Have you ever thought about incorporating your business? If you are doing real estate business and your properties are highly productive (or you simply have many properties) and making a lot of money (around JPY 9 million as annual taxable income, you need to think about this.
The reason comes from the difference between 'Individual tax rate' and 'Corporate tax rate'. If your properties generate a substantial profit (for example, more than around JPY 9 million as annual taxable income), Corporate tax rate is lower than Individual tax, then you are able to save your taxes. Here is the tax rates table.
|Your taxable income is|
Individual tax rate (approx.)
(including Inhabitant tax)
Corporate tax rate (approx.)
(including Inhabitant tax, etc.)
|JPY 3 million||20%||21%|
|JPY 6 million||30%||23%|
|JPY 9 million||33%||34%|
|JPY 12 million||43%||34%|
(Please note, that the above tax rate may not include some taxes such as Individual enterprise tax, etc., that some income deductions are not reflected in the table, and that tax rates vary from year to year, in order to make this table simple. Thus the above rates can be used only for the comparison of Individual tax rate and Corporate tax rate. Information updated as of 2016 March.)
As you can see, you need to consider if you need a company for your real estate business when your taxable income is around JPY 9 million.
What is taxable income? Generally described as 'Gross income minus business expenses or deductions'.
Yes, there are some disadvantages of setting up a company.
For example, a company is a separate legal entity so it requires setting-up expenses to register. Generally, companies are more costly compared to individuals.
Another example is that a company requires a lot of paperwork such as Articles of association and complicated Corporate tax returns (compared to Individual tax returns). In addition, you need to pay taxes even if your company incurrs a loss.
Therefore, if you are thinking about incorporating your business, you also need to think about these disadvantages.
There is no problem if you are very familiar with Japanese tax and accounting and know how to set up a company (also know the difference between a KK and GK, for example).
If you are doing some research on incorporating in Japan, we recommend you just ask us because that kind of research is time-consuming.
note:prices can vary depending on several factors (e.g.type of services, how much time is spent, etc.).