Register company in Japan

• Investors must first choose the structure of company that best suit their needs. Before every engagement, Tetra Consultants will fully understand your business model in order to recommend the most suitable business structure to meet your long-term business needs.
• These business structures do not enjoy limited liability and are thus not that recommended unless for the specific purposes mentioned in the earlier section.
  • Representative offices
  • Branch offices
  • Limited partnerships
  • General partnerships
  • Sole proprietorships
• In our experience, most investors’ needs would suit that of the Japan Limited Company (Godo Kaisha, GK) or the Joint Stock Company (Kabushi Kaisha, KK). This is because these two company structures offer a good mix of continuity and liability protection.

• Compared to a KK, a GK is cheaper, easier, and faster to incorporate and allows flexible profit-sharing independent of number of shares held. However, a KK would be more suitable for those looking to deal with Japanese companies or issue shares in the future, since the KK is the more established and credible company structure, with the GK being newly introduced in 2006. Investors need not worry about locking themselves into one type of company as they can convert between these two structures after company registration.

• Investors should then decide on the basic details of their company, such as business objectives and company name. This company name should not be vulgar, misleading or contain any existing trademarks. It should also not be similar to any existing company names. Tetra Consultants will assist our client to do a Japan company registration number search to ensure the chosen name is unique so as not to delay the incorporation process.

• The supporting documents should be prepared, beginning with the articles of incorporation (which should also be notarized for the KK). This document should contain all the important details of the company, in particular, it should contain the organizational structure and internal control regulations needed to properly manage the company.
• Additional documents to be prepared are the proof of deposit of the capital, notification of the company’s seal, and a letter of agreement stating that the directors are willing to take on the appointment. In the case of foreign directors, this letter should be notarized. Once all these are prepared, the application can be sent to the company registration authority in Japan, the Japanese Legal Affairs Bureau (Homukyoku).

• Even though the minimum paid-up capital to open a company is 1 yen, this is not practical in terms of running the business, and also because it would make it harder to open your corporate account with Japanese banks. For the same reason, even though the director does not need to be a Japanese resident, we would encourage our clients to temporarily appoint one to make it easier to deposit the starting capital and subsequently open the corporate bank account for you. Tetra Consultants works with several reputable banks and can also help you to open your local or international corporate bank account.

• Approval is expected to take three weeks, after which you will receive your 13-digit Japan company business registration number and certificate of company registration. The company and the director can now proceed to register for their seals. Our team of experts will also help to prepare your firms annual returns and financial accounting as per the 4 accepted standards for annual fiscal year reporting. These must then be presented at the shareholders’ meeting for each fiscal year.

• Companies must also use their Japan company tax registration number to register and notify the National Tax Agency of establishment of an office paying salaries, as well as with the municipal authorities for local inhabitants and enterprise tax. This number will be the same as their business registration number. The effective tax rate after factoring in national corporate tax of 15%-23.2% and VAT rate of 10% for Japanese corporations and local inhabitant tax will be a minimum of 30% for Japanese corporations with share capital above JPY 100 million.
• Contact us now to find out more about your Japanese accounting and tax obligations.

• Last steps will be to apply for any other required licenses, such as a cryptocurrency license. Companies should also note that if they would like to have a closer hand in running the business from within Japan, they may also apply for the Investor/Business Manager Visa. For this, they would need a physical office address and a minimum paid up capital of JPY 5 million (around US$45,000). Relevant notifications will also have to be made to the labour standards, public employment security and pensions offices that the respective Rule of Employment and insurance policies have been set up.

Required documents to register company in Japan

For individuals:

• Seal certificate (inkan shomeisho) of the investor and director, issued within 3 months
• Signature (or seal) of each investor and director on the Articles of Incorporation and other documents
• Personal bank account and passbook/statement of the investor to deposit the capital
• Company seal to be registered at the registry office

For foreign corporates:

• Registry certificate of the parent company issued within 3 months (original or notarized copy)
• Notarized signature attestation of the parent company’s representative
• Seal certificate (inkan shomeisho) of each director, issued within 3 months
• Signature (or seal) of the parent company’s representative and each director on the Articles of Incorporation

