This article provides a detailed look at the availability and main features of sole proprietorship status in Japan for 2025. It covers requirements, registration, taxation, and essential compliance details drawn from official sources and current Japanese regulations.
Availability of Sole Proprietorship (“Kojin Jigyo”) in Japan
Japan formally recognizes sole proprietorship under the status known as Kojin Jigyo (個人事業主), meaning “individual business owner” or “sole proprietor.” As of 2025, this business form remains widely accessible. It is used by freelancers, small business owners, and the self-employed to begin commercial activities quickly and with minimal bureaucracy.
Key Features and Registration Process
Operating as a Kojin Jigyo allows individuals to conduct business and handle tax obligations without forming a separate legal entity. The process is practical for those looking to commence business activities independently, including both Japanese nationals and eligible foreign residents with the appropriate visa status.
- To register, file a Notification of Commencement of Business (開業届, Kaigyo Todoke) at the local Japanese tax office.
- There is no minimum capital requirement or need for incorporation.
- Freelancers, consultants, online business operators, retailers, and other professions commonly adopt this structure.
Sole Proprietorship Data Overview (Japan, 2025)
| Status Name | Legal Entity Formation Required | Open to Foreign Residents | Main Registration Step |
|---|---|---|---|
| Kojin Jigyo (個人事業主) | No | Yes (with appropriate visa) | Kaigyo Todoke (開業届) |
Taxation of Sole Proprietorships in Japan (2025)
Income earned through Kojin Jigyo is taxed on a personal basis. Sole proprietors must file an individual income tax return, with rates assessed progressively according to total taxable income. There are additional local taxes and, above certain thresholds, obligations to pay consumption tax (Japan’s value-added tax).
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| Tax Type | Tax Rate / Obligation | Currency / Threshold (JPY, USD) |
|---|---|---|
| National Income Tax | 5% to 45% | Progressive (JPY, approx. $0 – $350,000 USD*) |
| Local Inhabitant Tax | ~10% | On taxable income (JPY, approx. $10,000+ USD*) |
| Business Tax (Certain Professions) | Varies | On applicable activities (JPY) |
| Consumption Tax (VAT) | 10% | Applies if annual sales >¥10,000,000 (≈$67,000 USD*) |
*Conversion at ¥150 = $1 USD (2025 benchmark exchange rate)
Most sole proprietors enroll in the National Health Insurance and National Pension systems for social insurance, which is handled separately from tax obligations.
Tax Compliance and Filing
Annual tax returns for sole proprietorships cover all personal and business income. Electronic and paper filings are both accepted. Local inhabitant tax is generally assessed and collected by the municipality of residence, and additional business taxes can apply depending on industry sector.
Summary Table: Sole Proprietorship Taxes (Japan, 2025)
| Requirement | Details (JPY/USD/%) |
|---|---|
| National Income Tax | Progressive 5%–45% on income |
| Local Inhabitant Tax | Approx. 10% on income |
| Consumption Tax (VAT) | 10%, applies if sales > ¥10M ($67,000) |
| Social Insurance | National Health Insurance & Pension (variable by income) |
Pro Tips for Managing a Sole Proprietorship in Japan
- Register as a sole proprietor as soon as possible if starting new business activities; the Kaigyo Todoke is standard and generally processed quickly.
- Carefully track all business expenses and retain receipts—they are deductible against earned income and reduce taxable profits.
- Keep an eye on annual sales. Crossing the ¥10 million (approximately $67,000 USD) threshold triggers a requirement to register and charge consumption tax (VAT).
- Ensure annual tax filings are submitted on time to avoid penalties—Japan’s National Tax Agency provides English-language resources for guidance.
- If you are a foreign resident, confirm that your visa status permits independent business activity before registering as a Kojin Jigyo.
Official Resources
Japan’s sole proprietorship (Kojin Jigyo) remains an accessible and efficient business structure for 2025. Progressive national and local taxes apply, and crossing certain thresholds triggers new obligations, such as consumption tax registration. With minimal setup requirements but a need for diligent record-keeping and compliance, the system meets the needs of both local and international entrepreneurs with qualifying residency.