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There are various types of business forms a foreign investor can choose from
when opening a company in Japan. Among these, the sole proprietorship is
the simplest structure which can be employed by both local and foreign
entrepreneurs as it can be established by one member.
A sole proprietorship in Japan can be a good choice for a business person
who has just begun a new business venture. In this country, the sole
proprietor is held entirely responsible for the venture. As a definition, a sole
trader is a business form owned by a single individual doing business in his or her own name.
Moreover, a person can start a sole proprietorship in Japan depending on his or her visa status or the
spouse’s status. Our company formation advisors can provide assistance related to starting such a business
entity in Japan, as well as on starting a company of any kind in Japan. You can rely on us for professional
company registration services in Japan.
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Other than that, the business owner will only need to file an application form with the Companies Registrar
and one with the tax authorities. Then, the licenses or approvals for operating the business must be obtained.
The sole trader must also have a seal created.
Our Japanese company formation consultants can offer more information on the requirements related
to starting a sole proprietorship as a foreign entrepreneur.
Freelancers with labor permits are also allowed to offer their services as sole proprietors in Japan.
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- restaurant: a restaurant has to obtain a permit from the Local Public Health Center and one from the Public
Safety Commission in case it will be served after 10 p.m. or offer alcoholic drinks;
- exporting and importing: this type of entity is not required to obtain a license, however, the business owner
has to acquit the customs tariffs for Japan. Our Japan company formation specialists can provide further
information on this matter;
- professional activities such as accounting and medical ones can also be completed as a sole trader in Japan.
It is important for the sole trader to enroll with professional associations in order to gain more visibility on the
Japanese market. It is just as important to promote small businesses set up as sole
proprietorships considering the large number of companies operating in Japan.
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%. Below, our Japan
company formation agents list some of the most important taxation brackets according to the 2021 national
income tax rates:
- 5% (5.105% including surtax) for taxable income up to 1,950,000 JPY;
- 10% (10.21% including surtax) for taxable income between 1,950,001 and 3,300,000 JPY;
- 20%(20.42% including surtax) for taxable income between 3,300,001 and 6,950,000 JPY;
- 23% (23.483%) for income between 6,950,001 and 9,000,000 JPY;
- 33% (33.693%) for income between 9,000,001 and 18,000,000 JPY;
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- 40% (40.84%) for income between 18,000,001 and 40,000,000 and 45% (45.045%) for income over this
amount.
Other taxes for individuals are the local inhabitants tax (10% plus a surtax and a levy) and the capital gains tax
with effective rates of 20.315% and 39.63% including the national surtax and the local inhabitants tax.
Permanent residents in Japan are taxed on their worldwide income while non-permanent ones only on their
Japanese-source income and their foreign income paid in or remitted in Japan. Non-residents are also taxed on
their Japanese-source income. For the purpose of taxation, an individual who has resided in the country for
one year or more is a resident. A non-permanent resident is a foreign national who has spent five years or less
in the country in the 10-year period preceding the tax assessment.
Foreign nationals, permanent or non-permanent residents can benefit from deductions and allowances and
our team can give you more details on how you can use these for the purpose of the sole trader.
It should be noted that foreign sole traders will be taxed based on the type of visa they operate under in
Japan. This is why it is important to ask for professional accounting services.
It is also possible for foreign entrepreneurs doing business in Japan as sole proprietors to benefit from the
country’s double taxation agreements in order to reduce the tax burden.
It is advisable to hire a local accountant to handle the finances and the relations with the tax authorities.
Our Japan company formation advisors can offer more information on the taxation requirements imposed
on sole traders here.
When starting your own business as a foreign national in Japan is an option, the sole trader encompasses
much of the initial needs for many types of entrepreneurs. If your spouse is a Japanese national, you will
encounter no issues when starting a sole proprietorship in Japan, because your visa situation is settled.
Making the initial registrations for the sole trader and making sure that one complies with the subsequent tax
rules are two of the most important issues concerning this business form, however, they are part of the issues
to consider when opening any type of company in Japan.
If you need to know more about starting a sole proprietorship in Japan, we invite you to get in touch with our
friendly company registration consultants in Japan.
Other business industries also present important potential, among which the energy sector (Japan has
important potential for offshore wind power generation). Tourism is also developed, making Japan one of the
top destinations in Asia (an industry which is likely to recover from the 2020 pandemic restrictions).
We offer tailored services and answers to foreign nationals, companies and individuals, who wish to know
more about how to do business in Japan.
We specialize in company incorporation services in Japan for both local and foreign investors interested in
doing business here no matter the chosen business form. You can also rely on us for other services related
to starting a business in Japan, such as business consulting and accounting services.
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