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Starting a Business in Japan

Starting a Business in Japan

Japan represents a major economy worldwide, having the third largest GDP by nominal in the world and the fourth largest by purchasing power parity (PPP). It is the world’s second-largest developed economy. Japan is a member of both the G7 and G20. According to the World Bank, the country’s per capita GDP (PPP) was at $40,193 (2020). This is the reason why investors are interested in setting up a company in Japan. In this article, we present you with the average business start-up costs in Japan.

Starting a business in Japan implies several steps, however, there are also the business start-up costs which need to be considered when undergoing such a procedure.

You can rely on our company formation specialists in Japan if you want to open a business here and need assistance. We will guide you through the entire process and also advise on the cost of each procedure.

The Business Manager visa can be a suitable option for entrepreneurs who wish to obtain Japanese residency. The application is subject to several conditions, mainly concerning minimum investment amounts. The applicant also needs to provide several essential documents to the Regional Immigration Bureau. Our team can help you with more information and assistance during application.

If you are interested in Japan immigration, you should know that a number of conditions apply to foreign nationals and one of the most important refers to having obtained a type of visa that allows one to remain in the country for medium or long term purposes (such as the one for business managers, or highly skilled professionals). Additionally, one also has to meet other requirements. 

The main steps of starting a business in Japan

The start-up costs of a company in Japan imply the costs associated with the registration of the business, the licensing costs and the other costs which can imply, renting a space for the office and and acquiring talent and necessary equipment to run your business.

Most of the time, foreign investors opening companies in Japan are first interested in company registration costs. For this purpose, our company registration agents in Japan explain the steps related to opening a business in this country which consist of:

  • – the reservation of a trade name, based on the submission of several names for approval with the Legal Affairs Bureau;
  • – the preparation of the incorporation documents which imply the drafting and notarization of the Articles of Association;
  • – the translation of various documents, if the shareholders are foreign citizens or companies (where applicable);
  • – the opening of the bank account and deposit of the share capital which are also subject to various fees;
  • – registering with the Japanese tax authorities for tax, social security and employment purposes;
  • – obtaining various licenses and permits in accordance with the activities to be undertaken.

If you are a foreign investor and need assistance in starting a business in Japan, you can rely on our local consultants.

Aditionally, investors will also need to apply for a visa to enter the country and remain here to open the company. Our immigration lawyers in Japan can give you details.

Costs involving registering a company in Japan

Some of the most important costs to take into account when opening a company in Japan are those related to the actual incorporation of the new company and the ones that are required for tax registrations or tax notices. The list below includes the main costs required to form a Kabushiki Kaisha company. Other, simpler business forms that are not subject to the same requirements will have lower costs.

  1. Professional Fees: starting from JPY 250,000 but depending on complexity
  2. Creating a Company Seal: from JPY 5,000
  3. Initial Tax Filings: from JPY 90,000
  4. Notary and out of pocket expenses: from JPY 50,000 (could be zero in the case of an LLC)

In addition to the registration costs, other notable costs are:

  1. Paid-in Capital (minimum is JPY 1 but we suggest anywhere from JPY 1M to JPY 9.5M at the start (unless a license or visa application calls for more)
  2. Office rent (if you need one) can range anywhere from JPY 50,000 to millions of JPY per month depending on where and what level of quality of space you are looking for.  Serviced Office space is a good option for new entrants into the Japan market, but if you plan to have a big team and want to attract top talent it may make sense for you to invest in a dedicated office space
  3. Recruitment costs for talent are standard 35-40% of gross salary if using a recruiter
  4. Operational and Compliance costs highly depend on your business type so we would suggest a call to discuss in greater detail with our Tokyo-based team.

We have helped over 2,000 foreign companies and investors set up their business in Japan and it generally it a very tailored discussion.  Our initial conversations usually take 30-60 minutes and we explain everything you need to consider in that time.  Please contact us so we can help you move forward.

Our immigration lawyers in Japan can also answer your questions regarding entry in the country based on nationality.


Costs related to opening an office in Japan

When you open an office for a new company in Japan, the following other costs are involved:

  • • rent, for a minimum of three months, for a temporary office;
  • • monthly rent in one of Tokyo’s five major districts;
  • • security deposit, for around 10 months of rent;
  • • real estate brokerage fee;
  • • other costs: our company formation agents in Japan can provide more details on what these other costs consist of and can help investors who are interested in starting a business in Japan begin their business venture as fast as possible.

Other costs for company formation in Japan

It is very common for foreign investors to appoint company registration agents to incorporate a business on their behalf in Japan. In this case, the costs associated with hiring specialists for such services must also be included. 

In addition to the costs that will appear when investor request the services of a company incorporation agent, the costs for hiring personnel should also be included. These mostly relate to the costs for the services offered by a recruiting agency, a common manner in which the business owners select their employees for different positions. These costs can be expressed as a percentage of the first year salary and will differ according to the position for which the recruitment is made (they will be larger for a manager position compared to another type of employee and they will also differ according to the sector in which the company activates).

Foreign investors who have obtained a long-term visa and plan on spending time in Japan in order to manage their company will also wish to include those costs that relate solely to their own expenses while in the country. Although these are not related to the company itself, it can be useful to find out more about the housing costs for a foreign national if you intend to relocate to the country.

The costs outlined in this article are expressed for the most common business form, the Kabushiki Kaisha or, alternatively, the costs for opening a branch in Japan are offered as comparison. They are reflective of the situation in which one foreign national acts as the managing director of the company.

Post-incorporation taxes for companies in Japan

The company set up costs are important when starting a business in Japan. However, once the company founders have successfully incorporated the business and have resolved the permanent office and the employment for the new company, they will need to take into account the general taxes applicable for companies.

Once incorporated, the company will start to be subject to the corporate income tax rate which has a value of 30% to 34%, including the local taxes. All companies that have their main office located in Japan are considered residents for tax purposes and are subject to tax on their worldwide income. The effective tax rate is calculated as the national standard corporate tax (23.2%) to which other taxes such as the local inhabitants tax and the local enterprise tax apply (this brings the effective tax rate to approximately 30% for companies which have a paid-in capital of over 100 million JPY).

For more details concerning the costs of starting a business in Japan, or if you need assistance related to opening a company in this country, we invite you to get in touch with our Japan company formation consultants.

You can also discuss with our accountant in Japan as soon as you need these types of services.

We can also answer questions about immigration to Japan.