Newsletter #005 Starting and Running a Business in Japan – Part 1 First, Understand the Tax Map

Helping foreign business owners understand Japan's tax system—one topic at a time.

Starting a business in Japan means dealing with several different types of taxes.

You do not need to understand everything at the beginning. First, it is useful to know the basic tax map.

1. Income Tax

If you operate your business as a sole proprietor, the profit from your business is generally included in your personal income and subject to income tax.

2. Corporate Tax

If you operate through a company, the company pays corporate tax on its taxable income.

The company and its owner are separate for tax purposes.

3. Consumption Tax

Depending on your business situation, you may need to collect and pay consumption tax.

The Invoice System is also important for many businesses.

4. Payroll and Withholding Tax

If you pay salaries to employees, or certain other payments, you may have to withhold income tax and pay it to the tax office.

This means that running a business may involve tax responsibilities for other people's taxes, not only your own.

5. Local Taxes

Businesses may also have to pay taxes to prefectural and municipal governments.

These are separate from national taxes.

Key Takeaway

You do not need to learn everything at once.

The important first step is to understand which taxes apply to you and your business, and when you need to take action.

We will explain each area step by step in this series.

Coming Next

Starting and Running a Business in Japan – Part 2

Sole Proprietor or Company?

One of the first important decisions when starting a business in Japan is whether to operate as an individual or establish a company.

Next time, we will explain the basic differences in simple English.

Prepared by　Kyoji Yasui Tax Accountant Office

Helping foreign business owners understand Japan's tax system with clear, practical guidance.