This is a translation of the Japanese original. The Japanese version and the official Japanese statistics are authoritative; all figures are for Japan.
"What share of sales is a normal level of expenses?" has an answer in official statistics. The Statistics Bureau's Survey of Unincorporated Enterprises (2025 survey, 2024 results, about 40,000 sole proprietors) shows that the average sole proprietor had sales of ¥13.99 million, an expense ratio of 84.4% and an operating margin of 15.6%. It varies widely by industry: 93% of sales goes to expenses in wholesale and retail, 89% in lodging and food service, 80% in construction and 67% in professional services[Statistics Bureau, 2025 Survey of Unincorporated Enterprises, summary (PDF, in Japanese)].
Tax law, however, has no "standard expense ratio by industry". Necessary expenses are calculated from what you actually paid, with only two exceptions: the special deduction for homeworkers and similar workers (¥690,000 from the 2026 tax year) and the deemed expenses for doctors' public health insurance income. Use the statistical ratios as a yardstick for where your own return sits relative to your peers.
In short: sole proprietors' expense ratios run from 69% to 93% by industry, averaging 84%
| Industry (major group) | Annual sales per business | Cost of sales | Wages | Operating expenses | Expense ratio | Operating margin | After family-employee pay |
|---|---|---|---|---|---|---|---|
| All industries | ¥13.99M | 42.9% | 9.3% | 32.2% | 84.4% | 15.6% | 11.2% |
| Construction | ¥14.74M | 33.3% | 7.8% | 39.3% | 80.4% | 19.6% | 13.9% |
| Manufacturing | ¥10.96M | 29.0% | 11.3% | 38.2% | 78.5% | 21.5% | 13.3% |
| Wholesale and retail | ¥28.25M | 66.8% | 6.3% | 20.2% | 93.3% | 6.7% | 3.9% |
| Lodging and food service | ¥11.03M | 41.5% | 11.3% | 36.6% | 89.4% | 10.6% | 4.7% |
| Personal services and amusement | ¥5.30M | 15.9% | 11.7% | 45.7% | 73.3% | 26.7% | 19.5% |
| Other services | ¥10.33M | 8.2% | 14.2% | 47.0% | 69.4% | 30.6% | 25.6% |
Our calculation from table 1 of the Statistics Bureau's 2025 Survey of Unincorporated Enterprises (per business, including consumption tax, averages)[e-Stat, table 1 by major industry group]. Expense ratio = (cost of sales + operating costs) ÷ sales. Operating profit = sales − cost of sales − operating costs, and includes the owner's own income and pay to family employees (before the blue-return special deduction). Agriculture, forestry and fisheries, hospitals and clinics, bars and domestic services are outside the survey.
An operating margin of 15.6% does not mean 15.6% of sales ends up in the owner's pocket. Family-employee pay (4.4% of sales on average), the blue-return deduction, social insurance and taxes still come out. These are averages, pulled up by larger businesses; medians are not published.
In more detail: specialty construction 78%, food retail 95%, professional services 67%, transport 73%
Within each major group, the presence of purchases and the weight of labour costs drive the spread. The main medium groups are below.
| Industry (medium group) | Annual sales per business | Expense ratio | Operating margin |
|---|---|---|---|
| General construction | ¥17.54M | 84.4% | 15.6% |
| Specialty trades (carpentry, plastering, interiors) | ¥12.94M | 78.0% | 22.0% |
| Equipment installation (electrical, plumbing) | ¥14.44M | 77.4% | 22.6% |
| Food manufacturing | ¥15.08M | 86.1% | 13.9% |
| Metal products | ¥12.50M | 75.9% | 24.1% |
| Machinery and equipment | ¥12.24M | 73.8% | 26.2% |
| Wholesale | ¥33.73M | 91.8% | 8.2% |
| Food and beverage retail | ¥48.16M | 95.2% | 4.8% |
| Clothing and other retail | ¥15.49M | 90.3% | 9.7% |
| Lodging | ¥8.50M | 92.7% | 7.3% |
| Food service | ¥11.27M | 89.2% | 10.8% |
| Personal services (hair, beauty, laundry) | ¥4.97M | 71.6% | 28.5% |
| Transport | ¥8.78M | 72.6% | 27.4% |
| Real estate transactions, leasing and management | ¥8.02M | 63.1% | 36.9% |
| Professional services (licensed professionals, design, consulting) | ¥22.38M | 66.9% | 33.1% |
| Technical services (design, surveying) | ¥12.33M | 69.1% | 30.9% |
| Education outside schools (cram schools, classes) | ¥3.89M | 80.2% | 19.8% |
| Health services excluding hospitals and clinics (osteopathy, acupuncture) | ¥6.58M | 68.9% | 31.1% |
| Automobile repair | ¥13.03M | 84.1% | 15.9% |
Our calculation from table 2 of the same survey (by medium industry group)[e-Stat, table 2 by medium industry group].
