Sole Proprietorship in Japan (Kojin Jigyo): 2026 Guide

A sole proprietorship in Japan, called kojin jigyo (個人事業), is a business run by one person without forming a company. The owner and the business are the same legal entity. You start one by filing a free business opening notice (開業届, kaigyo todoke) with your local tax office.

Foreign residents can start a sole proprietorship if their status of residence allows business activities. Permanent residents and spouses of Japanese nationals qualify without extra steps. Most work visas do not.

Sole proprietors pay income tax at 5% to 45% and resident tax of about 10%. Some also pay individual enterprise tax and consumption tax. This guide covers who can register, how to file, your tax obligations, and when to switch to a KK or GK.

What is a sole proprietorship (kojin jigyo) in Japan?

A sole proprietorship in Japan, or kojin jigyo (個人事業), is the simplest way for individuals to run a business. It is not a separate legal entity like a KK or GK. The owner, called kojin jigyo nushi (個人事業主), is personally liable for all business debts and losses.

You become a sole proprietor by submitting a business opening notice (開業届, kaigyo todoke) to the tax office. The National Tax Agency explains the form in its Kaigyo Todoke instructions.

This business form suits freelancers, consultants, online sellers, and small shop owners. Many start this way and incorporate once profits grow.

Quick overview:

• Legal structure: Individual business, not a separate legal entity

• Japanese terms: 個人事業 (kojin jigyo); the owner is 個人事業主 (kojin jigyo nushi)

• Setup cost: ¥0

• Where to register: Your local tax office, in person, by post, or online through e-Tax

• Opening notice deadline: Within one month for openings through 2025. For openings from January 1, 2026, by March 15 of the following year.

• Blue Form application: Within 2 months of starting, or by March 15 if you start before January 16

• Citizenship required: No

• Visa required: Yes. Your status of residence must allow business activities.

• Taxes: Income tax and resident tax; for some, individual enterprise tax and consumption tax

• Best for: Freelancers, consultants, e-commerce sellers, and small service businesses

Pros and cons of sole proprietorship in Japan

A sole proprietorship is cheaper and simpler to run than a company. The tradeoff is credibility. Banks, large clients, and job seekers often prefer a registered company.

Pros of sole proprietorship in Japan

• Easy, low-cost setup. To start a sole proprietorship, you file short notices with the tax office, your prefecture, and your city. There is no registration fee. In contrast, establishing a company takes registration fees and up to a month.

• Simpler tax reporting. Sole proprietors file one annual tax return, called kakutei shinkoku. Most Blue Form filers (青色申告, aoiro shinkoku) use accounting software. Companies must file corporate tax returns, and many hire an accountant for tax filing.

• Lower tax on lower profits. Sole proprietors pay income tax on their income, not corporate tax. At lower profits, this often means a lower tax bill than a company pays. The break-even point varies, so ask a tax accountant (zeirishi) before you decide.

• You keep the profit directly. The owner and the business are one entity, so you pay yourself no salary. You also run no payroll for yourself. Cash flow stays simple at a small scale.

• Lighter admin. Most sole proprietors join National Health Insurance and the National Pension. With fewer than 5 regular staff, you generally need not enroll employees in social insurance. That rule changes for businesses opening from October 1, 2029 (see "Hiring as a sole proprietor" below).

• No director payroll. A company director draws a salary and must join health insurance (Kyokai Kenpo) and employees' pension (Kosei Nenkin). This applies even to a one-person company.

Cons of sole proprietorship in Japan

• Lower social credibility. A sole proprietorship has no entry at the Legal Affairs Bureau. Some businesses in Japan prefer to deal with a registered company.

• Harder to get loans. Lenders struggle to separate business and personal money. Open a separate business bank account, even though the law does not require one. It keeps records clean for loans and your tax declaration.

• Harder to hire. Companies must offer employees' pension and health insurance. Many job seekers prefer that security over a small sole proprietorship.

