Shibuya crossing at night in city lights

Japan: The world’s best country to do business

This is the slogan promoted by Prime Minister Abe to provide incentives for foreign direct investment. This kind of contribution can help strengthen the Japanese economy and contribute to its regional revitalization through new technological innovations.

To improve Japan’s investment environment, the Prime Minister has new reforms planned, capped under the name of Abenomics. The latter includes promoting comprehensive regulatory reform of agriculture, medical service, energy, and employment sectors, reduce the corporate tax rate below 30% and formulate a corporate governance code.

Moreover, it plans to attract foreigners through a new policy which makes it easier for them to do business in Japan. This policy aims to facilitate the streamline business set-up and residency qualification process (for both the concerned foreigners and their families), provide more foreign-language resources to help businesses navigate the regulatory landscape, offer investment advisors and a “Promotion Scheme for Global Alliances”, through which international companies are matched with Japanese SMEs.

Government Efforts

Abenomics has two main goals set to improve all sides of Japan’s economy, including the workforce, companies’ operations, investment ecosystem, and the country as a whole. The first goal is to implement a reform that would accelerate an economic virtuous cycle. Currently, some regulations and laws sometimes limit new business. New policies aim to create a more attractive environment for international investors. The second goal refers to the implementation of a so-called society 5.0 where industrial competitiveness is enhanced through cutting-edge technologies helping to form a society that is better synced to today’s individuals’ needs.

Expatriates

To attract more overseas professionals who have an expertise or experience in a specific field, Japan accelerated visa procedures by creating fast-track visa screenings taking only 10 days and setting up the world’s fastest Japanese Green Card program for highly-skilled foreign professionals in selected fields. A new status of residence is now available to foreigners who possess a certain level of professional and technical skills as well as Japanese language proficiency. An online application for these procedures is open from 2019. International students and entrepreneurs will also get more support.

Need more information ?

For more information fill in the form or call us and we connect you to our client servicing team directly.

Creating a more competitive business

A new sandbox approach by the government supports new business ideas by evaluating them based on their merit. As a result, there are fewer administrative barriers and regulations for businesses allowing them to conduct pilot projects and demonstration tests more quickly.

SMEs get help to be more productive and ambitious through the creation of a forward motion that encompasses all stakeholders from regional staff to overseas investors. A new approach encouraged international expansion while property tax is reduced to motivate SMEs to grow their assets. Corporate tax will also be reduced to as low as 25% for companies proactively engaging in wage increases and capital investment. 

Administrative processes are being optimized and costs are going to be reduced by 20% by 2020 in such areas as “business approvals and licenses” and “social insurance”. Moreover, registration outlets are being consolidated into one to information more accessible. 

The government is also creating a more sustainable and self-reliant society by highlighting the abundant opportunities in localities outside the major cities. Foreign business and investments are encouraged to expand into Japan’s remote regions through the removal of geographical constraints, the use of new technologies, and the promotion of business opportunities.

Realizing Society 5.0

From a business perspective, the new society 5.0 would see the realization of many FinTech features which means a faster implementation of cashless payment and the promotion of blockchain technology for money transfer to reduce time and costs while assuring safety in global business transactions.

Incentives Programs

To facilitate investments in Japan, local governments are offering various incentives programs aimed exclusively at the foreign-affiliated companies and foreign companies that are planning to open an office in their region.

The followings are incentives relevant to overseas/foreign-affiliated companies:

National Incentives

Incentives related to investments in Japan (Subsidy Program for Global Innovation Centres)

This program supports the cost of overseas companies which are setting up innovation centres or conduct experimental studies and feasibility studies in collaboration with Japanese companies.

Incentives for enterprises that foreign-affiliated companies can also use

1. Tax incentives for strengthening local business facilities

These incentives are available for companies opening or expanding their headquarters, such as branch offices and research laboratories, in the prefectures outside of Tokyo as a part of the Regional Revitalization Areas program.

