Japan Company Establishment and Tax Guide 2026

Establishing a Company in Japan and Taxation 2026: Why Is It Both an Opportunity and a Risk for Foreign Investors?

Japan is on the radar of many Turkish and global investors due to its high purchasing power, technological infrastructure, and being a gateway to the Asian market. However, when it comes to actually establishing a company and the tax-visa rules, the picture is not as simple as “let’s just open a company, and the rest will follow.”

During the 2025–2026 period, the Japanese government is implementing significant tightening on both the tax and immigration fronts. In particular, it aims to filter out foreigners who establish companies on paper but do not engage in actual business activities with the “Business Manager” visa. This guide serves as a practical resource to help you see the holistic picture of establishing a company in Japan, tax obligations, and new regulations as you prepare for 2026.

1. Legal Company Types in Japan: KK, GK, or Branch?

Under the Japanese Companies Act, there are multiple company forms; however, three main structures stand out for foreign investors:

• Kabushiki Kaisha (KK)
• Godo Kaisha (GK)
• Branch office or subsidiary

1.1 Kabushiki Kaisha (KK) – The “Joint Stock Company” Standard

Kabushiki Kaisha (KK) is the most common and prestigious company structure in Japan. Banks, large corporate clients, and public institutions tend to favor the KK form.

Notable features:

• Reliability and reputation: In tenders and bids, especially on the B2B and public side, the KK form is generally preferred.
• Suitable for attracting investment: The shareholder and board (or director) structure is clear; share transfers and investor entries are relatively flexible.
• Business Manager visa: The Immigration Bureau considers the KK structure a more natural framework for manager visa applications.

As a disadvantage; notarization at establishment, relatively higher administrative costs, and a more formal management structure are required.

1.2 Godo Kaisha (GK) – Flexible and Cost-Sensitive Structure

Godo Kaisha (GK) is essentially a type of limited company structure and is likened to the LLC model in the USA.

Notable features:

• Less formality: The articles of incorporation are contract-based; notarization is not required.
• Structures with small and single ownership: Suitable for SMEs, start-ups, and sole proprietorship business models.
• All partners are limited liability: Partners are only liable up to the capital they have contributed.

In contrast, the perception of GKs in the market may be lower compared to KKs. Banks or large Japanese clients may find working with KKs more reassuring than GKs.

1.3 KK vs GK: Which is More Logical in Which Situation?

• If aiming for rapid scaling, investment, and corporate clients: KK is the better choice.
• If there is a single founder, low budget, and limited risk business model: GK is more flexible and cost-effective.
• If planning for a Business Manager visa: KK offers a more predictable framework on the immigration side.

1.4 Subsidiary or Branch?

A foreign company can enter Japan in two ways:

• Subsidiary: You establish a separate legal entity in the form of KK or GK in Japan.
• Branch: A branch registration is made in Japan on behalf of the foreign parent company, and no separate legal entity is formed.

In practice, most foreign investors prefer to establish a Japanese subsidiary (KK/GK) for the following reasons:

• Limited liability: Risk is limited to the capital of the Japanese company.
• Banking and contracts: Local banks and clients find it easier to work with a Japanese legal entity.
• Visa compliance: The framework for the Business Manager visa is clearer with a “Japanese company.”

2. KK / GK Establishment Process: Step by Step 2026 Flow

Although establishing a company in Japan may seem legally complex, it follows a predictable flow when approached systematically. The following steps show the general standard for KK and GK.

2.1 Strategic Design: Name, Purpose, Capital, Structure

In the initial phase, you clarify the following parameters:

• Company name and business purpose (activity area)
• Head office address
• Financial year-end (usually March 31 or December 31 is preferred)
• Paid-in capital amount
• Shareholder structure and representative director(s)

Theoretically, a company can be established with just 1 JPY in capital; however, in the reality of 2026, especially on the visa and banking side, this is not practically accepted. A reasonable capital amount should be determined based on the business plan.

2.2 Requirement for a Registered Office Address in Japan

Every Japanese company requires a registered office address within Japan. This address appears in the commercial registry and tax offices.

For those aiming for a Business Manager visa by 2026:

• Virtual office or just a mailbox is not accepted.
• Actual office space, lease contract, photos, and signage are required.

2.3 Preparation of the Articles of Incorporation (Teikan)

The articles of incorporation are the company’s “constitution” and are prepared in Japanese (they can be bilingual, i.e., Japanese-English if desired). Essential elements to include:

• Company name and address
• Business purposes (activity areas)
• Types of shares, number, nominal value
• Announcement method (newspaper, website, etc.)
• Organizational structure (general assembly, management, etc.)

For KKs: This articles of incorporation must be notarized by a notary public.
For GKs: Notarization is not required; the articles of incorporation are considered a contract between the parties.

2.4 Capital Payment and Bank Receipt

Before establishment, you deposit the capital into a temporary account opened in the name of the promoter. The bank receipt and transfer documents serve as proof that the capital has indeed been paid.

