Tax and Social Insurance When You Run a Company in Japan

The costs that arrive after incorporation and surprise people: corporate tax even in a loss year, employer social insurance at roughly fifteen percent, and the consumption tax threshold that catches new companies.

Setting up a company in Japan is cheap. Running one is where the numbers live, and the recurring costs are the ones people fail to model.

I am not an accountant. What follows is the shape of the thing, so you can ask a 税理士 the right questions rather than discovering the answers in your first filing.

The tax you pay for existing

Corporate resident tax (法人住民税) has a per-capita portion that is due whether or not you make any money. A dormant, loss-making company still owes it. Roughly 70,000 yen a year at the small end, rising with capital and with the municipality.

This catches people who incorporate early "to get things moving" and then take a year to start trading. The company is a meter that starts running at registration.

The taxes you pay on profit

Corporate tax (national), plus local corporate tax, corporate resident tax on income, and enterprise tax. Everyone talks about the "effective rate", which combines them and lands somewhere around thirty percent for a typical small company, with reduced rates on the first slice of income for smaller companies.

The exact bands change. Do not plan against a number you read once.

Consumption tax, and the threshold that matters

Consumption tax (消費税) is currently ten percent, with a reduced eight percent on food and some other items.

The rule that shapes new companies: businesses under a certain taxable sales threshold, historically ten million yen in the base period two years prior, may be exempt. A brand-new company has no base period, so it is often exempt for its first two years.

Two things break that exemption, and both are common:

Capital of ten million yen or more at incorporation. Register with capital at or above that and you are a taxable business from day one. This is a real consideration when you are capitalising to thirty million yen for the Business Manager visa. Those two requirements pull in opposite directions and you should decide deliberately rather than by accident.
The invoice system. Since October 2023, business customers generally need a qualified invoice to claim their input credit. If you sell B2B, your customers may effectively require you to register as a taxable business regardless of the exemption, because otherwise you cost them money. Many small companies register voluntarily and give up the exemption for that reason.

Social insurance is the big one

This is the cost that most consistently blindsides founders.

A company with employees — and a director drawing a salary counts — must enrol in health insurance (健康保険) and employees' pension (厚生年金). Contributions are split between employer and employee, and the employer share is roughly fifteen percent of salary, with the employee paying a similar amount from their side.

So a one-million-yen monthly salary does not cost the company one million yen. It costs closer to 1.15 million, before you count labour insurance on top.

Model this from the beginning. A hiring plan built on gross salaries alone is understated by about fifteen percent, and if you are hiring the qualifying employee the new visa rules require, that person's true cost is the number that matters.

Your own position

If you are resident in Japan, you are generally taxed on your worldwide income once you pass the non-permanent-resident thresholds. The rules on foreign-sourced income for people in their first five years are genuinely complicated and depend on remittances into Japan.

If you have income or assets outside Japan, do not improvise this. It is the single most common area where foreign founders get it wrong for years without noticing, and the correction is expensive.

The calendar

Corporate filings are due two months after your fiscal year end. You choose your fiscal year at incorporation, and choosing one that does not end in the same month as everybody else's can genuinely improve the attention you get from your accountant.
Personal tax return season runs roughly mid-February to mid-March.
Resident tax is assessed on the previous year's income, which means your first year here is cheap and your second is a shock. Budget for it in advance, because it arrives whether or not that income continued.

The one piece of advice

Get a 税理士 before you incorporate, not at your first filing deadline. The decisions that cost money — capital amount, fiscal year end, director salary level, whether to register for consumption tax — are all made at setup, and most of them are annoying or impossible to reverse afterwards.