• Higher tax on higher profits. Income tax is progressive, so your rate climbs as profit grows. Individual enterprise tax (個人事業税, kojin jigyozei) also applies to many business types above ¥2.9 million of income.

• Fewer deductible expenses. Sole proprietors face tighter rules on family salaries and retirement provisions. This is a common reason to incorporate later.

What are the tax obligations of sole proprietors in Japan?

Sole proprietors file a tax return each year between February 16 and March 15. The return covers income from January 1 to December 31 of the previous year. Many people now file online through e-Tax.

The tax office and your local government use that one return to set several taxes.

Writers and translators generally fall outside individual enterprise tax. You also pay National Health Insurance and National Pension premiums. Your city sets NHI from your income, so read how to pay National Health Insurance.

Consumption tax and the invoice system

You become a consumption tax filer when sales two years earlier exceed ¥10 million. It also starts if both sales and salary payments exceed ¥10 million from January to June of the previous year. Registering to issue qualified invoices makes you a filer too. Many sole proprietors register because business clients ask for invoices.

Sole proprietors who became filers only through invoice registration can use the 2-wari tokurei (2割特例). It caps the tax at 20% of the consumption tax collected, through the 2026 tax year. For 2027 and 2028, the new 3-wari tokurei (3割特例) caps it at 30%.

Read our complete guide to Japan's Invoice System here.

Japan's electronic recordkeeping requirement (電子帳簿保存法)

Since January 1, 2024, every business in Japan must keep electronic records in electronic form. This covers emailed PDF invoices and receipts from online purchases. A printed copy alone no longer meets the rule.

Keep the files organized, searchable, and unaltered. Most cloud accounting software for sole proprietors stores them for you. See our guide to Japan's Electronic Bookkeeping Act.

The rule ties directly to your Blue Form status. If you ignore a tax office notice to fix your records, it can revoke your Blue Form approval. You would lose the special deduction and the right to carry losses forward.

A grace measure exists for businesses with a valid reason, such as limited staff. It is not a permanent exemption, so plan to comply fully.

Tax rates for sole proprietors in Japan

Japan taxes sole proprietor income at progressive national rates. Use the quick deduction column to work out the tax in one step. Apply it to taxable income after all other deductions.

Add the 2.1% reconstruction surtax to the result. Resident tax of about 10% comes on top. See our full guide to Japan's tax rates.

Blue Form deductions change from the 2027 tax year. Japan's FY2026 tax reform, enacted in March 2026, creates four tiers:

• ¥750,000: double-entry books, filed through e-Tax, with qualifying electronic books

• ¥650,000: double-entry books, filed through e-Tax

• ¥100,000: double-entry books filed on paper, or simple books with revenue of ¥10 million or less two years earlier

• ¥0: simple books, with revenue above ¥10 million two years earlier

Until then, the maximum is ¥650,000 for e-Tax filers and ¥550,000 for paper filers. Double-entry filers who file on paper drop from ¥550,000 to ¥100,000 in 2027. Switch to e-Tax before then.

Use a Japanese tax calculator, such as this one, to estimate your bill. Chrome's built-in translator shows the instructions in English.

What is the Business Opening Notice (Kaigyo Todoke form) in Japan?

When starting a business in Japan, you submit a business opening notice, or kaigyo todoke (開業届). Its official name is 個人事業の開業・廃業等届出書. Pick it up at your local tax office or get it from the National Tax Agency's Kaigyo Todoke page.

Image. Kaigyo todoke form. Business opening notification form in Japan.

You can submit the form in person, by post, or online through e-Tax. There is no fee, and filing late carries no penalty.

The deadline changed in 2026. Openings through December 31, 2025 had one month to file. For openings from January 1, 2026, the deadline is March 15 of the following year. An April 2026 opening, for example, is due by March 15, 2027.

Apply for the Blue Form return at the same time

The kaigyo todoke alone does not give you "青色申告" (Blue Form Tax Return) status. File a separate application, the 青色申告承認申請書, within 2 months of starting. If you start before January 16, the deadline is March 15 of that year.

