Taxes in Japan for Foreign Entrepreneurs: What You Need to Know
Taxes are one of the most misunderstood and intimidating parts of launching a business in Japan—especially for foreign entrepreneurs. But the truth is, Japan’s tax system is straightforward when you know what to expect and have the right support.
Whether you’re running a startup, freelancing, or expanding an existing company into Japan, this guide covers all the essentials: what taxes apply, how much you’ll pay, and how to stay compliant.
1. What Types of Taxes Do Businesses in Japan Pay?
There are four main tax types that foreign entrepreneurs should understand:
a. Corporate Tax
Applies to profits generated by your business entity (GK or KK).
- Standard rate: ~23.2% (may vary with income level and local surtaxes)
- Paid annually after fiscal year ends
b. Consumption Tax (Shōhizei)
Japan’s version of VAT. Applied to most goods and services.
- Rate: 10% (8% for food & beverages)
- You must register and remit if your annual sales exceed ¥10 million
c. Income Tax (for freelancers or sole proprietors)
Progressive rates from 5% to 45%, depending on earnings
d. Local Inhabitant Tax
Paid by individuals and corporations to their local government
- Typically around 10% of income tax amount
2. Do Foreign-Owned Companies Get Taxed Differently?
No—once your company is legally registered in Japan (GK or KK), it is taxed the same as a domestic business. However, as a non-resident owner, your personal taxes may be affected depending on your visa status and residency.
- If you’re non-resident, you’re only taxed on Japan-sourced income
- If you live in Japan 183+ days/year, you may become a tax resident
Consult a tax advisor early to optimize your tax residency status.
3. When and How Do You Pay Taxes?
Corporate Tax:
- Filing deadline: Within 2 months after fiscal year-end (can be extended)
- Payment: In full or via installment based on previous year’s taxes
Consumption Tax:
- Filing: Annually or quarterly
- Payment: Due 2 months after end of fiscal year or quarter
Income Tax (for freelancers):
- Filing: March 15 (for previous calendar year)
4. Bookkeeping and Tax Filing Requirements
All businesses in Japan must:
- Maintain detailed financial records (double-entry)
- Issue proper invoices and receipts (with registration number from 2023 under new invoicing system)
- File annual tax returns (corporate or personal)
Using cloud software like Freee or MoneyForward helps simplify this. JapanFlex partners with bilingual accountants to help with monthly bookkeeping and annual tax prep.
5. Can Foreign Entrepreneurs Claim Deductions?
Yes—registered businesses and sole proprietors can deduct a wide range of expenses:
- Rent and utilities (including virtual office)
- Marketing and advertising
- Equipment and software
- Business travel
- Salaries and subcontractor payments
To be deductible, costs must be properly recorded and related to business operations.
6. What Happens If You Don’t File?
Failure to file taxes or submit accurate documents can lead to:
- Late penalties (up to 15–20%)
- Audit and back taxes
- Visa issues for those on Business Manager or Startup Visa
It’s critical to stay compliant from day one.
7. Real Example
Client: A US-based Amazon seller with ¥15M in annual Japan revenue
- Registered a GK using JapanFlex.com
- Reached ¥10M threshold and began collecting consumption tax
- Partnered with JapanFlex to automate quarterly filings
- Saved ¥600,000/year by properly categorizing deductions
8. How JapanFlex.com Can Help
JapanFlex.com offers:
- Monthly bookkeeping and expense tracking
- Consumption tax registration and filings
- Year-end tax returns (corporate or sole proprietor)
- Support in English with bilingual tax professionals
Whether you’re running an e-commerce store, SaaS startup, or consulting firm, we keep your finances compliant and optimized.
Final Thoughts: Taxes Don’t Have to Be Scary
Yes, Japan has rules—but they’re predictable, and you don’t have to figure them out alone.
With the right setup, deductions, and a trusted partner like JapanFlex.com, you can focus on running your business without worrying about tax season.
Get Tax Support Today with JapanFlex.com
Visit https://japanflex.com/ to learn more about our tax compliance packages for foreign entrepreneurs.
Stay compliant, stay profitable.
