Japan payroll and tax overview.

Your guide to doing business in Japan

Doing Business in Japan

Japan is one of East Asia’s largest economies, and the world’s third-largest by GDP. Historically regarded as a gateway to Asia and the rest of the world, Japan has grown to become the fourth-largest importer, and fourth-largest exporter in the world, and is a member state of the OECD, and the G7. Japan’s economy is driven by its industrial capacity, which includes the production of electronics, motor vehicles, tools, chemicals, and steel. Agriculture is also important to the Japanese economy - accounting for 13% of the country’s land use - as is the fishing industry, which represents 15% of the global catch. Japan ranks 34 on the World Bank’s Ease of Doing Business survey 2017, and represents an open, stable business environment with a low tax-revenue system and a consumer base of over 127 million citizens.

Why Invest in Japan?

There are plenty of reasons for investors to seek opportunities in Japan:

  • Economic resilience: Japan’s economy is steadily recovering from the 2008 financial crisis, with a predicted GDP growth of 1.5% over the next 5 years. Pro-business government policies have introduced low interest rates and ongoing industrial deregulation.
  • Business infrastructure: Japan’s business landscape is extremely favourable, and was ranked 6th in the world by the Global Competitiveness Report 2015-2016. 54 of the Fortune Global 500 companies have headquarters in Japan.
  • R&D opportunities: Japan is committed on a cultural level to innovation and technological progress, and is a world leader in research and development, devoting around 4% of its gross domestic spend to the field. Reflecting this trend, strong intellectual property laws reinforce innovative commercial projects.
  • Skilled labour: Almost 50% of Japan’s 25-34 year old demographic have some form of university-level or tertiary qualification. Japan’s citizens are amongst the most educated in the world, with a consistently high rating in STEM subjects. Various government incentive packages are available to foreign companies hiring skilled domestic workers.
  • Global hub: Japan is a global business hub, and its businesses benefit from a world class transportation network. Japan’s transport infrastructure includes air and sea links to Asia and the United States, and a rail network which transports 23 billion passengers per year with an average delay of only 36 seconds.

Foreign Direct Investment in Japan

Japan is recognised as a leading innovative economy which welcomes inward investment. Its political stability has high living standards and societal focus on innovation poise to the countries continued success. The Government appreciates the importance of foreign investment, providing incentives to attract investors and single point contacts in key Government agencies to streamline and simplify setting up business in Japan.

Registering A Company and Establishing an Entity in Japan

In order to set up an entity in Japan it is important to understand the procedure and follow the steps detailed below: -

Business Model Determination

Determine the types of business models the Japanese entity ("JPCO") has available, preferably through the advice from accounting firms. It is critical at this stage to engaged an accounting firm able to provide advice on Japanese legal aspects.

Legal Procedures

After the appropriate business model and entity type are determined, the JPCO must register a fixed place of business; this would require engaging a Japanese law firm to establish the entity. It is important to confirm at this stage whether the business is subject to any regulatory requirements.

Accounting and Payroll Set Up

Following the establishment of JPCO, engage a professional accountant for the following –

  • To set up an accounting system, compatible with reporting requirements with the Japanese accounting standards and tax regulations.
  • Complete the initial tax and payroll filings with the relevant governmental authorities.
  • Review your employment agreements for compliance with the Japanese Labour Laws and tax filing requirements.

Japan’s business registration office requests the following information from applicants:

  • Name and address of every incorporator
  • Amount of investment from each of incorporator
  • Name of the company
  • Registration address
  • Purpose of the business
  • Directors Auditors (if needed)
  • Representative director
  • Capital Unit of investment
  • Fiscal year
  • The first fiscal year

The following will be required before making the registration:

  • Registration seals or signatures of each of incorporators
  • Certificate of registration seals or certificate of signatures of each of the incorporators
  • Certificate of registration seal of representative director
  • Copy of a bankbook (passbook) to make sure remittance of capital

Business Banking in Japan

In Japan it is not mandatory to make payments to employees or the authorities from an in-country bank account.

Working Days and Working Hours in Japan

The working week in Japan is Monday to Friday from 9:00am to 6:00pm. There are no statutory provisions which prescribe maximum working hours. The EO does however provide that in addition to paid statutory (public) holidays, an employee is entitled to no less than one rest day in every period of seven days.

Basic Facts about Japan

General Information

Japan is an East Asian state on the western rim of the Pacific Ocean. It comprises four main islands - Honshu, Hokkaido, Kyushu, and Shikoku - along with thousands of smaller landmasses. Ancient Japan developed as an empire, but was ruled by feudal lords, known as Shoguns, and remained relatively isolated from the rest of the world until the mid-19th century - after which point it began to venture beyond its borders both culturally and politically. Today, as a member of the UN and other important organisations, Japan is a modern and highly developed country, and plays an important regional and global role. Japan’s living standards are amongst the highest in the world - its citizens enjoy the highest life-expectancy and the lowest infant mortality rate. Much of Japan is mountainous or heavily forested, meaning urban centres cluster around the islands’ coastlines. The country is temperate and mild, but weather conditions can vary greatly throughout the year: from harsh winters with heavy snowfall, to sweltering, humid summers.

Full Name: Japan

Population: 126.5 million (UN, 2011)

Capital: Tokyo

Major Language: Japanese

Major Religion: Shintoism, Buddhism

Monetary Unit: Yen

Main Exports: Vehicles, Computer Parts, Chemicals, Scientific Instruments and watches

GNI per Capital: US $45,180 (World Bank, 2011)

Internet Domain: .jp

International Dialling Code: +81


Hello こんにちは

Good morning おはようございます

Good evening こんばんは

Do you speak English? 英語を話せますか?