Blue Form status brings the largest tax savings. Miss the deadline and your first year is a white return.

Notify your prefecture and city

Sole proprietors also file a business start notice (個人事業開始申告書) with the prefectural tax office. Some cities ask for a similar notice. Deadlines vary, so check your prefecture's tax office page.

Keep proof of filing

A copy of the kaigyo todoke proves your business exists. Landlords and lenders ask for it when you sign office rental agreements or apply for startup loans. Since January 2025, tax offices no longer date-stamp copies, so save your e-Tax receipt notice.

Can sole proprietorships in Japan use a virtual office address on their business opening form?

Most sole proprietorships in Japan can list a virtual office address on the kaigyo todoke. This works for consulting, e-commerce shops, and most freelance businesses.

Licensed businesses are the main exception. Legal professions, real estate, and a handful of other cases need a physical office. Some also need a permit from the prefecture before they open.

If you work from home, you can list your home address instead. Many owners prefer not to print it on invoices and websites. A virtual office address keeps your home private without renting office space.

With a MailMate business address, you get:

• A business address you can use for registration

• Physical mail opened and OCR-scanned at your request

• Cloud storage for easy access and forwarding to your team

• One-click translated summaries and bill payment on your behalf

• Bilingual digital mailroom support

• A professional address if you are working from home

The sole proprietorship in Japan and visa requirements for foreign nationals

Anyone can submit a kaigyo todoke. Your visa status decides whether you can legally run the business. Check it before you register.

Visa statuses that generally allow sole proprietorship

According to the Ministry of Foreign Affairs and the Immigration Services Agency of Japan, these statuses carry no work limits:

• Permanent residents

• Spouses of Japanese nationals

• Spouses or children of permanent residents

• Long-term residents

Holders can start a sole proprietorship in any lawful type of business.

Work visas: Important limitations

Most work visas do not let you run any business you like. Common examples are Engineer/Specialist in Humanities/International Services, Instructor, Professor, and Skilled Labor.

Each visa covers a set range of activities. A side job outside that range breaks your visa conditions unless you get permission first.

About "self-sponsored" work in Japan

Japan has no official "self-sponsored visa." The term describes keeping a work visa through your own contracts instead of one employer.

Some Engineer/Specialist in Humanities/International Services holders work this way as freelancers. The work must stay inside the visa's category, usually through contracts with Japanese companies. Immigration checks for stable income and a clean tax record at renewal.

For work outside your category, you need permission to engage in activity other than that permitted (資格外活動許可). Approval is case by case. Ask a gyoseishoshi (immigration scrivener) before you start.

Business Manager visa and sole proprietorship

The Business Manager visa covers people who run a business in Japan. Sole proprietors can still apply. The October 16, 2025 rules set a high bar, though:

• Investment: at least ¥30 million. For a sole proprietor, this counts money spent on the office, one year of staff costs, equipment, and similar items.

• Staff: at least one full-time employee who is a Japanese national or holds an unrestricted status

• Language: Japanese at CEFR B2 (about JLPT N2) for you or that employee

• Background: at least 3 years of management experience, or a related master's, doctoral, or professional degree

• Business plan: checked by an SME consultant (中小企業診断士), a CPA, or a tax accountant

• Office: a physical office; a home address alone generally is not enough

Most people start a sole proprietorship under a status they already hold. The Business Manager visa suits founders with real capital behind them.

Visa statuses that do NOT allow sole proprietorship

You cannot run a sole proprietorship in Japan under these statuses:

• Tourist visa or visa waiver: no paid activity at all

• Student visa: part-time work of up to 28 hours a week, with permission. Running a business is generally not allowed, at a university or a language school.

• Dependent visa: the same 28-hour limit with permission (see our dependent visa guide)

• Designated Activities: only if your designation explicitly allows it

Work permit holders under these statuses still cannot run a business. Breaking the rules can lead to visa cancellation or deportation.

Visa rules change often. Confirm your case with the Immigration Services Agency of Japan or a gyoseishoshi before you register.

