Good to know
Good to Know
- You do not need a Japanese business partner or co-shareholder to incorporate — full foreign ownership of a KK or GK is standard practice in Japan.
- The trickiest practical hurdle for many foreign founders isn't the incorporation paperwork itself but opening a Japanese corporate bank account, which banks often want to see a physical local office and sometimes a resident director for before approving.
- If your goal is to live in Kyoto on the strength of your own company, budget separately for the Business Manager visa process — its capital and office-space thresholds are stricter than the bare minimum needed just to register a company on paper.
- A sole proprietorship (Kojin Jigyo) has no minimum capital and the lightest paperwork, but you carry unlimited personal liability and are taxed at personal progressive income tax rates rather than the flat corporate rate.
- Incorporating (GK or KK) gives limited liability and can become tax-advantageous once profit climbs, since the SME preferential 15% corporate rate on the first 8,000,000 JPY of income is often lower than the personal marginal rate at similar income levels — but you take on corporate filing obligations even in a loss year (the per-capita inhabitant tax is owed regardless of profitability).
- A Godo Kaisha (GK) is usually the practical middle path for a foreign solo founder in Kyoto: it's cheaper and faster to set up than a Kabushiki Kaisha (no notarization needed) while still giving limited liability; a KK mainly makes sense if you plan to raise outside investment or need maximum credibility with large Japanese corporate clients.
- Corporate tax filing in Japan (national tax + local inhabitant/enterprise tax) is complex enough that most foreign-owned companies use a licensed Japanese tax accountant (zeirishi) rather than self-filing, especially without Japanese-speaking finance staff.
- A new 4% Defense Special Corporate Tax surtax on the national corporate tax amount begins applying for fiscal years starting on or after 1 April 2026 — budget for a modestly higher effective corporate tax rate going forward.
- This section covers company-level/business tax only; your personal income tax residency and obligations as an individual are covered separately in this city's Visa & Legal category.
Structure Choices
Kojin Jigyo (sole proprietorship / freelancer)
- Who It Suits
- Freelancers, remote contractors, consultants, small-scale independent work.
- Japanese Name
- 個人事業
- Tax Treatment
- Business profit is taxed as the owner's personal income at Japan's progressive personal income tax rates (5%–45%), not at a flat corporate rate.
- Legal Separation
- None — owner and business are the same legal person, so liability for debts/obligations is unlimited.
- Setup Requirements
- No minimum capital and no incorporation with the Legal Affairs Bureau; you file a Notification of Commencement of Business (Kaigyo Todoke) with your local tax office.
- When Switching Makes Sense
- Common triggers cited for moving to a company are rising personal tax rates once profit climbs toward roughly 8–9 million JPY/year (where the flat corporate rate can become cheaper than the top marginal personal rate), a Japanese client requiring a corporate counterparty, or wanting limited liability.
- Eligibility Note
- You must already hold a visa status permitting the work — a tourist visa or visa waiver never qualifies, and a dependent-visa holder generally cannot register one either.
Filing Regime
- Blue Return
- Requires double-entry bookkeeping; in exchange gives a deduction of up to 650,000 JPY (with e-filing) or 100,000 JPY (simpler bookkeeping) against taxable income, plus the ability to carry forward business losses for three years.
- White Return
- Simpler bookkeeping, no special deductions.
Godo Kaisha (GK) — LLC-equivalent
- Governance
- No requirement for shareholder meetings, a board of directors, or public disclosure of financial statements; owners act as 'members' who can manage directly.
- Who It Suits
- Solo founders, small teams, freelancers upgrading from sole-proprietor status, and foreign-owned subsidiaries that don't need public-facing prestige — Apple Japan, Amazon Japan and Google Japan all operate as GKs.
- Japanese Name
- 合同会社
- Tax Treatment
- Subject to the same corporate tax regime as a KK (see rates below) — the GK/KK choice affects governance and cost, not the tax rate itself.
- Legal Separation
- Separate legal entity with limited liability for its members.
- Foreign Ownership
- 100% foreign ownership is legal — there are no nationality restrictions on founders or shareholders under the Companies Act, and the requirement for a Japan-resident representative director was removed in 2015.
- Setup Cost And Process
- Cheaper and faster than a KK because the Articles of Incorporation do not need to be notarized; typical registration cost is around 100,000 JPY.
Kabushiki Kaisha (KK) — joint-stock company
- Governance
- Generally requires a board/representative director structure; more formal ongoing compliance than a GK.
- Who It Suits
- Founders planning to raise outside investment, issue shares, or who need maximum credibility with large Japanese corporate clients, banks, or government-related counterparties.