• The representative director’s personal bank account and passbook/statement to deposit the capital
• Company seal to be registered at the registry office
• Articles and Memorandum of Association

Articles of incorporation will include:

Absolute Matters for Kabushiki-Kaisha (joint-stock corporations):

• Purpose of the company
• Trade name
• Place of principal office
• Value or minimum amount of assets contributed at the time of incorporation
• Name and address of each promoter

Relative Matters for Kabushiki-Kaisha:

• Names of persons contributing in kind, assets to be contributed, value of the assets, and number and type of shares assigned
• Assets to be taken over after the corporation’s establishment, value thereof, and name of transferor
• Incorporation expenses incurred by the corporation
• Appointment of auditor(s)
• Establishment of the board of directors
• Rules on payment of dividends of surplus

Absolute Matters for Godo-Kaisha (limited liability companies):

• Purpose of the company
• Trade name
• Place of principal office
• Names and addresses of members
• Statement that all members are limited liability members
• Purpose and value of members’ contributions

Relative Matters for Godo-Kaisha:

• Relative entries that may be freely determined as long as they do not contravene the Companies Act

Accounting and tax obligations to register company in Japan

Accounting obligations

• In Japan, companies adhere to accounting principles and practices that are widely accepted within the country, mirroring International Accounting Standards with some variations.
• The Business Accounting Deliberation Council (BADC) issues Financial Accounting Standards for Business Enterprises, which serve as the accepted accounting principles in Japan.
• The Japanese Institute of Certified Public Accountants (JICPA) provides guidelines for interpreting and applying accounting principles mandated by the Companies Act and the Financial Instruments and Exchange Act.
• Companies are required to prepare and submit annual financial statements, which include a balance sheet, income statement, and cash flow statement, following Japanese accounting standards.
• Additionally, companies must submit monthly and quarterly financial statements to local authorities.
• Public companies, governed by the Financial Instruments and Exchange Act, have more stringent disclosure requirements compared to those under the Companies Act.

Tax obligations

Corporate income taxation:

• Companies operating in Japan are obligated to pay corporate income tax, currently set at a standard rate of 23.2%. This tax is levied on the profits generated by the company throughout the fiscal year.

Consumption taxation:

• Japan imposes a consumption tax at a rate of 10% on the sale of goods and services. Businesses are responsible for collecting and remitting consumption tax on eligible transactions.

Withholding taxation:

• Dividends disbursed by a Japanese subsidiary to a foreign shareholder are subject to Japanese withholding tax. Additionally, interest or royalty payments made from a Japanese subsidiary to a foreign corporation are also subjected to withholding tax.

Local taxation:

• Apart from national taxes like corporate income tax, companies may also encounter local taxes such as the Individual Inhabitant Tax. These taxes are payable to prefectural or municipal governments and can vary depending on the company’s location.

Tax compliance and reporting:

• Companies are mandated to file tax returns and adhere to reporting obligations to ensure accurate computation and settlement of taxes. Taxpayers must submit their tax returns to the tax office within specified deadlines for assessment and payment.

Visas and status of residency to register company in Japan

• Foreign nationals seeking to establish a company in Japan must typically acquire a visa or status of residence permitting business activities. The primary visa for this purpose is the “Investor/Business Manager” visa, necessitating a minimum ¥ 5 million investment in the company. This visa grants a 5-year validity, with eligibility for permanent residency after 3 years.
• Alternatively, individuals with unrestricted visas, such as Permanent Residents or dependents of Japanese Nationals, can freely choose their business structure. Those lacking a suitable visa must apply for the Investor/Business Manager visa after registering a company with at least ¥ 5 million capital. Other visa options include partnering with Japanese nationals or investors, or applying for visas like “Specialist in Humanities/International Services” or “Engineer”.

Human resource management aspect to register company in Japan

Employee-centric labor regulations:

• In Japan, robust labor laws safeguard the rights of workers while balancing corporate interests. These regulations encompass recruitment, employment contracts, wage structures, working hours, workplace safety, and resignation or dismissal protocols. Adhering to these laws ensures fair treatment of employees and fosters a positive work culture.

Establishing comprehensive rules of employment:

• Crafting a thorough Rules of Employment document is vital for delineating employee rights and obligations within the organization. Aligning these policies with Japanese labor regulations ensures legal compliance and fosters transparency in employer-employee relations.