Good bye さようなら

Thank you ありがとう

See you later 後であなたを参照してください


Dates are usually written in the day, month and year sequence. For example: 1st of July 2015 or 1/7/15.

Income Tax & Social Security in Japan

The Tax Year runs from 1st January to 31st December.

Further information can be found via the following Governmental Departments:

National Tax Authority:

3-3-1 Kasumigaseki, Chiyoda-Ku, Tokyo, 100-8978

Japan Pension Office:

3-5-24 Takaidonishi, Suginami-Ku, Tokyo, 168-8505


  • Tokyo Regional Tax Bureau, Otemachi Sangokan 1-3-3 Otemachi, Chiyoda-Ku, Tokyo,100-8102
  • Tokyo Metropolitan Government Bureau of Taxation,19th & 20th Floor, Tocho Daiichi Honchosha,2-8-1 Nishi-Shinjuku, Sinjuku-Ku, Tokyo, 163-8001
  • Tokyo Labor Bureau,1-2-1 Kudanminami, Chiyoda-Ku, Tokyo, 102-8305


  • Osaka Regional Tax Bureau, SanGokan 1-5-63 Otemae, Chuo-Ku, Osaka-Shi, Osaka, 540-8541
  • Osaka Prefectural Government,2 Otemae, Chuo-Ku, Osaka-Shi, Osaka, 540—8570
  • Osaka Labor Bureau,8th Floor Nigokan, 4-1-67 Otemae, Chuo-Ku, Osaka-Shi, Osaka 540-8527


  • Nagoya Regional Tax Bureau,3-3-2 Sannomaru, Naka-Ku, Nagoya-Shi, Aichi, 460-8520
  • Aichi Prefectural Government,3-1-2 Sannomaru, Naka-Ku, Nagoya-Shi, Aichi, 460-8501
  • Aichi Labor Bureau,2-5-1 Sannomaru, Naka-Ku, Nagoya-Shi, Aichi, 460-8507

Income Tax in Japan

In Japan, income taxes on salary are calculated and withheld from employee salary. There are two main taxes – national income tax (equivalent of Federal Tax for the US) and Inhabitant Tax (also known as resident tax).

Penalty tax is 10% and interest is 2.8% for the first two months and 9.1% for after two month from the due date.

Social Security in Japan

Social Security payment in Japan is due at the end of each month. The company will receive a notification of the amount that is due.

Both the Company and Employees must be enrolled into the National Social and Labour Insurance programs consisting of Health Insurance, Pension, Nursing Care (for those employees over the age of 40), Workman’s Compensation and Employment Insurance. If the expatriates want to work for your company and will be named as a Director, they will not receive Labour Insurance in accordance with Labour Law. Both the employer and employee (approximately a 50/50 split in the cost) pay for the premiums for these social benefits. The employee portion will be taken directly from Gross Monthly Salary along with other statutory deductions such as Withholding Tax and Inhabitant Tax (Inhabitant tax does not begin until the employee has worked for more than 1 year). This is because your inhabitant tax amount is based on your first year of residence in Japan).

For the late submission and payment of Social Security, the interest rate is 4.3% for the first three months and 14.6% for after three months from the due date.

Reporting Tax in Japan

The ‘Monthly Compensation Report’ can be submitted by a payroll provider. It must be submitted to the National Pension Office or Health Insurance Union between the 1st and 10th of July for the period of April – June. This report must be signed by the client.

The ‘Workers Compensation Calculation and Insurance Report’ can be submitted by a payroll provider. It must be submitted to the Local government office between the 1st of June and 10th of July for the period of April to March the previous year. This report must be signed by the client.

The ‘Annual Compensation Report’ can be submitted by a payroll provider. It must be submitted to the Local government office between the 1st and 31st of January each year with the information from the previous year. This report must be signed by the client.

New Employees in Japan

Before they begin employment, New Starts in Japan must be registered with the appropriate authorities, and must provide a variety of documents. The deadlines for document registration are as follows:

  • New Starts must be registered with the authorities when they start employment.
  • Below are the deadlines for new starts to be registered with the relevant authorities:
  • Pension and Health Insurance Forms (within 5 days)
  • Workers Compensation Forms (within 10 days)
  • Employment Insurance Forms (within 10 days)
  • Third Party Payroll Calculation Form (within 1 month )
  • Insurance Report (within 50 days)
  • By the 10thof the following month to the Public Employment Service Offices

Expat new starts must provide the following information when registering with the authorities:

  • Copy of Passport
  • Signed Contract
  • Work Permit
  • Attached Registration Form
  • Registration Card

Below are the deadlines for expat new starts to be registered with the relevant authorities:

  • Social Insurance (Within 5 Days)
  • Employment Insurance (within 10 days)

Leavers in Japan

Unless otherwise stated and if requested, the company must pay the employees their final pay within seven days from the final day. Notifications must be made to the Social Insurance Office and Employment Insurance Office.

Payroll in Japan

It is important for employers in Japan to observe all relevant payroll rules and regulations - and comply with withholding obligations. Broadly, Japan’s payroll system involves two main taxes: the Social Insurance contribution, which covers the government health insurance, pension, and nursing plan, and the Labour Insurance contribution, covering accident and unemployment insurance. Personal income tax is also calculated and withheld by employers.

Payroll reports in Japan must be kept for at least 40 years, while payslips may be issued to employees online.