This is a translation of the Japanese original. The Japanese version is authoritative; figures follow Japanese tax law.
You can start a company in Japan with stated capital of one yen. People still agonise over the number because the amount changes the tax you pay from year one. Set it at 10 million yen or more and you are a consumption-tax payer from your very first fiscal year, and the flat-rate inhabitant tax in Tokyo's 23 wards rises from 70,000 to 180,000 yen a year. Go past 100 million yen and the small-business reliefs fall away. Here is where the steps are, based on National Tax Agency and Tokyo Metropolitan Government sources.
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].
"Under 10 million" and "10 million or less" are not the same
The rule is written as "10 million yen or more is not exempt", so exactly 10 million yen falls on the taxable side. If you are aiming for the exemption you need 9.99 million yen or less. One yen changes the outcome, so be careful with the final digits.
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.
If you register for invoices, this step shrinks
Issuing qualified invoices requires being a taxable business, so registering wipes out the exemption. If your customers are mainly businesses you will often be asked to register, and then capital below 10 million yen does not save you consumption tax. Staying exempt has also become harder to negotiate, because the share a buyer can deduct drops to 70 per cent from October 2026.
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]:
| Capital | 50 employees or fewer | More than 50 |
|---|---|---|
| 10 million yen or less | 70,000 yen/year | 140,000 yen/year |
| Over 10 million to 100 million | 180,000 yen/year | 200,000 yen/year |
| Over 100 million to 1 billion | 290,000 yen/year | 530,000 yen/year |
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.
| Item | 100 million yen or less | Over 100 million |
|---|---|---|
| Corporate tax rate (first 8 million yen of income) | 15% | 23.2% |
| Flat-rate levy (23 wards, 50 staff or fewer) | 70,000–180,000 yen/year | 290,000 yen/year and up |
| Pro-forma (size-based) enterprise tax | Not applicable | Applicable |
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.
Licensed industries
Where a licence is required, a financial-standing test often applies. Whether it is measured on stated capital or net assets differs by scheme, so check the supervising ministry's page for your industry.
The "Business Manager" residence status
For foreign nationals running a company in Japan, the capital requirement has been raised to 30 million yen. See the capital requirement for the Business Manager visa.
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].
| Registration | Calculation | Where the floor ends |
|---|---|---|
| Kabushiki kaisha, incorporation | Capital x 0.7% (minimum 150,000 yen) | About 21.43 million yen |
| Godo kaisha, incorporation | Capital x 0.7% (minimum 60,000 yen) | About 8.57 million yen |
| Capital increase | Increase x 0.7% (minimum 30,000 yen) | About 4.29 million yen |
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.
- List your start-up outlays (equipment, deposits, stock, registration costs)
- Estimate fixed costs until revenue arrives (rent, director's remuneration, social insurance, communications)
- Take three to six months of (1) plus (2) as your floor
- 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
Increasing capital
A shareholders' resolution and a registration. Registration tax is 0.7% of the increase, minimum 30,000 yen. Building capital up once trading is established keeps first-year tax down.
Reducing capital
A special resolution plus creditor-protection procedures (official gazette notice and so on), taking a month or more. "A generous figure just in case" is hard to undo.
The rule of thumb is to start low and increase later. Read it together with when to incorporate.
Frequently asked questions
Q. Is capital of one yen really acceptable?
A. It is legally possible. But you are likely to be balance-sheet insolvent as soon as start-up costs are paid, which can hurt start-up finance applications, corporate bank account opening and credit checks. Tax-wise it makes almost no difference, so decide from the working capital you actually need.
Q. What happens at exactly 10 million yen?
A. Consumption tax treats "10 million yen or more" as not exempt, so exactly 10 million makes you a taxable business from your first year. The flat-rate levy still uses the "10 million or less" band (70,000 yen a year in the 23 wards with 50 staff or fewer), but the consumption-tax test falls on the other side. Use 9.99 million yen or less if you want the exemption.
Q. Does larger capital mean higher registration costs?
A. A kabushiki kaisha pays 0.7% of capital but with a 150,000 yen floor, so up to about 21.43 million yen it is a flat 150,000 yen. A godo kaisha has a 60,000 yen floor, flat up to about 8.57 million yen. Within those ranges, more capital costs nothing extra.
Q. If I register for invoices, does capital stop mattering?
A. For consumption tax, almost. Registering makes you a taxable business even below 10 million yen. But the flat-rate inhabitant tax (70,000 versus 180,000 yen a year in the 23 wards) still depends on capital, so staying under 10 million yen still pays.
Sources
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.