How to register as a sole proprietor in Japan (step-by-step)

To start a sole proprietorship in Japan, you need to file a few short forms. Most people finish in one day.

Step 1. Confirm your visa or residency status

Check the visa table above. Permanent residents and spouses of Japanese nationals can start right away. If you are unsure, ask a gyoseishoshi.

Step 2. Download or pick up the Kaigyo Todoke form

Get the Kaigyo Todoke (開業届) form at your local tax office or from the National Tax Agency's website. The form is one page.

Step 3. Fill in the form

The form asks for:

• Your full name, address, and My Number

• Your type of business and a short description

• Your start date

• A trade name (屋号, yago), which is optional

• Your business address, which can be your home address or, in most cases, a virtual office

The form also asks whether you are filing the Blue Form application. Submit both together to save a trip.

Step 4. Submit the Kaigyo Todoke

You can submit it three ways:

• In person at the tax office for your address

• By post, sent from any post office

• Online through e-Tax, using your My Number Card

There is no fee to submit this form.

Step 5. Keep proof of filing

Tax offices stopped date-stamping copies in January 2025. If you file online, save the e-Tax receipt notice. If you file on paper, keep your copy and the postal record.

Step 6. Open a business bank account

Many banks let you open an account under your family name plus your trade name. Bring your kaigyo todoke copy, residence card, and My Number. See our list of banks for foreigners.

Hiring as a sole proprietor

Sole proprietors in Japan can hire full-time and part-time staff. You need to file a few notices around your first hire.

• Salary-paying office notice (給与支払事務所等の開設届出書): file it with the tax office within one month.

• Labor insurance: workers' accident insurance is required from your first employee. File at the Labor Standards Inspection Office within 10 days of the first hire.

• Employment insurance: Employment insurance: enroll staff who work 20 or more hours a week and are expected to stay 31 days or more. File at Hello Work within 10 days. See our guide to unemployment insurance in Japan.

• Withholding: deduct income tax from each salary and pay it to the tax office. See our guide to payroll in Japan.

Social insurance is mandatory once you have 5 or more regular employees in one of 17 designated industries. From October 1, 2029, the industry condition is dropped for newly opened businesses. Below that line, your business can join voluntarily. At least half of eligible staff must agree, and the Health Ministry must approve. You yourself stay on National Health Insurance and the National Pension.

Sole proprietorship vs incorporation in Japan

Not sure whether to register as a sole proprietor or set up a company? Compare the two business forms below. For a company-type comparison, read GK vs KK.

A sole proprietorship registers with your local tax office. A KK or GK registers with the Legal Affairs Bureau, a separate government body. That is why a sole proprietorship is faster and cheaper to set up.

A worked example: ¥8,000,000 in annual profit

Numbers make the comparison clearer. This simplified example uses ¥8,000,000 in annual profit. Tax advisors often cite this level as the point where incorporating starts to pay off.

As a sole proprietor, using the brackets above and the ¥650,000 e-Tax Blue Form deduction:

• Taxable income after the Blue Form deduction: ¥8,000,000 − ¥650,000 = ¥7,350,000

• National income tax at 23%: (¥7,350,000 × 23%) − ¥636,000 = ¥1,054,500, before the 2.1% surtax

• Resident tax at about 10% of the same base: about ¥735,000

• Individual enterprise tax at 5%, for a designated business: (¥8,000,000 − ¥2,900,000) × 5% = ¥255,000

• Rough total: about ¥2.0 million, or about 26% of profit

This example skips the basic deduction and social insurance deductions. Both lower the real bill. Individual enterprise tax ignores the Blue Form deduction, so it uses the full ¥8,000,000.

As a KK, you pay corporate tax instead. Companies with capital of ¥100 million or less pay a reduced 15% rate on the first ¥8,000,000 (National Tax Agency). The standard rate above that is 23.2%. The reduced rate is temporary and covers fiscal years starting by March 31, 2027.

