Stated Capital in Japan: Why Firms Stop Below 10 Million Yen

Short answer: most companies start below 10 million yen

There is no single correct figure, but tax law puts two steps in the road: 10 million yen and 100 million yen. Cross a step and your bill rises even in a loss-making year.

Working the other way, a floor can be imposed from outside the tax code: financial requirements for business licences, residence status, and the view taken by lenders and customers. Identify the steps first, then check whether any floor applies to you.

Step 1: 10 million yen decides whether you pay consumption tax in year one

Consumption tax liability is normally judged on taxable sales two years earlier (the base period). A newly formed company has no such period, so the first and second fiscal years are in principle exempt.

The National Tax Agency states the exception plainly: a company whose stated capital at the start of the fiscal year is 10 million yen or more is not exempt, even without a base period[National Tax Agency].

For the second year there are other tests as well (for example one that looks at sales and payroll in the first half of the previous year), so two exempt years are not automatic.

Step 2: 10 million yen also raises the levy you pay even at a loss

The flat-rate portion of corporate inhabitant tax is due every year whether or not you make a profit. The amount is set in bands by capital and headcount. For a company with offices only in Tokyo's 23 wards[Tokyo Metropolitan Government]:

Crossing 10 million yen costs a small company 110,000 yen more every year — 1.1 million yen over a decade — payable even in years with no sales.

Outside the 23 wards you pay the prefectural and municipal portions separately. The banding logic is the same, but amounts are set by local ordinance, so check the page for the municipality where you will register.

Step 3: 100 million yen ends small-business treatment

Most reliefs define a "small or medium-sized company" as one with capital of 100 million yen or less.

The reduced 15 per cent rate applies to the first 8 million yen of income for ordinary companies capitalised at 100 million yen or less. However, for fiscal years beginning on or after 1 April 2025, the rate becomes 17 per cent where income exceeds 1 billion yen[National Tax Agency]. Small capital no longer guarantees the relief if profits are large.

Pro-forma enterprise tax charges on payroll and capital rather than profit, so it applies even at a loss. The scope of covered companies is under review and Tokyo publishes decision flows by effective date, so check before any increase or reduction around the 100 million yen mark.

When the floor is set from outside: licences, visas and lenders

So far these were reasons not to go high. Sometimes you cannot operate at all below a certain figure.

Lenders and customers look at the figure too. A company capitalised at one yen is often balance-sheet insolvent the moment it pays its start-up costs, which can count against you when applying for start-up finance, opening a corporate bank account, or being credit-checked. Look at the cost of setting up a company and your working capital, not just the tax steps.

Registration tax: 0.7% of capital, minimum 150,000 yen

Registration and licence tax on incorporation is 7/1000 of stated capital, subject to a floor of 150,000 yen for a kabushiki kaisha and 60,000 yen for a godo kaisha[National Tax Agency].

So a kabushiki kaisha pays the same 150,000 yen whether its capital is 1 million or 20 million yen. Shrinking capital "to save on registration" achieves nothing within that range.

A practical method: three to six months of running costs

Stated capital is also the cash you put into the company at the start.

1. List your start-up outlays (equipment, deposits, stock, registration costs)
2. Estimate fixed costs until revenue arrives (rent, director's remuneration, social insurance, communications)
3. Take three to six months of (1) plus (2) as your floor
4. If that reaches 10 million yen, decide whether to cap capital at 9.99 million and cover the rest with a director's loan or a later increase

A loan from the owner to the company is not stated capital, so it does not affect the levy or the consumption-tax test. It is the usual way to hold more cash while keeping capital low.

Can you change it later? Increases are easy, reductions are not

The rule of thumb is to start low and increase later. Read it together with when to incorporate.

Summary

• With capital of ¥10,000,000 or more, you are a consumption tax payer from the first fiscal year. To stay exempt, keep it at ¥9,990,000 or less.
• In Tokyo's 23 wards with 50 or fewer employees, the per capita levy is ¥70,000 a year for capital of ¥10,000,000 or less, and ¥180,000 a year above that.
• Above ¥100,000,000, the SME incentives fall away: the 15% reduced rate is no longer available and the company becomes subject to size-based enterprise tax.
• Registration tax is 0.7% of capital. For a kabushiki kaisha it is a flat ¥150,000 up to about ¥21,430,000.
• If in doubt, start small and increase capital later. Loans from directors are not counted as capital and do not affect the per capita levy or consumption tax tests.

Sources

• National Tax Agency No.6501 Exemption from consumption tax liability (in Japanese)
• National Tax Agency No.5759 Corporate tax rates (in Japanese)
• National Tax Agency No.7191 Registration and licence tax table (in Japanese)
• Tokyo Metropolitan Government, corporate enterprise and inhabitant tax (in Japanese)

Rates and requirements change. Figures were checked against the official sources above on 20 September 2026. For your own filing, consult a tax accountant or the relevant tax office.