Navigating termination procedures:

• Terminating full-time employees in Japan requires adherence to intricate legal processes. Familiarizing oneself with these procedures is crucial to mitigate risks and uphold legal obligations. Ensuring staff comprehension of termination intricacies promotes fairness and reduces misunderstandings.

Adhering to workplace guidelines:

• Understanding Japanese workplace guidelines concerning working hours, safety standards, and hygiene protocols is imperative for fostering a safe and productive work environment. Compliance with these regulations enhances employee well-being and minimizes workplace hazards.

Navigating recruitment practices:

• Conducting recruitment activities in Japan necessitates compliance with local regulations and customs. Collaborating with seasoned professionals streamlines the hiring process and ensures adherence to legal requirements, facilitating successful talent acquisition.

Ensuring compliance with labor laws:

• Whether domestic or foreign-owned, companies operating in Japan must comply with key labor statutes, including the Labor Standards Act, the Industrial Safety and Health Act, and the Minimum Wage Act. Timely filing of requisite documents to demonstrate adherence to labor laws is a standard practice for businesses operating in the country.

Is Japan a good place to start a business?

Political

• According to Transparency International’s 2020 Corruption Perceptions Index, Japan is ranked 19^th among 180 countries when it comes to public sector corruption. This suggests that Japan is a relatively corrupt-free country.
• According to the 2021 World Press Freedom Index, Japan is ranked 67^thamong 180 countries when it comes to the freedom of press.
• In May 2018, Japan passed the first national law meant to facilitate equal filling of male and female political candidates during elections. This suggests that Japan respects women’s rights.

Economic

• Japan is the third-largest economy in the world with $5.15 trillion based on its nominal Gross Domestic Product as of 2019. This is expected to be $5.37 trillion based on the International Monetary Fund’s 2021 estimates.
• The Japanese yen is said to have derived its strength from foreign assets and currencies. The low cost of borrowing in yen makes it an attractive vehicle especially in the field of funding and investing.
• The Japanese government has placed greater pressure on Japanese employers to raise workers’ wages. This could mean that labour costs in Japan may be more expensive.

Social

• According to the Organisation for Economic Co-operation and Development, in 2021, Japan’s unemployment rate is placed at 2.9% of its workforce.
• Japanese is the official language of Japan. According to the Education First’s English Proficiency Index, Japan is ranked 55th among 100 countries when it comes to proficiency in English. This suggests that you may potentially run into language issues when communicating in Japan.
• More than 20% of Japan’s population is over 65 years old, the struggle with Japan’s aging society can potentially lead to a decline in its economy.

Technological

• As introduced by the previous Japanese Prime Minister, Shinzo Abe, the “Data Free Flow with Trust” initiative suggests Japan’s commitment towards innovations.
• Japan is home to the largest international tech giants such as Fujifilm, Sony, Canon and Panasonic.
• The Government of Japan is heading towards a vision of Society 5.0. Society 5.0 aspires to be a society where innovations of the fourth industrial revolution are included into every industry and the Japanese social lives.

Legal

• Japan’s taxation laws generally include various tax exemption and reduction schemes that are meant to encourage investment in Japan.
• Japan is a party to many major Intellectual Property-related treaties such as the Patent Cooperation Treaty and the Paris Convention for the Protection of Industrial Property.
• While Japan’s judiciary is said to be largely independent, it is also important to note that the only way to remove a judge in Japan is through impeachment. Based on the Japanese Constitution, politicians can decide if a judge should be impeached. This suggests that there could be a potential infringement in the judiciary’s independence.

Environmental

• A recent report made by the Organisation for Economic Co-operation and Development highlighted that only 1% of Japan’s council waste ends up in landfills. This achievement is remarkable as compared to Australia’s 49%.
• The unfortunate Fukushima Daiichi disaster have also brought along several environmental problems such as ocean pollution.
• Japan is highly vulnerable to many natural disasters such as tsunamis, floods, typhoons, earthquakes, cyclones and even volcanic eruptions. These disasters have negatively affected its economy.

Contact us to find out more about how Japan company registration certificate can be obtained. Our team of experts will revert within the next 24 hours.

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