If your own ratio is more than 10 points above or below these figures, be ready to say why. Common reasons: heavy subcontracting (construction), an expensive location (food service), a year with equipment purchases (depreciation), or a home used as an office with apportioned costs (services). How to document apportionment is in what share of home costs is reasonable to apportion.
What the expenses consist of: cost of sales 43%, wages 9%, operating expenses 32% overall, with different heavy items by industry
The breakdown reveals each industry's character. Of the 32.2% of operating expenses across all industries, depreciation is 3.2%, rent 2.9%, subcontracting 2.9%, taxes and dues 2.3%, insurance 0.9%, welfare 0.6%, interest 0.3%, and the rest is utilities, communications, supplies, travel and so on.
| Industry | Subcontracting | Rent | Depreciation | Wages | Character |
|---|---|---|---|---|---|
| Construction | 15.1% | 0.6% | 2.4% | 7.8% | Subcontracting is the core expense; work is farmed out rather than staffed |
| Manufacturing | 5.7% | 2.2% | 3.4% | 11.3% | Cost of sales 29% plus wages 11%: people more than materials |
| Wholesale and retail | 0.7% | 1.3% | 1.2% | 6.3% | Cost of sales at 67% dominates; everything else is thin |
| Lodging and food service | 0.3% | 5.8% | 3.8% | 11.3% | Rent and labour weigh heavily; margin around 10% |
| Personal services and amusement | 1.0% | 8.3% | 4.6% | 11.7% | Shop rent is the largest fixed cost |
| Other services | 4.2% | 4.2% | 7.1% | 14.2% | Large depreciation on equipment and vehicles |
Shares of sales (table 1 of the same survey).
Compared with companies: a 3.7% operating margin versus 16.3% for sole proprietors, because directors' pay is an expense
In the SME Agency's Basic Survey of Small and Medium Enterprises (final 2025 edition, fiscal 2024 accounts, population of 3.09 million businesses), companies' operating margin is 3.7% and unincorporated businesses' is 16.3%. Companies book the owner's director's pay as a labour cost, while sole proprietors keep their own income inside profit; it is not a difference in profitability[e-Stat, Basic Survey of SMEs 2025 final, sales and operating expenses by industry and size].
| Industry | Unincorporated: cost of sales | Unincorporated: SG&A | Unincorporated: margin | Companies (5 or fewer staff): ordinary margin | Companies (all): ordinary margin |
|---|---|---|---|---|---|
| All | 45.8% | 37.9% | 16.3% | 4.1% | 4.4% |
| Construction | 45.5% | 34.2% | 20.4% | 4.4% | 5.7% |
| Manufacturing | 33.8% | 42.8% | 23.5% | 3.0% | 5.0% |
| Information and communications | 16.5% | 53.6% | 29.9% | 4.1% | 6.3% |
| Wholesale | 73.7% | 17.5% | 8.7% | 2.0% | 2.7% |
| Retail | 64.9% | 27.5% | 7.6% | 1.9% | 2.6% |
| Lodging and food service | 38.9% | 45.4% | 15.7% | 1.5% | 4.3% |
| Professional and technical services | 6.6% | 59.5% | 33.9% | 16.2% | 13.0% |
| Real estate and leasing | 8.1% | 55.8% | 36.0% | 9.4% | 9.0% |
Our calculation dividing aggregate figures by sales. Unincorporated margins are before family-employee pay; company ordinary margins are after directors' pay.
This gap is the starting point for "how incorporating changes take-home". Company margins move with how much the director is paid, so company statistics look low. The threshold is discussed in when a sole proprietor should incorporate. Japan Finance Corporation's survey of small-company indicators (its borrowers, companies with under 50 staff) shows ordinary margins of profitable firms at 4.8% in construction, 5.7% in manufacturing, 3.5% in wholesale and retail, 5.3% in food and lodging and 7.7% in services, which is roughly what lenders expect[Japan Finance Corporation, survey of small-company management indicators (in Japanese)].
Tax law has no "standard expense ratio by industry": the only exceptions are the ¥690,000 homeworker deduction and doctors' insured income
You may hear that "our trade can just file at an expense ratio of X%". The National Tax Agency publishes no such ratios. Business income is total revenue minus necessary expenses actually incurred[NTA, No. 1350 taxation of business income (in Japanese)][NTA, No. 2210 basics of necessary expenses (in Japanese)]. Deemed expenses are allowed by law in two cases only.
