Accounting and tax in 2021

Japan tax obligations

Tax regime

  1. Japan’s corporate tax for companies with a paid-in capital of over 100 million JPY is 23.4%, applicable for fiscal years beginning on or after 1st April 2016;
  2. Furthermore, the company must pay two type of local taxes, both of which vary depending on the size and location of the company. The inhabitant’s tax varies from 12.9% to 16.3%; and the enterprise tax, that has three components: a progressive rate of taxable profits caped at 3.6%, a 1.2% tax on value added and 0.5% on share capital and capital surplus;
  3. The effective tax rate for companies in Japan is around 30%;
  4. In the country, the standard value added tax (VAT) rate is 8%;
  5. The country has signed double taxation avoidance agreements (DTAA) with 54 countries;
  6. The country has signed the Trans-Pacific Partnership which allows free trade with 12 countries.

Accounting regulations

  1. In Japan, most companies require an annual statuary audit;
  2. Healy Consultants compliance department guides our Client through legal and tax obligations to support Japan company formation;
  3. Domestic companies which are wholly owned by other domestic companies can file consolidated tax returns with their parent company;
  4. Monthly and quarterly financial statements must be submitted to the local authorities. The statements must include total global revenues and will be taxed on its profits;
  5. Healy Consultants can assist our Clients with tax registration for their Japan Company. This includes to notify its establishment to Japanese tax authority, which cover VAT tax (consumption tax), local tax and enterprise tax.

Legal and compliance

Japan’s company law is complex and so starting a business in Japan can be time consuming. Furthermore, most documents related to Japan incorporation are written in Japanese, therefore non-Japanese speaking foreign investors face translation costs and waiting times.

Business set up regulations

  1. In accordance with Japan Companies Act, the minimum share capital of a Japanese GK company is one Japanese yen. However, to employ a foreigner and smooth the incorporation process, it is recommended to have a minimum capital of US$50,000. To optimize engagement efficiency and minimize delays, Healy Consultants is happy to deposit these funds on behalf of our clients;
  2. Since March 16, 2015, Japanese limited companies do not require appointment of ordinarily residents in Japan as local resident director. However, if our Client is interested to appoint a local nominee resident director, Healy Consultants will provide a passive nominee resident director for an annual fee of US$6,750 per nominee;
  3. All companies in japan need to register with the Japanese Ministry of Justice, and all non-Japanese foreign nationals living in Japan must register with the Japanese government;
  4. The Japanese government emphasizes that leases cannot be prematurely terminated without having just a reason. Therefore, it is difficult to relocate after signing a lease agreement;
  5. All business activities conducted in Japan receive government approvals, permits and licenses. There is an obligation to register specific products with the government, including food, pharmaceuticals, medical devices, and medicine;
  6. For a de-registration of resident Japanese companies, Healy Consultants will fulfil all the Government requirements, which will take a minimum of 6 months. Our fee for offering this services is US$1,450. Also, during this period, our Client will need to maintain the resident company secretary and the resident office.

Staff regulations

  1. In Japan, an employer is required to contribute i) 5% of the employee’s annual salary for their health insurance, ii) 9% towards the employee’s pension fund and iii) 1% for unemployment contribution;
  2. The Japanese government encourages a “life time employment” policy. Therefore, it may be difficult to employ Japanese staff if you do not adopt this policy.

Reporting regulations

  1. Companies can set their fiscal year when it begins its operations in Japan and must submit their accounting reports within two months of the end of its fiscal year. Monthly and quarterly financial statements must be submitted to the local authorities;
  2. There are two type of tax return forms, blue and white. The blue tax return form requires approval from the tax office and gives companies several tax benefits. To be eligible for the blue form, a company must request an approval prior to the starting day of the taxable year;
  3. It is important to notice that when setting up a joint stock company, an internal auditor must be appointed;
  4. Cash remittances of more than US$30,000 must be reported to the ministry of finance by multinational firms.

Contact us

For additional information on our accounting and legal services in Japan, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi