Doing business in Japan

Japan is a civil law jurisdiction with national codes covering company, civil, commercial, labour and tax law, and no separate state-level company or tax law, although local governments levy inhabitants' and enterprise taxes. Key authorities for an incoming business are the Ministry of Finance and the Bank of Japan (foreign investment notifications), the Ministry of Justice legal affairs offices (company registration), the National Tax Agency, the Ministry of Economy, Trade and Industry (export controls), the Japan Fair Trade Commission, the Personal Information Protection Commission and the Japan Patent Office.

Key facts

Corporate tax

23.2% national rate (capital over JPY 100m)

Effective corporate rate

About 31.52% in Tokyo (larger companies)

Consumption tax

10% standard, 8% reduced

Foreign investment

Prior notification for designated sectors; 30-day waiting period

Withholding tax

20% plus 2.1% surtax on dividends, interest and royalties

Minimum wage

Set by prefecture; FY2025 average up 6.3%

New York Convention

Party since 1961 (reciprocity reservation)

Foreign investors usually incorporate a stock company or register a branch with the legal affairs offices of the Ministry of Justice. Investments in designated sectors, including stakes of 1 percent or more in listed companies, need prior notification under FEFTA and are subject to a waiting period; other investments may need a post-closing report.

Key facts

• Check FEFTA before signing: prior notification applies to designated sectors, and to stakes of 1 percent or more in listed companies, based on what the target actually does.

• A notified deal cannot close for 30 days in principle, which can be extended up to five months; plan signing-to-closing time accordingly.

• Where a post-closing report applies, it is due within 45 days of completion.

• Company and branch registration documents go to the Civil Affairs Bureau system of the Ministry of Justice, and incorporation includes a Statement of Beneficial Owner.

Who handles this in JapanSetting up and running a companyLicences, permits and regulatorsBuying, selling and investing

National corporate tax is 23.2 percent for larger companies, with local taxes added, so the effective rate in Tokyo is about 31.5 percent. A 4 percent defence special corporation tax applies from fiscal years beginning on or after 1 April 2026. Consumption tax is 10 percent, and payments of dividends, interest and royalties abroad carry 20.42 percent withholding unless a treaty reduces it.

Key facts

• Budget for an effective corporate tax rate of roughly 31.5 to 35.4 percent in Tokyo once local taxes are included.

• The new defence special corporation tax adds 4 percent of base corporate tax above a JPY 5 million deduction and needs its own return.

• Consumption tax is 10 percent, or 8 percent for food and non-alcoholic drinks other than restaurant meals.

• Outbound dividends, interest and royalties face 20 percent withholding plus surtax unless reduced under one of Japan's treaties; corporate returns are due two months after year end.

Who handles this in JapanTax and structuringAccounting and annual filings

Employers must run social insurance through payroll, and several employee rates changed in March and April 2026. Minimum wages are set by prefecture and rose by 6.3 percent on average in the FY2025 revision. Labour standards, termination rules and visas could not be confirmed for this guide.

Key facts

• Employees pay 9.15 percent of pay into welfare pension, with monthly pay capped at JPY 650,000; the employer share also needs to be budgeted.

• Health insurance rates, the new child and childcare support contribution and the unemployment insurance rate changed in spring 2026, so payroll settings need updating.

• Minimum wages differ by prefecture and rose sharply in FY2025, so check the rate where staff work.

Who handles this in JapanEmployment, payroll and immigration

Tax incentives were reshaped by the 2026 Tax Reform Act: the research and development credit was revised and the salary increase credit was cut back for larger companies. Sector licensing, procurement and property rules were not researched for this guide.

Key facts

• The research and development credit was revised for fiscal years from 1 April 2026; the general credit is capped at 20 percent of corporate tax.

• Larger companies should not assume they still qualify for the salary increase credit after the 2026 reform.

• Regional revitalisation measures generally favour locations outside Tokyo, Osaka and Nagoya.

Who handles this in JapanLicences, permits and regulatorsTax and structuring

FEFTA reporting on inward investment runs through the Bank of Japan; the wider exchange control position was not confirmed. Branch profits can be sent to head office without withholding tax, and banks report non-resident account information each year.

Key facts

• FEFTA share acquisition reports are processed by the Bank of Japan's International Department.

• Branch profits remitted to head office carry no withholding tax.

• Banks collect non-resident account information as at 31 December for reporting by 30 April, so expect tax residence questions at onboarding.

Who handles this in JapanPayments and currencyBanking and capitalTreasury and funding

Exports of controlled goods and technology may need METI authorisation. The 2026 Tax Reform Act brings low-value imports into consumption tax. Customs procedures, tariffs and economic partnership agreements could not be confirmed for this guide.

Key facts

• Screen exports and technology transfers for METI authorisation requirements.

• Cross-border sellers of low-value goods (JPY 10,000 or less per item) should plan for consumption tax liability under the 2026 reform.

• Excise taxes apply to fuel, tobacco and liquor in addition to customs duty and consumption tax.

Who handles this in JapanCustoms, trade and export controlsAnti-bribery, sanctions and compliance

This research could not open the Personal Information Protection Commission website, so the Act on the Protection of Personal Information is not covered here. Digital tax compliance is confirmed: qualified invoices are needed for input tax credits, electronic transaction records must be kept electronically, and platform taxation applies to digital services.

Key facts

• Invoices must carry the seller's qualified issuer number for buyers to claim input consumption tax, so billing systems must support the Qualified Invoice System.

• Electronic transaction documents must be stored electronically since 1 January 2024.

• Platforms facilitating cross-border digital services may account for consumption tax under platform taxation from 1 April 2025.

Who handles this in JapanData protection and cyberAccounting and annual filings

Japan is party to the Paris Convention, the PCT, the Madrid Protocol and the Hague Agreement, so international patent, trademark and design filings can designate Japan. National registration rules at the Japan Patent Office were not confirmed.

Key facts

• Paris Convention priority has been available since 1899.

• International patent applications can enter Japan through the PCT, and trademarks through the Madrid Protocol.

• Industrial designs can be protected through the Hague system since 2015.

Who handles this in JapanTrade marks, patents and brands

Share acquisitions meeting domestic turnover tests of JPY 20 billion for the acquirer group and JPY 5 billion for the target must be notified to the Japan Fair Trade Commission, with a 30-day waiting period. Larger below-threshold deals may warrant voluntary consultation, and revised Merger Guidelines are being prepared.

Key facts

• Notify the JFTC where the acquirer group exceeds JPY 20 billion and the target JPY 5 billion of domestic turnover and voting rights cross 20 or 50 percent.

• Closing is barred for 30 days after formal receipt unless the JFTC shortens the period.

• Consider consulting the JFTC on deals worth more than JPY 40 billion even below the thresholds.

• Revised Merger Guidelines were consulted on until 31 August 2026; check whether the final version has been issued.

Who handles this in JapanBuying, selling and investingContracts and commercial law

FEFTA breaches can lead to divestiture orders, and a crypto-asset reporting regime starts on 1 January 2026. Anti-bribery, anti-money laundering and sanctions rules could not yet be confirmed from official sources.

Key facts

• Failing to notify or comply under FEFTA can lead to corrective orders, including divestiture of shares.

• Crypto-asset service providers face reporting under the Crypto-Asset Reporting Framework from 1 January 2026.

• Export control compliance is a core risk area, since controlled exports and technology transfers may need METI authorisation.

Who handles this in JapanAnti-bribery, sanctions and complianceContracts and commercial law

Japan has applied the New York Convention since 1961 with a reciprocity reservation only, so foreign awards from other contracting states can be enforced. Court structure, the Arbitration Act, arbitration institutions and mediation rules could not be confirmed.

Key facts

• Awards made in other New York Convention states can be enforced in Japan; Japan has not limited the Convention to commercial matters.

Who handles this in JapanDisputes and arbitration