• ¥8,000,000 × 15% = ¥1,200,000 in national corporate tax

• Local corporate and business taxes come on top. Including them, the total effective rate at standard rates is about 21.4% on income up to ¥4 million and 23.2% from ¥4 million to ¥8 million (YG Tax).

• Rough total: about ¥1.8 million, roughly ¥250,000 below the sole proprietor's ¥2.0 million, before any director's salary.

A KK also pays a per-capita inhabitant tax every year, even at a loss. In Tokyo's 23 wards, the minimum is ¥70,000 for a company with capital of ¥10 million or less.

The catch: the KK figure assumes the profit stays in the company. In practice, you pay yourself a director's salary, and that salary is taxed again as personal income. The balance depends on how you split salary and retained profit.

A licensed tax accountant (zeirishi) can model this for your numbers. Start with our list of bilingual accounting firms in Tokyo. You can also run your own numbers in the tax calculator linked above.

Many owners start as sole proprietors and incorporate as profits grow. When that time comes, follow our step-by-step guide to company incorporation in Japan.

Sole proprietorship in Japan frequently asked questions

What is a sole proprietorship (kojin jigyo) in Japan?

A sole proprietorship in Japan, called kojin jigyo (個人事業), is a business run by one person without forming a company. The owner and the business are the same legal entity. The owner is personally liable for all business debts. It is a common business form for freelancers and small shops.

How do I start a sole proprietorship in Japan?

You start a sole proprietorship by filing a business opening notice (開業届), called the kaigyo todoke, with your local tax office. You can file in person, by post, or online through e-Tax. There is no fee. For openings from January 1, 2026, the deadline is March 15 of the following year.

Can foreigners start a sole proprietorship in Japan?

Yes, if your status of residence allows business activities. Permanent residents, spouses of Japanese nationals, and long-term residents can start one with no extra permission. Most work visa holders can only work inside the activity category of their visa. You do not need Japanese citizenship.

What taxes does a sole proprietor in Japan pay?

Every sole proprietor with taxable income pays income tax at 5% to 45% and resident tax of about 10%. Individual enterprise tax of 3% to 5% applies to about 70 designated business types above ¥2.9 million of income. Consumption tax generally applies once sales two years earlier exceed ¥10 million, or once you register for invoices. You report everything in one annual tax return between February 16 and March 15.

Is the Blue Form tax deduction changing in 2027?

Yes. From the 2027 tax year, the Blue Form special deduction has four tiers: ¥750,000, ¥650,000, ¥100,000, and ¥0. The top two tiers require double-entry books and filing through e-Tax. The ¥750,000 tier also requires qualifying electronic books. Double-entry filers who file on paper drop to ¥100,000. Until then, the maximum is ¥650,000 with e-Tax.

Can I run a sole proprietorship on a work visa or student visa?

Usually not as a separate business. A work visa covers a set range of activities, and a side job outside it needs permission to engage in activity other than that permitted. A student visa allows part-time work of up to 28 hours a week with permission. It generally does not allow you to run a business.

Can sole proprietors in Japan hire employees?

Yes. Sole proprietors file a salary-paying office notice (給与支払事務所等の開設届出書) with the tax office and join labor insurance. Social insurance is mandatory once you have 5 or more regular employees in one of 17 designated industries. From October 1, 2029, the 5-employee rule covers every industry for newly opened businesses.

How do I switch from a sole proprietorship to a company?

First, register a KK or GK with the Legal Affairs Bureau. Then file a notice of business closure (廃業届), called the haigyo todoke, with the tax office for the sole proprietorship. Many owners make this switch, called hojin nari (法人成り), as profits approach ¥8 million a year. A licensed tax accountant (zeirishi) can time the move for your numbers.

✈️ Planning a move to Japan more broadly?

If you're weighing sole proprietorship against a bigger relocation decision, career planning, and lifestyle logistics beyond just the business structure itself, Japan Remotely is a resource worth exploring alongside this guide. They specialize in immigration and business support for remote workers and entrepreneurs relocating to Japan.