 Establishment or expansion of headquarterRelocation of headquarter
Employment Promotion taxationTax credit up to 600,000 JPY per new employeeTax credit up to 900,000 JPY per new employee
Capital Investment tax cut15% special depreciation or 4% tax deduction on the acquisition value (has to be 10 million yen or more for SMEs) of business facilities25% special depreciation or 7% tax deduction on the acquisition value (has to be 10 million yen or more for SMEs) of business facilities
Tax exemption or unequal taxation of local taxesCertified companies may be able to receive exemption or reduction on:

–          Enterprise taxes

–          Property acquisition taxes

–          Property taxes

2. Incentives regarding Special Zones

Overview
National Strategic Special ZoneSpecial regulatory measures, corporate income tax treatment and financial support for companies in National Strategic Special Zones
Comprehensive Special ZonesIntegrated support for strategic challenges in selected regions. There are two types:

– For International competitiveness

– For Local revitalization

Special Zones for ReconstructionSpecial measures are available for companies based in disaster afflicted areas.

 

A map of Japan depicting special business zones

3. Incentives based on Industrial Competitiveness Enhancement Act

Overview
System to Remove the Grey Zone AreasThe competent ministry of the business confirms whether the new enterprise is regulated or not based on the new existing laws and regulations.
System of Special Arrangements for Corporate Field TestsIf safety and other requirements are satisfied, individual enterprises are allowed a special provision.

4. Incentives based on the Act on Special Measures for Productivity Improvement

Overview
Regulatory Sandbox in JapanThis framework enables speedy verification and data collection that can lead to regulatory reforms when new technologies or business models can be demonstrated.
Connected Industries Tax system30% special depreciation or 3% tax deduction if new systems, sensors, robots or new technologies to boost productivity are introduced.

5. Tax Deduction System based on the Regional Future Investment Promotion Act

A tax deduction is applied to those projects that contribute to the revitalization of local regions and strengthen the regional economy.

 Overview
Special taxation measure regarding capital investmentCapital investment done in accordance with an approved business plan that can stimulate the local economy.

Up to 40% of special depreciation and 4% of tax deduction in different categories.

Tax exemption or unequal taxation of local taxesCertified companies may be able to receive exemption or reduction on:

–          Property acquisition taxes

–          Property taxes

6. Tax Incentives for Research and Development

 Overview
R&D Tax Credit SystemTax incentives based on R&D expenses can be deducted from their corporate tax.
Promotion of Open InnovationTax credit for the total amount of expenses for joint or contract research with universities, national research institutes, etc.

Tax credit = total amount of special R&D expenses times 20% or 30%.

7. Incentives for Highly Skilled Foreign Professionals from foreign countries: Incentive measures for foreign nationals concerning start-ups

OverviewIncentives
Points-based preferential immigration treatment for highly skilled foreign professionalsUsing the points based system, foreign professionals with more than 70 points will be given a Japanese Green card and preferential treatment.If they score 80 points or more, foreign nationals can apply to permanent residence after one year of residence in Japan.

If they score is 70 or more, the latter can be done after three years of residence.

Resident status (so-called “start-up visa”) based on “Programs to Promote the Acceptance of Foreign Entrepreneurs” for National Strategic Special ZonesForeign nationals attempting to start a business in Japan need to obtain a “business manager” visa. However, if the requirements to obtain it are not fulfilled 6 months of residence to set up the business are granted.Foreign entrepreneurs are required to submit a founding activity plan etc. to the local government of the project and obtain confirmation to receive this incentive.

The target area is only special zones: Fukuoka, Niigata, Imabari, Sendai, Hiroshima and Aichi prefecture.

Resident status (so-called “start-up visa”) based on “Projects for Encouraging Foreign Entrepreneurs to Start BusinessForeign nationals attempting to start a business in Japan need to obtain a “business manager” visa. However, If the requirements are not fulfilled, applicants can still acquire a resident status for up to one year for a preparatory entrepreneurial activitiesForeign entrepreneurs are required to submit an activity plan of preparatory entrepreneurial activities to the local government of the project and obtain approval to receive this incentive.

The target area is only special zones: Fukuoka, Niigata, Imabari, Sendai, Hiroshima and Aichi prefecture.

