Sole proprietorship or company in Japan: tax comparison
Taxes and contributions for a sole proprietor under each available system and for your own company, for a resident of the chosen country with the same profit.
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Form
Sole proprietor, blue return
Sole proprietor個人事業主（青色申告・65万円控除）
Profit minus ¥650,000 is subject to income tax at 5–45% (+2.1%) and 10% inhabitant tax; on top, 5% enterprise tax on profit above ¥2.9 million, National Health Insurance and the National Pension.
Conditions
Blue-return approval is required: apply by 15 March (or within 2 months of starting), keep double-entry books and file via e-Tax (or keep electronic books). Without e-Tax the deduction is ¥550,000.
Consumption tax applies if sales two years earlier exceeded ¥10 million or you register as an invoice issuer; it is not included in the calculation.
The company pays corporate tax of 15% up to ¥8 million and 23.2% above, local corporate tax, corporate inhabitant tax and enterprise tax (together roughly 22–38%). The owner declares dividends with other income at progressive rates with the dividend credit and also pays health insurance and the pension.
Conditions
Dividends from an unlisted company cannot be taxed separately at 20.315%: they are declared under aggregate taxation (the 20.42% withheld is credited).
An owner without salary is not in employees' pension and health insurance, so they pay the National Pension and National Health Insurance themselves — even if profit stays in the company.
The flat inhabitant tax of ¥70,000 is due even with a loss. Consumption tax as for sole proprietors (not included); a new company with capital under ¥10 million is usually exempt for 2 years unless it registers for invoices.
Business activity: IT and consulting services for business clients
One owner, resident of Japan, under 40 (no long-term care premium), no employees, no other income, no children, full year 2026; Tokyo, 23 special wards.
Inhabitant tax and health insurance at 2026 rates are applied to 2026 income (in practice they are paid the following year on this year's income). Prior-year enterprise and local taxes are not deducted as expenses.
For the company: capital up to ¥10 million, financial year = calendar 2026, the owner takes no salary; profit after tax is either paid out in full as dividends or kept in the company.
Not included: consumption tax, the ¥1,000 forest environment tax, the defence special corporate tax (financial years from 1 Apr 2026; not yet applicable with a calendar-2026 financial year).
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