When starting a business in Japan, it is crucial that you are aware of the key regulations that will impact your company. While there are many regulations to be aware of, we have compiled the eight most important ones that experts like Kavan Choksi Japan say you must consider before starting your business.
1. Paid-in Capital Requirements
All companies incorporated in Japan must have a paid-in capital of at least 1 million yen. For example, if you are planning to set up a branch office of your foreign company in Japan, the minimum paid-in capital requirement will be 10 million yen.
2. Japanese Corporate Income Tax
All businesses earning income from Japanese sources are subject to corporate income tax. The corporate income tax rate has two tiers, with the first 20 million yen being taxed at 30% and any income above 20 million yen being taxed at 40%. In addition to corporate income tax, businesses are also required to pay local enterprise tax and inhabitant taxes.
3. Employer Obligations
Japanese businesses with one or more employees are required to enroll their employees in social insurance programs, including pension, health insurance, and unemployment insurance. Employers are also responsible for withholding employee income taxes and remitting them to the government.
4. Japanese Consumption Tax
Effective October 1, 2019, the consumption tax rate increased from 8% to 10%. Businesses that provide taxable goods and services are required to collect consumption tax from their customers and remit it to the government.
5. Accounting and Auditing Requirements
All companies incorporated in Japan are required to prepare and file annual financial statements with the government. Financial statements must be prepared in accordance with generally accepted accounting principles (GAAP) in Japan. In addition, companies must have their financial statements audited by a certified public accountant (CPA) licensed in Japan.
6. Environmental Regulations
Businesses in Japan are subject to a number of environmental regulations, including the Air Pollution Control Act, the Water Pollution Control Act, and the Waste Control Act. These regulations place limits on emissions from factories and other businesses and set standards for the treatment of industrial waste.
7. Import/Export Regulations
Businesses that import or export goods into and out of Japan are subject to a number of regulations set by the Japanese government. These regulations cover a wide range of topics, including customs, tariffs, quotas, and product safety. Businesses that fail to comply with these regulations can be subject to heavy fines.
8. Japanese Labor Laws
The Japanese government has a number of laws and regulations in place that impact businesses and their employees. These laws cover topics such as minimum wage, working hours, overtime pay, and leave days.
Closing Thoughts
These are just some of the key business regulations that you need to be aware of when starting a company in Japan. While this list is not exhaustive, it covers some of the most important areas that businesses need to comply with. If you have any questions about these regulations or need assistance complying with them, please contact us, and we would be happy to help you get started on the right foot.