Due to the 2026 audit trend, immigration and tax authorities closely examine the legitimacy of the source and whether it is “trust/loan capital,” especially for high capital entries.

2.5 Document Package for Registration Application

The standard package submitted to the Legal Affairs Bureau generally includes:

• Registration application form
• Articles of incorporation (notarized for KK)
• Appointment and identification details of the executive/representative director
• Proof of capital payment (bank receipt, etc.)
• Company seal (inkan) registration forms
• Identification and address declarations for foreign partners and directors (often apostilled/notarized)

With a properly prepared file, the registration process is usually completed within 1–2 weeks. The registration date is legally the date of the company’s establishment.

2.6 Post-Establishment Notifications and Registrations

After the company is established, you need to notify various authorities:

• National tax office (corporate tax, withholding tax, etc.)
• Relevant prefecture and municipality (inhabitant tax, enterprise tax)
• Social security and unemployment insurance institutions (if hiring staff)

Additionally, every year:

• A general assembly is held, and financial statements are approved.
• Shareholder and director records are kept up to date.
• Accounting is maintained on a JPY basis with double-entry bookkeeping (submissions are made in Japanese).

3. New Rules for Business Manager Visa and Foreign Founders in 2025–2026

The most critical point for foreign investors in the 2025–2026 period is the tightening of conditions for the Business Manager visa. The aim is to limit the “paper company – no actual activity” model.

3.1 Capital Requirement: From 5 Million JPY to 30 Million JPY

In previous years, a visa application could be made with 5 million JPY in capital. As of 2026, the immigration authority has significantly raised the bar to create a realistic business scale:

• Minimum capital considered reasonable for the Business Manager visa: approximately 30 million JPY.
• The source is expected to be the founder’s own equity; temporary debt/trust capital models will be scrutinized more closely.

3.2 Mandatory Local Employee and Founder Experience

With the new regulations:

• You must employ at least one full-time employee (Japanese citizen, Permanent Resident, or Long-Term Resident).
• The founder is expected to demonstrate at least 3+ years of management experience or a relevant university degree.

These requirements are part of Japan’s policy to filter out entrepreneurs who “only establish companies to obtain a visa.”

3.3 Office and Audit: From “Paper Company” to “Real Activity”

In the context of the Business Manager visa, the reality of 2026:

• A real commercial office is mandatory; a mailbox or shared address in coworking is not sufficient for the visa.
• The immigration authority may want to see the office: signage, workspace, lease agreement, photos, etc.
• After visa approval, actual audits and interim checks are on the agenda; employee presence, tax payments, and the reality of business activity may be questioned.

In this framework, it becomes critical to structure correctly from the planning stage in terms of both immigration and tax and business law.

3.4 Realistic Timeline

For the process from the business plan to company establishment and the actual acquisition of the visa under 2026 conditions, it is healthier to plan a timeline of 6–8 months. Office selection, capital transfer, document translation, and compliance checks can extend this period.

4. Japanese Corporate Tax System: Rates, Structure, and 2026 Reforms

4.1 Basic Corporate Tax Structure

Corporate income in Japan is taxed at both national and local levels. The structure is briefly as follows:

• National corporate tax: The standard rate is 23.2%.
• Discount for small companies: For companies with paid-in capital below 100 million JPY, a rate of 15% may apply to the first 8 million JPY of annual profit.
• Local taxes: Composed of items such as local corporate tax, inhabitants’ tax, enterprise tax, and special corporate business tax.

For example, in Tokyo, the combination of these national and local taxes results in an effective tax rate typically ranging from high 20s to low 30s for most companies. Capital size, income level, and business structure affect this rate.

4.2 Components of Local Taxes

Particularly in the case of Tokyo, the main local taxes commonly encountered include:

• Local corporate tax: Charged as a certain percentage (e.g., 10.3%) of the national tax; effectively creates a burden of about 2.39% on corporate income.
• Inhabitants’ tax: Calculated as a certain percentage (e.g., 10.4%) of the national corporate tax and paid to the municipality where the company is located.
• Enterprise (business) tax: Progressive based on income; for SMEs, the effective upper bracket may be around 7.48%.
• Special corporate business tax: A multiplier applied on top of the enterprise tax (lower rates for small companies, higher for larger ones).

When considering all these items together, it is necessary to simulate the effective total tax burden rather than focusing solely on the “23.2%” rate while preparing your business plan.

4.3 2026 “Defense Strengthening” and Corporate Tax Implications

As part of Japan’s strategy to increase defense spending, an additional burden is being discussed on the corporate tax side for 2026 and subsequent years. International tax guides are discussing a structure for an additional rate/surtax to be applied on corporate income. This structure is based on the logic of increasing the total tax burden by an additional percentage without changing the basic corporate tax rate.

Additionally, tax credits and deductions for R&D, digital transformation, and green energy investments are being expanded as of 2026. This can significantly lower the effective tax burden for companies investing in strategic areas.