- Japanese Name
- 株式会社
- Tax Treatment
- Same corporate tax regime as a GK — see rates below.
- Legal Separation
- Separate legal entity with limited liability; Japan's standard corporate form, broadly equivalent to a C-corp.
- Setup Cost And Process
- More paperwork than a GK because Articles of Incorporation must be notarized; typical registration cost is around 250,000 JPY.
Corporate Tax Regime For Gk Kk
- Typical Effective Combined Rate
- Guides commonly cite an all-in effective corporate tax burden (national tax + local corporate tax + inhabitant tax + enterprise tax combined) of roughly 30–35% for a profitable SME once income exceeds the 8 million JPY preferential band, though the exact figure shifts with Kyoto's specific local rates and the company's capital/employee count.
- Overview
- A company incorporated in Japan (GK or KK) is taxed on its worldwide income as a domestic corporation, regardless of the founder's nationality; a foreign corporation with only a branch/permanent establishment in Japan is taxed only on Japan-source income.
Components
National corporate tax (national income tax)
- Standard Rate
- 23.2% on taxable income, for fiscal years beginning on or after 1 April 2025.
- SME Preferential Rate
- Small/medium-sized companies (paid-in capital of 100 million JPY or less) pay a preferential 15% on the first 8,000,000 JPY of taxable income each year; income above that threshold is taxed at the standard rate. This preferential rate was extended for two more years under the 2025 reform, rising to 17% only if the company's taxable income exceeds 1 billion JPY.
- Note Amount Example
- ¥8,000,000
Income threshold below which the SME preferential 15% national rate applies
National local corporate tax
- Rate
- A fixed 10.3% of the national corporate tax liability, for fiscal years beginning on or after 1 April 2025.
Corporate inhabitant tax (prefectural + municipal)
- Per Capita Levy Range
- From roughly 70,000 JPY (small company, capital ≤10 million JPY, ≤50 employees per location) up to several million JPY for very large companies.
- Description
- Includes both an income-based portion and a fixed per-capita levy that applies even to loss-making companies; the exact rate and per-capita amount are set by the local government (prefecture/city) where the company is registered, so a Kyoto-registered company's exact rate differs from the Tokyo example figures most guides quote.
Enterprise tax (prefectural)
- Description
- Levied by the prefecture (for a Kyoto company, Kyoto Prefecture) and calculated differently depending on the company's capital base; larger companies with capital over 100 million JPY face a pro-forma tax based on income, added value, and capital rather than income alone.
Defense Special Corporate Tax (new)
- Amount Example
- ¥5,000,000
Annual basic deduction applied before the 4% defense surtax
- Description
- A new 4% surtax on the corporation's base national corporate tax amount, applying to fiscal years beginning on or after 1 April 2026, with a basic annual deduction of 5,000,000 JPY built into the calculation.
Consumption tax (Japan's VAT/GST)
- Rate
- 10% standard rate, charged on sales of goods and services in Japan; this is entirely separate from corporate income tax and is collected/remitted on transactions rather than profit.
Blue Return Filing
- Benefit
- Companies (not just sole proprietors) can apply in advance for blue-return status, which allows net operating losses to be carried forward for up to ten years and unlocks certain accelerated depreciation and special deductions.
- Requirement
- Must apply in advance with the National Tax Agency and maintain accounting records meeting the required standard.
- Japanese Name
- 青色申告 (aoiro shinkoku)
Filing Obligations
- Deadline
- Annual corporate tax returns (covering national corporate tax, national local corporate tax, enterprise tax, and inhabitant tax together) must be filed within two months of the fiscal year end, with a one-month extension available.
- Authority
- All national business taxes are administered by the National Tax Agency; local taxes (inhabitant tax, enterprise tax) are additionally filed with Kyoto Prefecture and Kyoto City tax offices for a Kyoto-registered company.
- Who Files
- Most foreign-owned companies file through a licensed Japanese tax accountant (zeirishi) rather than doing it in-house, particularly if there is no Japanese-speaking finance staff locally; the company itself remains legally responsible for the return's accuracy even when a tax accountant prepares it.
- Provisional Payments
- Companies with a tax period longer than six months must generally make a provisional/interim tax payment — computed at half of the prior year's tax liability — due within two months of the six-month mark.
Incorporation Process And Requirements
- Realistic Timeline
- Roughly 2–4 weeks from finalized documents to a completed company registration for a straightforward KK or GK, assuming capital deposit and notarization go smoothly. Add extra time for: opening a Japanese bank account as a new arrival (can take weeks), and, if residency is also being sought, a separate Business Manager visa application that can take an additional 1–3 months through the Immigration Services Agency.
