing bodies of companies in the articles of incorporation.

5. Application of commercial registration
Apply for the registration with the prepared articles of incorporation and other documents.

(4) Tax reports and applications after business start-up

1. National tax office
(a) Tax report for establishment of Japanese corporation
(b) Tax report for commencement of payroll
(c) Application for filing blue form tax return
(d) Application for withholding income tax payment on a semi-annual
(e) Application for extension of the filing due date for final tax returns

2. Local inhabitant tax
(a) Tax report for establishment of Japanese corporation
(b) Application for extension of the filing due date for final tax returns

Recurring services

We provide following recurring services in one-package.

(1) Bookkeeping

(2) Payroll

(a) For the payroll taxes, please see here.
(b) For the Employee’s Pension Insurance, please see here.
(c) For the health insurance, please see here.

(3) Consultation on daily taxes issues

(a) Corporate tax
(b) Consumption tax
(c) Withholding income tax
(d) Other taxes (if required)
For the summary of tax rates, please see the detailed information from here.

(4) Tax returns preparation

(a) Corporate tax
(b) Consumption tax
(c) Local inhabitant tax
(d) Other taxes (if required)
For the summary of tax rates, please see the detailed information from here.

(5) Quick legal advice or quick review of legal documents

How to avoid legal trouble in Japan clients

More and more companies owners have legal troubles such as bad debt collection and arguments by employees.
Thus, We provide legal advice services in order to protect our clients from such legal troubles.

Companies Act update

On November 29, 2013, the Cabinet decision was made on the proposal for revision of the Companies Act aimed at strengthening corporate governance. In the proposal, the multiple shareholder lawsuit, which parent company shareholders can pursue the liability of directors of a subsidiary, is newly provided and the accountability of the reasons why not place an outside director to the company is imposed on the company of a certain size.

Civil Code update

As the social economy in Japan has dramatically changed in various aspects according to the globalization of the market as well as developments in information technology and transportation measures, it is considered that the provisions of the law of obligations in the Civil Code need to correspond to the changes of social economy. Accordingly, on October 28, 2009, the Minister of Justice consulted with the Legislative Council of the Ministry of Justice for the revision of the Civil Code. In response to this consultation, the general assembly of the Legislative Council decided to establish “Working Group on the Civil Code (Law of Obligations)” for this mission. This Working Group is scheduled to deliberate on the Civil Code reform relating to law of obligations. Upon completion of the deliberation, the Working Group is expected to report the basic policy for the reform to the general assembly of the Legislative Council. Adopting this basic policy, the Legislative Council will submit the recommendation to the Minister of Justice.

Inbound Services & Outbound Service for international clients

(1) Inbound Services for international clients

We provide following services to international clients;
(a) Business set-up servies
(b) Office location serach services
(c) Visa application services
(d) Monthly reporting services
(e) Monthly recurring services (Please see the above for the details.)
(f) Audit and review services
(g) International tax consulting services

(2) Outbound Services for international clients

We provide following services to international clients;
(a) Introduction of oversea specialist
(b) Research of regulations in foreign countries
(c) Feasibility studies in foreign countries
(d) Attendance at client meetings in foreign countries

How to cope with tax audit in Japan

(1) General introduction

In Japan, tax audits are conducted every 2 or 3 years if the company earns taxable income and the target company is selected by certain criteria in National Tax Agency (“NTA”).

The jurisdiction of the tax payment and tax audit varies depending on the capital size of the company and whether or not the the head office is located in Japan (“Domestic company”) or not (“Foreign company”).
(a) If the paid-in capital of the domestic company exceeds JPY 100 million or if the company is a foreign company of which head office is located outside Japan, the jurisdiction for such companies will be a regional tax bureau, Tokyo Regional Tax Bureau (“TRTB”) in Tokyo.
(b) If the paid-in capital of the domestic company does not exceed JPY 100 million, the jurisdiction for such companies will be local national tax offices.

TRTB has a special team concentrating on the tax audit for foreign companies and staffs are good at analysis on the international cross-border transactions in Japan. Thus, you will need to check and consider how much the capital amount should be and where the head office should be located from a view of tax audits standpoint.

More and more national tax office are keen on auditing not only huge tax payer but also small tax payer and international cross-border transactions in Japan.

(2) Our services

We provide tax audit support services as follows;
(a) Atendance at tax audits
(b) Riaison between tax examiners and clients
(c) Reporting to headquarters
(d) Process management

Note: The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. While every effort has been made to ensure the correctness of the information provided and the opinion expressed in this homepage, no warranty is given or implied as to the correctness of the information provided and no liability is accepted for any opinion stated herein. Appropriate tax advisor or other professional advice should be sought or obtained for any specific issues that may arise from the information provided in this homepage.
Any tax advice included in this written was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding any penalties that may be imposed on the taxpayer by any governmental taxing authority or agency

For a corporation which invests in real estate in Japan

(1) Investment in real estate in Japan

When a foreign corporation which does not have domicile or residence in Japan invest in real estate in Japan, it must pay special attention to the following matters for tax purposes:

(2) If it has acquired real property

When a foreign corporation acquires real property in Japan, the following taxes must be paid:

 1. Stamp tax…The stamp shall be affixed to the sales contract.

 2. Registration and license tax…This tax shall be paid when registering the acquired real property.

 3. Real estate acquisition tax…This is a tax that the prefectural government charges to those who have acquired real property.

