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Employing in Japan

At a glance

Employment in Japan

Foreign companies that employ workers in Japan face complex and numerous challenges when trying to adhere to the nation’s employment regulatory framework.  In some cases, using an outsourced employer will make the process smoother, and it is recommended to use professional legal services as well.  Our guide explains Japanese policies on contracts, probation periods, termination procedures, leave and payment of benefits.

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Payroll & Tax in Japan

Complying with local payroll and tax requirements is essential for a company doing business in Japan.  For a foreign company to comply with Japanese tax laws they will need to consider individual income tax (for employees in Japan), public welfare pension costs, health insurance, payroll tax, sales tax, business tax and permanent establishment concerns. These tax rate and social security issues are all essential in ensuring a seamless human resources operation.  Many companies will consider outsourcing these administrative tasks to a GEO (Global Employment Organization).

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Immigration / Work Permits in Japan

Foreign workers are required to have the proper visas and work permits in Japan, as established by immigration laws. Workers entering Japan generally enter through a points based highly skilled visa (高度専門職1号イ,ロ及びハ) or one of the industry specific categories for working visas. These categories include areas such as ‘business manager’ (経営・管理) or ‘intra-company transferee’ (企業内転勤). The entire process of applying for work visas can take over 3 months and may require a large amount of technical, industry specific documents.

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Incorporation

There are several business structures available for incorporation in Japan, and each has advantages and disadvantages.  In some cases it will depend upon the type of industry that you are in, and the scope of planned business activity. Our guide discusses important factors to consider when incorporating in Japan, such as business factors, regional factors, regional language and authorities. We then compare the time and cost of incorporating standard company structures including a Subsidiary Company (joint-stock or limited liability corporation), Branch Office and Representative office.

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GEO Solutions or DIY Employment in Japan?

Companies entering Japan must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities.  A GEO or Japan Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Japanese entity established that can run payroll.

A DIY approach will be delayed until there is a properly incorporated company or branch ready to run payroll and can be a costly option. Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

 
Grossed income Tax Rate (%)
1 - 1,950,000 ¥ 5%
1,950,001 - 3,300,000 ¥ 10%
3,300,001 - 6,950,000 ¥ 20% of base exceeding 3,300,000
6,950,001 - 9,000,000 ¥ 23% of base exceeding 6,950,000
9,000,001 - 18,000,000 ¥ 33% of base exceeding 9,000,000
18,000,001 - 40,000,000 ¥ 40% of base exceeding 18,000,000
Over 40,000,000 ¥ 45% of base exceeding 40,000,000
Corporate Tax Requirements

Corporations are required to file a final tax return within two months of the end of its annual accounting period. Corporate taxpayers are obligated to file and pay a national ‘local corporate tax’ of 4.4%.

Employers Social Security and statutory contributions

Social insurance  premiums are deducted from a salaried worker’s monthly salary. A pension insurance premium for salaried workers is  imposed at 17.828%, half of which must be paid by the employer. Employer covered worker’s accident compensation insurance varies between 0.3% to 10.3% depending  on a company’s industry.

Employees Social Security and statutory contributions

Half of the pension insurance premium of 17.828% must be paid by the employee.

Corporate Income Tax Rate

25.5%

Sales Tax

8%

Withholding Tax

Dividends: 20%

Interest: 15-20%

Royalties: 20%

Rents (from real properties): 20%

Other Tax

Local inhabitant tax is made up of prefectural tax (4%) and municipal tax (6%).

Work Permits
Can Sponsor Work

Yes

Work Permit process

Documents Required:

  1. Passport
  2. One visa application form (nationals of Russia, CIS countries or Georgia need to submit two visa application forms)
  3. One photograph (nationals of Russia, CIS countries or Georgia need to submit two photographs)
  4. Certificate of Eligibility (Note) – the original and one copy

Chinese nationals must also submit the following documents:

  1. Copy of the Chinese Family Register
  2. Temporary Residence Permit or Residence Certificate (If the applicant does not have a family register within the region under the jurisdiction of the embassy or consulate where the application will be made)

Depending on the nationality of the applicant, other documents may be necessary in addition to the above.

A Certificate of Eligibility is issued before a visa application by a regional immigration authority under the jurisdiction of the Ministry of Justice as evidence that the foreign national meets the conditions for landing in Japan, including the requirements that the activity in which the foreign national wishes to engage in Japan at the time of the landing examination is not fraudulent and is an activity that comes under a status of residence (excluding Temporary Visitor Status) stipulated in the Immigration Control Act. (Application for the Certificate of Eligibility by a proxy in Japan is allowed.)

A foreign national in possession of a Certificate of Eligibility can get a visa issued more easily at an embassy or consulate within the standard processing period (five working days from the day after the date of the acceptance of application). (However, issuance of the visa is not guaranteed.) Furthermore, by presenting the certificate at the time of examination for landing, the examination procedures will be smoothly carried out.

Even in the case that the purpose of visit is a long-term stay, the visa application can be made to the embassy or consulate without this certificate but please be aware that in this case it will be necessary to submit a large number of verifying documents in addition to those above; and the processing will take a long time (several months) because the visa application documents will have to be sent to the Ministry of Justice via the Ministry of Foreign Affairs in Japan for examination.

Can Work Permit be processed in country

Yes

Can Spouse work on dependent visa?

Limited, but normally yes

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