Case 5
<Question>
I have been working in Japan as an expatriate from Canada though, I plan to leave the company and start a business in Japan. Could you tell me about the laws and regulations with regards to starting a business in Japan.
<Answer>
Regarding starting a business in Japan, the following categories should be taken care.
- Visa and status of resident ⇒ Please make an arrangement with lawyers or administrative scriveners
- Starting a business
- Taxes
- Human resource ⇒ Please make an arrangement certified social insurance labor consultant
1. Sarting a business
If your business is not a corporation, registration to the Legal Affairs Bureau is not necessary. There are several types of corporations in Japan.
(1) Joint-stock corporation (Kabushiki-Kaisha (K.K.))
(2) Limited liability company (Godo-Kaisha (LLC))
(3) Unlimited partnerships (Gomei-Kaisha)
(4) Limited partnerships (Goshi-Kaisha)
All types can be established by completing the required procedures stipulated by law and then registering the corporation. Kabushiki-Kaisya (K.K.) is the most common type of corporation in Japan.
General procedures for establishing companies are as follows.
(1) Determination of companies information to be registered
(2) Examination at the Legal Affairs Bureau of similar corporate names
(3) Establishment of companies (date of companies establishment is at the companies discretion)
(4) Application to the Legal Affairs Bureau for registration of companies establishment; registration of company seal with the Legal Affairs Bureau
(5) Acquisition of certificate on registered information and company seal registration certificate(approx. two weeks after application for registration)*3
(6) Opening of bank account under companies name
(Note)
*1 Companies’ articles of incorporation, establishment certificate, registration certificate, and other such documentation in Japanese.
2 Time required: about one month after determination of companies to be registered.
*3 Taking advantage of seals for individuals and companies are common instead of using a signature. Stationary shops are available to make seals.
2. Taxes
When establishing corporations, the tax authority require the filing of several application forms (Filing similar application forms is required to start an individual business).
National Tax Forms
(1) Notice of Incorporation *1
Within two months after the date of incorporation
(2) Application for approval of filing blue-form return
One day before the earlier day of the following.
i ) Three months after the date of incorporation
ii) The end of first fiscal tax period
(3) Application for the extension of time to file corporation tax return
The end of the first fiscal year
(4) Notice of adoption of accounting method
Due date of filing of tax return for the first fiscal year
(5) Notice of commencement of payment of wages and salaries
Within one month after the date of establishment
(6) Application for approval of semi-annual payments of withholding taxes *2
Effective at the end of the month following the month of filing
(7) Notice of consumption tax election to be a taxable enterprise *3
The end of the fiscal year
Local Tax Forms
(1) Notice of commencement of business, etc
Within 15days after the date of commencement of operations
(2) Application for the extension of time to file enterprise tax return
The end of the first fiscal year
(3) Application for the extension of time to file inhabitants tax return
The end of the first fiscal year
*1 Attachment
- A copy of articles of incorporation
- Authenticated registration
- A copy of shareholder’s list
- Explanation of the reason for the incorporation
- Balance sheet as of the date of incorporation
*2 If number of employees subject to payroll is less than ten at any time, the company can use this form.
*3 In general, an enterprise with sales in Japan will be a consumption tax payer. There is a relief provision for small scale enterprises where the amount of taxable sales in a “basis period” is not more than 10 million. However, the enterprise be able to elect to become a taxable enterprise by filing a “Notice of Consumption Tax Election to be a Taxable Enterprise”, if the amount of taxable sales of an enterprise in the taxable base period is not more than 10 million. The base period is the business year two years prior to the current business year. Please note that a newly established enterprise is a consumption tax payer if the capital of the enterprise is 10 million and more.
Reference
Starting a business in Japan – Business operation 25/10/2012
Starting a business in Japan – Blue tax return for Income tax 11/10/2012
Starting a business in Japan – Opening bank accounts and borrowing money 28/09/2012
Starting a business in Japan – Tax merit (a corporate or an individually owned business?) 10/09/2012
Starting a business in Japan – Consumption tax
By Certified Public Accountant (CPA) & Tax Accountant, Koji Takahashi
Tokyo & Yokohama