- Special deduction for homeworkers and similar: piece-workers at home, sales agents, bill collectors, meter readers and people who continuously provide services to a specific client can deduct ¥690,000 from the 2026 tax year (¥650,000 for 2025, ¥550,000 for 2020 to 2024) even if actual expenses are lower. Not available if salary income is ¥690,000 or more[NTA, No. 1810 special deduction for homeworkers (in Japanese)].
- Deemed expenses on doctors' and dentists' public insurance income: with insured income of ¥50 million or less (total income ¥70 million or less), 72%, 70%, 62% or 57% of the income can be deducted depending on the bracket. This is the only industry-specific deemed ratio in the law, worked through in doctors' insured income is exempt from enterprise tax.
The employment income deduction and the public pension deduction are also "deemed expenses", but they depend on the type of income, not the industry. Side-job miscellaneous income has no industry ratio either; it uses actual expenses (tax returns for side jobs).
The tax office, on the other hand, does use peer ratios. For taxpayers without books, income may be estimated from peers' cost or income ratios ("estimated assessment", Income Tax Act article 156; not applicable to blue-return filers). In selecting audit targets, returns whose expense ratio stands out against the trade are said to draw attention; see how likely a tax audit is. Being away from the average is not itself a problem. Whether you can explain the gap with receipts and apportionment records is what matters.
How to work out your own ratio, and three uses for the statistics
On the blue-return statement, divide "expenses total" by "sales (revenue)" on page 1; on the white-return income statement, use "revenue" and "expenses total". Where the boxes are is in how to fill in the income statement and blue-return statement. When comparing with the statistics, leave family-employee pay and the blue-return deduction out of expenses, since the survey's operating profit is before them.
- Pre-filing check: if your ratio is more than 10 points from your medium group, re-examine that line. For items you are unsure about, see ten grey-area expenses for sole proprietors.
- Choosing simplified consumption tax: the deemed purchase ratios are 90% wholesale, 80% retail, 70% manufacturing, 60% food service, 50% services and 40% real estate. Wages, taxes and dues, insurance and part of depreciation carry no consumption tax, so your taxable-purchase ratio is lower than your expense ratio. Food service, for example, has an 89% expense ratio, but after removing 11% wages and other tax-free items, taxable purchases are typically in the 60s, close to the 60% deemed rate. The step-by-step comparison is in simplified versus standard consumption tax.
- Loan applications and business plans: when you write a margin into a Japan Finance Corporation start-up plan, citing the industry average gives it weight. Profitable companies' ordinary margins of 3 to 8% and sole proprietors' operating margins of 10 to 30% (including the owner's income) are the going rates.
Summary
- The Statistics Bureau's Survey of Unincorporated Enterprises (2024 results) puts sole proprietors' expense ratio at 84.4% overall: wholesale and retail 93.3%, lodging and food 89.4%, construction 80.4%, manufacturing 78.5%, personal services 73.3%, other services 69.4%
- The 15.6% operating margin includes the owner's income and family-employee pay (4.4%); after family pay it is 11.2%
- Companies' operating margin is 3.7% (Basic Survey of SMEs) because directors' pay is an expense, so it cannot be compared directly with the 16.3% for sole proprietors
- Tax law has no industry expense ratio; necessary expenses are actual. The exceptions are the ¥690,000 homeworker deduction (from 2026) and doctors' 72 to 57% on insured income
- Use the statistics as a yardstick for distance from your peers; if you are far off, check the line items and be able to explain why with receipts and apportionment records
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Sources
- Statistics Bureau, "Survey of Unincorporated Enterprises" (in Japanese): 2025 survey summary (published 2 March 2026, PDF), definitions, table 1 (major groups), table 2 (medium groups)
- SME Agency, "Basic Survey of Small and Medium Enterprises, 2025 final (fiscal 2024 accounts)" (e-Stat, published 29 June 2026)
- Japan Finance Corporation Research Institute, "Survey of small-company management indicators" (in Japanese)
- Ministry of Finance, "Financial Statements Statistics of Corporations, fiscal 2025 annual survey" (published 1 September 2026, PDF)
- NTA, No. 1350 "Taxation of business income", No. 2210 "Basics of necessary expenses", No. 1810 "Special deduction for homeworkers", Q&A "Special calculation of income from public health insurance treatment" (in Japanese)
The statistics are averages, per business, including consumption tax. This article is general information based on materials published as of October 2026; for your own return, consult a tax accountant or the tax office.