 4. Fixed property tax…This is a tax that the municipal government charges to the owner of real property every year.

Tax notices for real estate acquisition and fixed property taxes are sent to a foreign corporation after the acquisition of real property, and it will have to pay them. However, it is generally required to hire a tax agent in Japan for the reception of tax notices and payment procedures.    

A tax agent is a person who takes care of paperwork including submitting applications, receiving notices, and carrying out payment procedures on behalf of a foreign corporations which does not have domicile or residence in Japan.

(3) When leasing real estate

The rent that a foreign corporation receives from leasing out its property is subject to corporation tax in Japan. Therefore, a foreign corporation which leases its property is obliged to file its corporation tax return and pay corporation tax in Japan.  

Also, in certain cases, consumption tax may be imposed. In that case, it is obliged to file consumption tax and make a payment. For more information on consumption tax liability, visit this website: https://www.nta.go.jp/foreign_language/consumption_tax/01.htm#c06

Since it is difficult to file these tax returns from outside Japan and make payments, a foreign corporation shall generally appoint a tax agent to do the paperwork on its behalf.

In Japan, those who pay rent to a foreign corporation are to withhold 20.42% of the rent and pay it to the government as the foreign corporation’s income tax and special income tax for reconstruction (hereinafter called “income tax, etc.”). This withheld income tax, etc. can be deducted from its total corporation tax calculated when it files its tax return. If the total corporation tax is too low to be deducted, the withheld tax will be returned to it. Please note that for individuals who borrow a property for their or their family’s residence, its income tax, etc. does not need to be withheld from the rent.

(4) If it has sold real property

Income arising from the transfer of a real property in Japan is subject to corporation tax. Therefore, a foreign corporation which transfers its real property and gains income are obliged to file its corporation tax return and make a payment.

Also, in certain cases, consumption tax may be imposed. In that case, it is obliged to file consumption tax and make a payment. For more information on consumption tax liability, visit this website: https://www.nta.go.jp/foreign_language/consumption_tax/01.htm#c06

Since it is difficult to file these tax returns from outside Japan and make payments, a foreign corporation shall generally appoint a tax agent to do the paperwork on its behalf.

In Japan, those who purchase a real property from a foreign corporation are to withhold 10.21% of the purchased amount and pay it to the government as the foreign corporation’s income tax, etc. This withheld income tax, etc. can be deducted from its total corporation tax calculated when it files its tax return. If the total corporation tax is too low to be deducted, the withheld tax will be returned to it. Please note that for those individuals who purchase a real property costing 100 million yen or lower for their or their family’s residence, its income tax, etc. do not need to be withheld from the purchased amount.

 (5) Services we provide

We, Bansho Ito Certified Public Accountant’s Corporation, provide the following services for a foreign corporation which has purchased real property in Japan:

 

Services

Fees (tax exclusive)

  (i) Being appointed as a tax agent, we receive and submit documentation from/ to the national and local governments and perform tax payment procedures on your behalf. Please note that we do not make advance payments on your behalf.

(*1)

 (ii) We perform accounting activities related to its real estate leasing and create your tax return form. Additionally, we report your annual income/expenses in English.

(*2)

 (iii) We perform accounting activities related to the sales of real property and create your tax return form.

(*3)

(*1) 50,000 yen/ year

(*2) As follows

Annual rent (tax exclusive)

Fees (tax exclusive)

0 yen to 3,000,000 yen

90,000 yen

3,000,001 yen to 5,000,000 yen

110,000 yen

5,000,001 yen to 10,000,000 yen

130,000 yen

10,000,001 yen to 15,000,000 yen

150,000 yen

15,000,001 yen to 20,000,000 yen

180,000 yen

20,000,001 yen to 25,000,000 yen

250,000 yen

25,000,001 yen or more

For more than 25,000,001 yen of annual rent, an additional 50,000 yen will be charged for every additional 5,000,000 yen of annual rent.

  If you require us to file a consumption tax return, an additional 50,000 yen will be charged.

(*3) Amount equivalent to 2% of the sales value

(6) Why we are chosen

Bansho Ito Certified Public Accountant’s Corporation, established in 1942, has provided services to customers for over 75 years that enable them to focus on their businesses. We have proven experience and success in this field.    

We have several lawyers and are able to provide advice on subjects not limited to accounting and taxation issues for real properties, but also on other legal issues. We aim to provide true one-stop services.  

Please contact us to protect your important real properties in a foreign country, Japan. 

*The services listed above are based on the laws as of the end of January 2017.

 

 

 

Service

Start up business in Tokyo/Japan
In-bound/Out-bound services in Tokyo/Japan
Inheritance by foreign people/cross-border inheritance
How to avoid legal troubles in Japan
How to cope with tax audit in Japan
How to cope with tax audit in Japan