- Governing Framework
- Company formation in Kyoto follows Japan's national Companies Act (Kaisha-ho), administered through the Kyoto Legal Affairs Bureau (Kyoto Chiho Homukyoku), a branch of the Ministry of Justice. There is no Kyoto-specific incorporation regime — the process, fees, and forms are identical to anywhere else in Japan.
- Official Registry Link
- https://houmukyoku.moj.go.jp/kyoto/
Core Steps
- Decide entity type (KK vs GK) and draft company details: company name, business purpose (jigyo mokuteki), registered office address, capital amount, and director/shareholder structure.
- Draft the Articles of Incorporation (teikan); for a KK these must be notarized at a Japanese Notary Public office; a GK skips notarization.
- Open a temporary bank account (or use a director's personal account) to deposit the paid-in capital and obtain a certificate of capital payment.
- File the registration application with the Legal Affairs Bureau covering the company's registered address (for Kyoto-based companies, the Kyoto Legal Affairs Bureau) — the company legally comes into existence on the registration date.
- Post-registration filings: notify the local tax office, Kyoto prefectural/municipal tax offices, the pension office (Japan Pension Service), and the labor standards office if hiring staff.
- Open a permanent corporate bank account, register for a corporate 'My Number' (corporate number), and apply for a Business Manager visa if the founder needs residency status tied to the company.
Typical Cost
- Notary Fee Kk Only
- ¥50,000
- Registration Tax Gk Minimum
- ¥60,000
- Registration Tax Kk Minimum
- ¥150,000
- Judicial Scrivener Agent Fees
- ¥200,000
Common Entity Types
Kabushiki Kaisha (KK)
- Description
- Joint-stock company, the most recognized and prestigious structure; preferred if the business needs credibility with banks, larger corporate clients, or plans to hire staff/sponsor visas. Requires notarized Articles of Incorporation.
Godo Kaisha (GK)
- Description
- Similar to an LLC; cheaper and faster to set up since Articles of Incorporation do not require notarization. Increasingly used by solo founders and smaller foreign-owned ventures, though it carries less prestige with some Japanese counterparties.
Local Partner Or Sponsor Mandate
- Shareholding
- No local partner or Japanese co-owner is required — 100% foreign ownership of a KK or GK is permitted.
- Resident Director Requirement
- Since a 2015 relaxation of the rule, at least one representative director no longer needs to be a Japanese national, but Legal Affairs Bureau practice generally still expects at least one representative director/officer to have a physical residential address in Japan at the time of registration. Non-residents commonly work around this by appointing a Japan-resident director (a trusted contact, or a paid nominee/administrative-scrivener service) for the incorporation stage, then adjusting the board once the founder secures their own resident visa.
- Visa Note
- Incorporating a company does not itself grant residency. Founders who intend to live in Japan and run the business typically need a Business Manager (Keiei-Kanri) visa, which has its own separate capital and office-space requirements.
Freelancer Vs Company Practical Comparison
- Liability
- Sole proprietor bears full personal liability for business debts; GK and KK both give limited liability separating personal and business assets.
- Cost To Start
- Sole proprietor: effectively free (just the Kaigyo Todoke filing). GK: roughly 100,000 JPY in registration costs. KK: roughly 250,000 JPY, largely due to mandatory notarization of the Articles of Incorporation.
- Conversion Path
- It is possible to start as a sole proprietor and later incorporate as a GK or KK once revenue or risk grows, or to convert a GK into a KK later — though conversion involves its own legal steps and cost.
- Visa Dependency
- Which structure is realistic often depends on your visa status as much as tax planning: operating a Kojin Jigyo or incorporating a company you personally manage generally requires an existing status that permits self-employment/business management (e.g., permanent residency, spouse/long-term resident status, or a Business Manager visa) — a standard work-sponsored visa or tourist status does not permit either path.
- Administrative Burden
- Sole proprietorship has the lightest bookkeeping burden; a GK has lighter governance obligations than a KK (no mandatory shareholder meetings or board); a KK has the most formal ongoing compliance.
- Credibility With Local Clients
- A GK or KK is generally viewed as more credible than a sole proprietorship by larger Japanese clients, banks, and suppliers, which can matter when seeking a business loan or a bigger corporate contract.
AI-generated estimateData refreshed July 2026
Sources cited for this category
These are the sources cited in this business permits & incorporation for foreigners research for this city. Individual figures may not each trace to one of them.
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Data last updated July 2026 · Verify anything important.