8. Tax incentives for wage and productivity improvement

OverviewSubsidy Rates/ Maximum Amount
Tax deduction system for wage and productivity improvement

(for large companies)

Tax incentives where a part of a wage increase and allowance by large company can be deducted from their corporate tax of the relevant fiscal year.Condition: increase by 3% or more

 

Tax measures: up to 20% deduction

Incentives related to disaster recovery

1. Subsidies for new business establishment and employment creation in areas recovering from the tsunami and nuclear disaster

Subsidized ProjectsEligible CostsSubsidy rates/ maximum amount
Subsidy Program for New Business Establishment in the Areas Recovering from Tsunami and Nuclear Disaster towards Employment CreationProgram to encourage employment creation in the areas within prefectures inundated by the tsunami and Tohoku Earthquake and the areas in Fukushima prefecture affected by the nuclear power station accident.Acquisition to land construction and installation of product equipment covered.Subsidy rates depend on the size of the company:

– Large companies = up to 1/3

– SMEs = up to 1/2

Subsidy Program for Industrial Location and Job Creation to Support Independence and a Return to Recovering Areas (A project supporting the location of business sites for the manufacturing and service sectors)The program aims to support companies that establish or expand factories to increase employment creation and promote industrial accumulation in Fukushima areas.Land acquisition cost, Land development cost, Building acquisition cost, Equipment costSubsidy rates depend on the size of the company:

– Large companies = up to 2/3

– SMEs = up to 3/4

Subsidy for Business Location for Reconstruction of Industry in FukushimaProvide subsidy for manufacturing companies, distribution and R&D facilities, , call centre and others to promote creation of employment in Fukushima prefecture suffered damage in wide areas hit by Great East Japan Earthquake and Nuclear Disaster.Initial cost of installing machinery and equipmentSubsidy rates depend on the size of the company:

– Large companies = up to 1/3

– SMEs = up to 1/2

 

Subsidies for Employment toward Reconstruction of Industry in FukushimaEmployment costsSubsidies for employment victims by the national and local governmentsExpenses for employing disaster victims seeking employmentSMEs up to 1.2 million yen

 

Large companies up to 2.25 million yen

Costs of housing supportHousing allowances and expenses related to company by national and local governmentsHousing allowances and expenses related to company-rented houses or apartment buildingsSubsidies will amount to 3/4 of expenses eligible for subsidization.

 

Maximum subsidy per enterprise: 2.4 million yen per year.

2. Preferential tax treatment for special zone

Overview
Special Zone for Promoting Investment in Reconstruction of Industry in FukushimaCompanies (from specific type of industries) who contribute to maintaining employment opportunities in reconstruction industry in Fukushima are eligible to apply for special tax measures when they made capital investment or employed disaster victims.

Incentives of local governments for foreign affiliated companies

Prefecture/cityName of subsidies/incentivesIncentives of local governments for foreign-affiliated companies
Fukushima Pref.Subsidy for Investment Support Project for Foreign Corporations Entering into Fukushima Prefecture for BusinessSupport companies in the expenses for incorporation

 

Eligibility: companies in manufacturing, R&D and/or sales for the first time in the fields of pharmaceuticals, medical equipment, renewable energy and/or robotics

 

Subsidy rate: ¾, up to 28m yen

Ibaraki Pref.Subsidy for Foreign Companies Investing in Ibaraki PrefectureSubside expenses for:

Incorporation = 1/2, up to 2m yen

 

Rent = 1/2 of monthly rent x 1 year, maximum 2.4m yen

 

R&D = 1/4, maximum 2m yen

 

Chiba Pref.Office Lease Subsidies for Foreign-Affiliated Companies in Chiba Prefecture1/3 of annual rent and up to 600k yen for small companies and 1.8m yen for large companies.
Office Lease Subsidies for Foreign Affiliates Start-up Centre (FASuC)1/3 of annual rent for 3 years for FASuC

 

Chiba CityFacility Rent Subsidy for Foreign-Affiliated Companies½ of annual rent for 3 years and reducing corporate inhabitant tax by half for 3 years
Tokyo MetropolisOverseas Financial Corporation Business Establishment Subsidy Program½ fees incurred in consultation with experts and personnel recruitment costs

 

Program to Increase Foreign EntrepreneursDeregulation of a “business manager” visa requirement for foreign nationals wishing to start business in Tokyo
Kanagawa Pref.Select Kanagawa 100, Rent Subsidy1/3 of rent for factories, R&D centres or offices

Shizuoka Pref.Office Rent Subsidy for Foreign-Affiliated or Foreign Companies½ of monthly of office rent for a year
Niigata Pref.Subsidy for Office Rent for Foreign-Affiliated Companies1/2 of rent for 3 years
Niigata CityForeign Company Business Promotion Subsidy

 

Registration fees = up to 150,000 yen per company

Rent = 1/2 of monthly rent for 2 years

Niigata City National Strategic Special Zone – Entrepreneurial Incentives for ForeignersDeregulation of a “business manager” visa requirement for foreign nationals wishing to start business in Niigata
Aichi Pref.

