(Published on: 2019/4/11)
When you want to set up a company in Japan, you can ask certain legal professionals such as Shiho-shoshi. You want to know some useful tax information (e.g. saving taxes) too? Some shiho-shoshi know Japan tax rules very well, but probably it is better to ask tax professionals. Normally, many tax professionals such as certified public tax accountant are happy to help you free of charge (maybe the first few hours at least, I believe.). Tax professionals do tax returns so you just need them after the year end? No. Their jobs are not limited to tax returns so you must ask them when you set up a company. Alternatively, you can visit Tokyo One-Stop Business Establishment Center if your office will be close to Tokyo.
Before you set up a company
There are some initial expenses you pay when setting up a company. And one of them is Registration and license tax. How much is it? It depends on ‘Capital stock (Common stock)’. You pay 0.7% of ‘Capital stock (Common stock)’ as a registration and license tax (For Kabushiki geisha, known as KK, you need to pay JPY 150,000 at least. And or Godo geisha, known as GK, you need to pay JPY 60,000 at least). However, the amount of money paid by you (or other investors) is not necessarily treated as ‘Capital stock (Common stock)’. For KK, half of the paid amount or less can be treated as ‘Additional paid-in capital’, which is not subject to Registration and license tax. It is worth considering if you are going to put more than (approximately) JPY 21 million as ‘Capital stock (Common stock)’.
‘Capital stock (Common stock)’ has several impacts on taxes. Consumption tax is another one. Normally, newly established companies (small companies) are not required to file consumption tax return. However, if ‘Capital stock (Common stock)’ is JPY 10 million or more, you need to file the return (this is because companies with JPY 10 million are no longer small). What is complicated is ‘no consumption tax return’ does not necessarily mean good. It depends on your business. For example, if a company that exports its products to foreign countries, probably the company gets a consumption tax refund every year, so it is better to file a consumption tax every year. If you want to enjoy tax exemption period (generally 2 years), the ‘Capital stock (Common stock)’ should be JPY 9,999,999 or less. Also, there may be other things you have to do about consumption tax before the first fiscal year end arrives (you may be able to determine how consumption tax is computed in order to save the tax.).
After you set up a company
You need to prepare and submit several documents (applications) to the tax offices after the incorporation. Those are not tax returns and tax payments are not needed at that moment. But you shouldn’t ignore if you want to save taxes through ‘tax loss carryforward’. Your company did not get any sales for the first fiscal year? Then tax loss carryforward is a great benefit. Certain application needs to be submitted to the tax office by the deadline. The deadline can change depending on when you set up the company and when the company’s financial year end is. It is highly recommended you contact tax professionals right after (or before) the incorporation.
Many people set up a company alone. I mean you are the only person working for the company. Do you know how you get paid? A company is an artificial person and separate from you even if you own 100% of the shares. You cannot do whatever you want. You need meeting minutes for your salary and approve them. Also, the same amount of salary should be paid regularly for tax purposes (link).