5. Consumption Tax (Consumption Tax / JCT) and 2026 Changes

5.1 Basic Rates and Scope

The Japanese Consumption Tax (JCT) is an indirect tax similar to VAT:

• Standard rate: 10%
• Reduced rate: 8% for certain products such as basic food items
• Registration threshold: JCT liability becomes mandatory for businesses exceeding an annual turnover of 10 million JPY.

Export transactions are generally exempt from JCT, while consumption tax arises on imports. For the system and official statements, the Japanese National Tax Agency’s consumption tax page is a current reference point.

5.2 E-Invoice and Registration System in the 2025–2026 Period

After 2025, the most significant change on the JCT side is the full implementation of the Qualified Invoice System and e-invoicing. By 2026:

• To use deductible JCT (input tax credit), invoices received from suppliers must be compliant with the system.
• Digital processes for JCT registration and e-invoice system integration for foreign companies in Japan will be largely standardized.

This change makes processes more transparent but also more technical, especially for e-commerce, SaaS, and digital service providers.

6. Personal Taxes, Payroll, and Residency Perspective

6.1 Taxation on Employment Income

The income tax system for employees in Japan is progressive:

• National income tax: Ranges from approximately 5% to 45% in progressive rates.
• Local income tax (inhabitant tax): Generally adds an additional burden of around 10%.

Your company is obliged to withhold (withholding) for your employees and report to the relevant tax offices.

6.2 Social Security and Employer Costs

The Japanese social security system is comprehensive and represents a significant cost element shared between employer and employee:

• The total burden amounts to approximately 30% when considering health, retirement, unemployment, etc.
• About half of this is borne by the employer, and half by the employee (the proportional distribution may vary from company to company and year to year).

Especially when planning to employ highly qualified foreign workers, it is necessary to calculate the total employer cost by adding social security contributions to the gross salary.

7. Strategic and Operational Risks When Establishing a Company in Japan in 2026

Major challenges you may encounter when entering the Japanese market:

• Language and document standard: All official processes and declarations are conducted in Japanese. Translation and local representation for foreign founders create additional costs.
• Banking and KYC: Opening a bank account for newly established companies with foreign ownership can be time-consuming; especially anti-money laundering (AML) audits are strict.
• Visa-company synchronization: For the Business Manager visa, office, capital, employee employment, and company activity are evaluated as a whole. Proceeding without a plan poses a risk of rejection.
• Multi-layered tax structure: National + local taxes, consumption tax, and social security obligations should be considered together.

8. Corporate Structuring, Payroll, and Global Mobility in Japan with Corpenza

Establishing a company in Japan is not just a business registry process; it requires correctly structuring immigration law, corporate tax, consumption tax, payroll, and social security aspects simultaneously. Especially with 2026:

• Correctly showing a capital of 30 million JPY from the right source for the Business Manager visa,
• Structuring the employment of at least one local full-time employee in compliance with payroll and tax,
• Strategically answering the question of whether to establish a company, branch, or test the market first with an EOR/payroll model

requires field experience and proper planning.

Corpenza has a team specialized in corporate structuring, cross-border payroll (payroll/EOR), tax optimization through posted worker models, and residency and citizenship by investment. In tightly regulated markets like Japan, employing personnel through the EOR (employer of record) model before establishing a company can often be more rational for testing the market and then transitioning to the correct legal structure.

In terms of corporate structuring, residency permits, global payroll, and tax optimization, collaboratively designing which scenario (KK, GK, branch, EOR, hybrid structure) is most accurate according to your business model significantly reduces potential financial and legal risks.

9. Conclusion: How Should You Structure Your Japan Strategy as You Prepare for 2026?

As of 2026, Japan is not closing its doors to foreign investors; on the contrary, it is opening up space for structures that will genuinely operate and create employment. However:

• The rising capital and employment requirements for the Business Manager visa,
• The complex corporate + consumption tax system,
• E-invoicing, digital reporting, and strict bank compliance processes

mean that the cost of a “poorly structured entry plan” can be higher than ever.

Therefore, before entering the Japanese market:

• Clarify your target business model (trade, technology, service, manufacturing),
• Holistically view the company type (KK/GK/branch), taxation, payroll, and visa requirements,
• If necessary, limit your risk with an initial EOR/payroll or local partner model,
• Then proceed to company establishment with the right timing

provides a more solid roadmap.

For details on tax and consumption tax, the Japanese National Tax Agency’s consumption tax guide is a good starting point; however, in practice, the structure and risk profile of each company differ.

Important Disclaimer

This text is a general informational document prepared based on updated international sources as of the end of 2025. It does not constitute legal, financial, or tax advice; it should not be relied upon as the sole basis for any investment or company establishment decision. Since tax, corporate law, and immigration legislation in Japan can be frequently updated, always check the current official legislation and statements from the relevant authorities before making decisions and seek professional support from a qualified financial advisor, lawyer, or consultant.