"If you own a business (including outside Japan) and are planning to invest in property in Japan, it is important to know the difference between registering your investment property under your own name or as a corporate structure," according to PLAZA HOMES.
Should you register your Japanese investment property under your own name, or under a corporate structure? What are the advantages or disadvantages of both options? How about tax implications? Accessibility to financing?
In a recent pod-cast interview between Nippon Tradings and Mr Sadaysu Ito of Sadywell Accounting - a corporate accounting firm from Tokyo, Japan, who answers all of these questions, and more.
"In Japan, tax rates for individuals on real estate investment income isn't really high. The biggest difference between an individual and a corporation is that, for individuals, we adapt a progressive taxation system - the lowest tax rate is just 5%, and the highest is 40%. For corporations, on the other hand, the basic tax rate is fixed at 34%. If your taxable income is less than around 70,000 USD annually, for example, your effective tax rate as an individual will be around 23% - but corporate tax rate will be fixed at 34%, says Ito.
"However, if your revenue from real estate and other income increases, eventually the individual tax rate will exceed the corporate tax rate. If taxable income exceeds 350,000 USD annually, the corporate tax rate will be lower than the individual tax rate."
Ito went on to say that another advantage of investing under a Japanese incorporated company is that Japanese incorporated companies can carry losses forward up to 9 years, whereas individuals can only carry them forward for 3 years. In reality, when you start investing, it's difficult to turn a profit in the first year, because there are many costs, and it may take time to tenant the property. In these cases, you will have a loss during the first years. If you're an incorporated entity, you will be able to carry those losses forward for 9 years, and offset them against your future income, to reduce your tax obligations. This is one of the biggest advantages for corporations.
Useful links related to setting up a business in Japan
・How to Set Up Business in Japan by JETRO
Laws and regulations for setting up business in Japan
・JETRO Office Space for Free
Jetro offers office space free of charge for the first 50 days. All spaces are fully-furnished. The space has office rooms, reception areas, copy rooms, and meeting rooms.
・Tokyo Employment Consultant
Attorneys with knowledge of labor-related laws give advice free of charge.
・About VISA (Ministry of Foreign Affairs of Japan)
・Start-Up Visa (Ministry of Foreign Affairs of Japan)
・Immigration Bureau
・Japanese Embassies in the World
・Branch Office and Subsidiary Company
・Comparison of Types of Business Operation
There are many English speaking firms which offer visa consulting service. In some cases it would be much easier and faster if you ask their advice.
Sources: PLAZA HOMES, Nippon Tradings, Sadywell Accounting, Jetro
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