Starting a Business in Japan: 3 Essential Tax Steps for Foreign Entrepreneurs
【Koshida Accounting Firm Column Date:】
Hello, my name is Taisei Koshida, and I am a certified public accountant and licensed tax accountant in Japan.
I specialize in supporting non-Japanese business owners who need assistance with accounting and tax matters in Japan, especially those who face challenges with the Japanese language. If you find the Japanese tax system complex, I can help you handle your tax filings smoothly and correctly.
Are you a foreign entrepreneur planning on starting a business in Japan?
While establishing a company in Japan offers incredible opportunities, navigating the Japanese tax system can be complex. Missing crucial tax procedures early on can lead to higher corporate taxes or the loss of valuable tax benefits.
As an English-speaking accounting firm in Japan, we have compiled the three most important tax steps every foreign business owner must complete immediately after company registration.
Planning to Start a Business in Japan?
If you are planning to establish a company in Japan, there are several important tax procedures you should complete early on. Missing these steps may result in higher taxes or lost benefits.
Below are three key tax points you should check:
1. Submit the Blue Form Tax Return (Aoiro Shinkoku) Application
To optimize your corporate tax in Japan, submitting the Blue Form (Aoiro Shinkoku) notification to your local tax office is essential. This application unlocks significant tax benefits for your new company, including:
- ●Carry-forward of tax losses: You can carry forward net operating losses for up to 10 years, which is vital for startups in their early stages.
- ●Accelerated depreciation: Claim larger depreciation expenses on qualifying assets to reduce taxable income.
Important Deadline: This application must be filed within two months of your company’s establishment.
If you would like more details, please refer to this article.
Blue-Form Tax Returns in Japan: Importance and Deadlines
2. Set Your Director’s Compensation (Yakuin Hoshu) Correctly
Under Japanese corporate tax law, you must carefully determine the director’s compensation (Yakuin Hoshu) within 3 months of company registration.
If you fail to set this up properly or try to change the amount mid-year without a valid reason, the Japanese tax authorities will not allow you to deduct the compensation as a business expense. This oversight can significantly inflate your corporate tax bill.
If you would like more details, please refer to this article.
Setting Director’s Compensation: A Key Step When Starting a Company in Japan
3. Register for Japan’s Consumption Tax (Invoice System)
With the introduction of Japan’s Qualified Invoice System, foreign entrepreneurs must decide whether to register their new business as a Qualified Invoice Issuer.
If you choose not to register:
- ●You may lose the ability to claim consumption tax (JCT) refunds.
- ●B2B clients may hesitate to do business with you, as they cannot claim tax credits on your invoices.
Registration is particularly critical if you work extensively with corporate clients or plan to make significant initial investments.
If you would like more details, please refer to this article.
Should New Businesses in Japan Register for Consumption Tax?
Get Expert Accounting & Tax Support for Your Business in Japan
Setting up a business involves more than just registering a company name. At Koshida Accounting and Tax Office, we provide comprehensive, English-speaking accounting and tax services specifically tailored for foreign entrepreneurs.
Beyond tax compliance, our trusted professional network can assist you with comprehensive one-stop support:
- ●Visa and immigration procedures (e.g., Business Manager Visa)
- ●Company incorporation and registration
- ●Social insurance enrollment
- ●Legal matters and Web development
Koshida Accounting also collaborates with specialists in:
- ●Web marketing
- ●Website development
- ●Business consulting tailored to the Japanese market
The above services are provided in English
Don’t navigate the Japanese tax system alone. Contact us today for a free consultation and ensure your business in Japan starts on the right financial footing.