How Much Capital for a Japanese Company? Tax, Visa and Credibility

Under the Companies Act, a company can be incorporated with share capital (資本金) of as little as ¥1. In practice, the amount is set with reference to near-term working capital, the criteria for the Business Manager visa (経営・管理ビザ), the asset requirements of business licenses and the relevant tax categories. ¥10 million and ¥100 million in particular are key thresholds at which the tax treatment changes.

Share capital basics

• Share capital is the portion of the money paid in by investors at incorporation that is recorded as capital.
• The minimum capital requirement was abolished when the Companies Act took effect in 2006, so a company can be set up with ¥1.
• Capital paid in can be used for the business after incorporation. It does not need to stay in the bank account.
• Up to half of the amount paid in can be recorded as capital reserve instead of share capital.

The amount of share capital is registered and can be checked by anyone. Business partners and financial institutions use it as one indicator of a company’s size and stability.

If the capital is spent running the business and losses continue, net assets fall below share capital. Once liabilities exceed assets (negative net worth), this affects how banks and business partners view the company. It also becomes a factor in judging business continuity when renewing a Business Manager visa. It is important to set the capital with loss-making periods in mind.

How to decide the amount

1. Start from working capital

Add up incorporation costs, the deposit and rent for an office, recruitment costs, and several months of expenses until revenue starts coming in. If capital is too low, the company will soon need loans from its parent or representative director, or a capital increase.

2. Business Manager visa criteria

For new Business Manager visa applications from October 16, 2025, capital and similar funds of ¥30 million or more is one of the criteria. Applicants are also asked to explain how the funds were raised and where they came from. For details, see Revised approval criteria for the Business Manager visa.

3. Asset requirements for business licenses

Construction, worker dispatch, fee-charging employment placement, travel agency and other businesses have financial requirements such as minimum equity or base assets. As these are often assessed on net assets or cash and deposits rather than share capital alone, check the criteria for each industry.

4. Credibility with business partners and banks

With extremely low capital, it becomes harder to explain the scale of the business in partners’ credit checks and when opening bank accounts. Consider industry practice and the size of your counterparties as well.

Approaches by situation

Taxes and rules that change with the amount of capital

Consumption tax: the ¥10 million threshold

A newly incorporated company has no base period for determining its tax status, so in principle it is exempt from consumption tax for its first two fiscal periods. However, a “newly established corporation” with capital of ¥10 million or more at the start of the period is not exempt. Whether capital is set at ¥9.99 million or ¥10 million makes a difference.

Even with capital under ¥10 million, a “specified newly established corporation”, where more than 50% of the shares are held by a company with taxable sales above ¥500 million or similar, is not exempt. For taxable periods beginning on or after October 1, 2024, cases where the group’s total domestic and overseas revenue exceeds ¥5 billion were added. Subsidiaries of large overseas groups need to take particular care. For details, see Determining exemption from consumption tax.

Per-capita levy of corporate inhabitant tax

The per-capita levy (均等割) is a flat-rate tax payable even when the company makes a loss. The amount depends on the amount of capital, etc. and the number of employees. At standard rates, a company with capital, etc. of ¥10 million or less and 50 or fewer employees pays ¥70,000 in total: ¥20,000 to the prefecture and ¥50,000 to the municipality. Above ¥10 million and up to ¥100 million, the total is ¥180,000 (50 or fewer employees). Actual rates may differ by local government.

Corporation tax: the ¥100 million threshold

Small and medium-sized companies with capital of ¥100 million or less benefit from a reduced 15% rate on annual income up to ¥8 million. For fiscal years beginning on or after April 1, 2025, the rate is 17% in years when annual income exceeds ¥1 billion. Other special measures, such as a fixed deduction for entertainment expenses, are also available.

However, a company 100% owned by a large company with capital of ¥500 million or more cannot use many of these special measures, even if its own capital is ¥100 million or less. Depending on the parent’s size, this restriction may apply, so check in advance. For an overview of taxes, see An overview of taxes on Japanese companies.

Registration and license tax at incorporation

For example, a KK with capital of ¥30 million pays registration and license tax of ¥210,000. A KK also incurs other costs, such as the fee for notarization of its articles of incorporation at a notary office (公証役場).

Combining investment from overseas with loans

Points to note on paying in and remitting capital

• When incorporating a KK, the capital is paid into a bank account, and a document certifying the payment is attached to the registration application.
• The account used is in principle in the name of a promoter. There are also arrangements for promoters living overseas who do not hold a Japanese account, so check in advance.
• When a foreign investor invests in a Japanese company, this constitutes inward direct investment under the Foreign Exchange and Foreign Trade Act (外為法, FEFTA), and a post-investment report or prior notification may be required.
• Remittance records also serve as evidence of the source of funds in the Business Manager visa review.

Balancing equity and loans

Rather than putting all required funds into share capital, some companies fund part of their needs through loans from the parent or representative director. The advantage of a loan is that the funds can be returned in the form of repayments.

However, if borrowing from an overseas parent or similar lender is too high, thin capitalization rules may prevent part of the interest from being deducted as an expense. In principle, these rules apply where liabilities to foreign controlling shareholders exceed three times their equity interest. The interest rate should also be considered from a transfer pricing perspective.

Increasing or reducing capital later

• Capital increase: carry out procedures such as issuing shares for subscription and file a change registration. Registration and license tax is 0.7% of the increase (¥30,000 if this comes to less than ¥30,000).
• Capital reduction: creditor protection procedures such as a public notice in the Official Gazette are required, with a period of at least one month. It takes time and effort.
• Capital reserve: booking part of the amount paid in as reserve keeps the share capital figure, which is used for registration and license tax and the consumption tax test, lower. On the other hand, the reserve is included in the “amount of capital, etc.” used for the per-capita levy.

If you are investing to meet the Business Manager visa criteria, confirm with a professional before applying how much is to be recorded as share capital.

Summary

Decide the amount of capital by first working out what is needed for working capital and any visa or license requirements, and then checking tax thresholds such as ¥10 million and ¥100 million. Because reducing capital later takes effort, planning before incorporation is essential.

Working with partner judicial scriveners (司法書士), certified tax accountants (税理士) and administrative scriveners (行政書士), TIMOA supports capital planning, remittance and payment of capital, incorporation registration and post-incorporation tax filings. For details, see our Japan Entry & Company Setup page.