Gifu Pref.

Mie Pref.

Nagoya City

GNI Business Start-up Support Program1. Consultation fees and expenses paid for specialists for company registration and visa applications

2. Expenses for personnel recruitment

3. Expenses for brokerage costs of an office

Mie Pref.Subsidy for Foreign Affiliated Enterprises Planning to Establish an Asian Base in Mie

 

 

Subsidizing 20% of depreciable assets invested by foreign-affiliated companies when establishing manufacturing bases
Subsidies for Office RentOffice rent = ½ for 3 years
Kyoto Pref.Subsidy for Foreign Affiliated Enterprises planning to establish in KyotoSubsidizing registration fees
Osaka Pref.Osaka Prefecture’s Subsidies for Investment Promotion (Subsidy for Foreign-affiliated Companies)Subsidizing 5% of investment on building and capital goods

 

Office rent = 1/3

 

O-BIC Support Program for Foreign CompaniesSubsidizing expenses for:

Registration = up to 100,000 yen per company

 

Acquisition of resident status = up to 50,000 yen per company

Hyogo Pref.Tax Incentives1/3 reduction of corporate enterprise tax

 

Subsidies for Office Rent

 

Office rent = ½ for 3 years
Subsidies for New Employment

 

Subsidies for new employment : 300,000 yen/person
Subsidies for the Costs of Establishing a Japanese HeadquartersSubsidizing 1/2 of cost of market research and corporate registration

 

Kobe CityRental Assistance for Overseas Corporations and Foreign-Affiliated FirmsHyogo Prefecture and Kobe city in partnership:

Office rent = ½ for 3 years

 

Kobe city/additional subsidies:

Office rent = ¼ for 3 years

Fukuoka Pref.Subsidy for Visit to FukuokaSubsiding portion of travel expenses for companies in fields of automobiles, IT, semiconductors, biotechnology, environment and robots which are considering opening in Fukuoka prefecture.
Incentives to Encourage Establishment of its Subsidiary in JapanRegistration fee = ½
Fukuoka CityBusiness Establishment Support Programs in Fukuoka City (for Foreign and Foreign Affiliated Enterprises)Office rent = ¼ for a year or two based on the size

 

New employment = 500,000 yen/person for citizens of Fukuoka City

 

Cost for marketing research, interpretation fees, obtaining approvals and registering for licenses, or cost of recruiting employees = 1/2

Office and Residential Rent Subsidy Program for Foreign Start-ups

 

Rent = ½ for a year
Start-up Visa (Entrepreneurial Incentives for Foreigners)Deregulation of a “business manager” visa requirement for foreign nationals wishing to start business in Fukuoka City.
Kumamoto Pref.Substantial incentives to support the operation after the establishment in Kumamoto.Promoting Establishment of Business Facilities:

– Up to 5billion yen

–  Eligibility: Investing 300m yen more, and hiring 10 new employees or more.

 

Promoting Establishment of Industry Support Service Businesses:

– Up to 500million yen

– Eligibility: Investing 30million yen or more, and hiring 50 new employees or more.

Summary

Japan is embracing international cooperation by creating more incentives for foreign businesses, especially small and middle enterprises to invest in the country. There are both nation-wide and local initiatives and subsidies aiming at facilitation of the market entry for foreign-bourne companies in Japan. Depending on the region and type of business one can choose from a wide variety of options to set the business up and keep it running, especially during the initial period of operations.

Japan Finance Corporation and Government Support FAQ

To sum up, what kind of incentives are there?

The main categories of incentives are tax deductions, different subsidies for companies operating outside major cities, and faster visa processing or special conditions for valued professionals. You can check available option by prefecture/city, by type of business or by one’s skills.

What are National Strategic Special Zones?

These are zones that promote deregulation under Abenomics.

What institution is in charge of these incentives?

There is no single institution because many incentives are tied to local governments. However, Japan External Trade Organization (JETRO) keeps tabs on all of them and can provide you with initial information about available options on its website.

As a business owner how do I take my business to Japan?

Whether you plan to go as a starup and apply for relevant subsidies or as a mature corporation, we encourage you to take a look at incorporation and visa requirements first.

How many points do I need to qualify for the HSFP visa?

You need a total of 70 points to qualify as a highly-skilled foreign professional. You can earn points based on a list of criteria including educational background, training, annual salary, and age.