(Almost) Everything You Need to Know About How to Set Up as a Sole Proprietor in Japan
If you would like to build your own freelance business in Japan, perhaps teaching English, you’re going to want to make sure that you take full advantage of the benefits and leverage available by registering as a sole proprietorship.
A lot of foreigners to Japan basically “set up shop” on a real bootstrap kind of basis, never realizing that they run some significant risks – and are missing out on big benefits – operating a freelance business in another country like Japan this way.
Luckily though, with the inside information below, you won’t have to worry about those risks any longer.
Below you’ll find (almost) everything you need to know about how to set up as a sole proprietor in Japan.
Benefits of Registering a Sole Proprietorship in Japan
Though there are a multitude of advantages to setting up a sole proprietorship in Japan, the biggest has to be your ability to enjoy unrestricted income potential in a way just not possible as a foreigner without this business structure.
Foreigners in Japan are limited to what they can do as entrepreneurs, freelancers, and even employees while working in the country. When you operated sole proprietorship registered in Japan, however, you can have a lot more freedom.
On top of that, you’re also going to have an opportunity to deduct your expenses from your revenues to save on your Japanese taxes.
All in all, this is the smart move to make.
Can Anyone Incorporate in Japan?
A lot of people can create a sole proprietorship in Japan, though there are some restrictions in place for foreigners living and working in the country that want to build this kind of business.
Long-term residents (with a visa), permanent resident visa holders, and the spouse of permanent residents are all able to set up as all proprietorship in Japan without much issue.
Those that have a “working holiday visa” are also eligible for this program.
Individuals with stable contracts connected to Japanese companies, those that are in Japan as a student or cultural activity member (with permission to work), as well as those that have a freelance work visa will be able to set up a sole proprietorship, too.
Requirements You’ll Need to Hit
There are a couple of requirements you need to hit when you go to register for this program.
First of all, you’re going to need a tradename that you can use to reserve in register your new business with through the Japanese Companies Registrar.
You are also going to need to have a legal address (your home address works here) to put down on your documents, the address that your use as your headquarters your new business – even if your freelance work takes you around the country.
You’ll also need to fill out paperwork with the Companies Registrar and at least one of the tax organizations and authorities in Japan.
Any specific licenses, certifications, or government approvals you need for your business will have to be secured in advance, too.
Important Info About Permits Needed in Japan
As a freelance English teacher in Japan you may need to secure a permit from the Japanese Ministry of Education – especially if you’re looking to open a private school.
If you are running an afterschool program, though, or an adult education program the odds are pretty good that you will not need to get your hands on that same kind of permit before moving forward with your business registration.
Important Info About Taxes in Japan
As a sole proprietor in Japan, you are going to be responsible for paying a number of taxes you may not be used to paying in your native country.
Every sole proprietor is going to have to pay:
- Income tax on all of their income
- A consumption tax
- An enterprise tax
- A residence tax
- As well as any and all real estate taxes that may be applicable in this situation
All of these taxes are going to be paid out on a self-assessment kind of basis, with progressive tax rates that are based off of any annual income figures reported with local authorities.
As of early 2021, the lowest tax rates in Japan for sole proprietors sits at 5% in the highest is pegged at 45%.
Other taxes are going to range wildly – with some municipalities charging 6%, others 4%, and others still somewhere between 3% and 5% for a variety of different taxes.
At the end of the day, you’ll want to make sure that you are filling out the “blue form” as opposed to the “white form” when you are filing your taxes. There are a lot of advantages here as a foreign freelance sole proprietor in Japan – especially when it comes to managing your income and your expenses.
References
https://www.juridique.jp/business/soleproprietor.php
https://www.companyformationjapan.com/start-a-sole-proprietorship-in-japan
https://www.at-it-translator.com/starting-a-small-business-in-japan-as-a-kojin-jigyo/
