Hi all.
I'm a little confused about the difference between being a contractor vs being self-employed vs being a sole proprietor in Japan.
For the past ten years, I've been working on a gyomu-itaku 業務委託 contract, so I'm a contractor. I pay my own pension, health insurance and city taxes and do my own blue form tax returns. I've always been this since I came to Japan, and as far as I remember, I didn't officially register as self-employed or anything.
Does this mean I fall into the category of being self-employed? Is this the same as being a sole proprietor? Both seem to use the same Japanese term Kojin-Jigyo-Nushi 個人事業主.
However, many websites talk about registering your sole proprietorship, which I have never done. Does this even apply to me as a contractor?
Now I've got my Permanent Residency, I'm planning to start up a little business of my own to run alongside my regular contract work to diversify income streams. But do I need to register anything as I am already set up for doing my own taxes?
I'm a bit confused by it, so thank you for any knowledge on this.
Cheers.
Contractor vs Self-Employed vs Sole Proprietor
Re: Contractor vs Self-Employed vs Sole Proprietor
Just bumping this post up in case anyone has any useful info.
Cheers.
Cheers.
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imaginatorium
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Re: Contractor vs Self-Employed vs Sole Proprietor
This is quite old, and I do not have any "expert" advice, but my own experience is of being self-employed / 個人事業 for 30 years. First the words: 個人 means "individual (person)", and 事業 means "business", so this is a "sole proprietorship". Put 主 on the end and it refers to the "sole proprietor". (Funny how suffixes can operate in reverse directions like that.)
I have never "registered" anywhere for anything, except that I file taxes as an individual. I have also filed taxes in the UK for (mostly part-time) self-employment, and apart from curious details, there is very little difference between the two systems; the term "self-employed" is obviously a bit of legal wordplay (is there legal anything else?) with no real meaning, except it has become the common term.
I do not know anything specific about "contractor", but I used to be a freelance translator; as such I had various contracts with translation companies. At one stage one offered me a fixed-rate contract (minimum n0-man per month); I did not take it, but if I had I do not think it would have made any difference in terms of tax status.
I have never "registered" anywhere for anything, except that I file taxes as an individual. I have also filed taxes in the UK for (mostly part-time) self-employment, and apart from curious details, there is very little difference between the two systems; the term "self-employed" is obviously a bit of legal wordplay (is there legal anything else?) with no real meaning, except it has become the common term.
I do not know anything specific about "contractor", but I used to be a freelance translator; as such I had various contracts with translation companies. At one stage one offered me a fixed-rate contract (minimum n0-man per month); I did not take it, but if I had I do not think it would have made any difference in terms of tax status.
Re: Contractor vs Self-Employed vs Sole Proprietor
I asked about this at the tax office today. It's been on my to-do list for a while! Was helped by a lovely gentleman who was knowledgable, friendly and patient. The more I deal with the tax office in Japan, the more I like them. HMRC have a lot to learn!
In answer to my question above, he said it doesn't matter at all. The difference between being a contractor, being self-employed, being a sole proprietor and being a freelancer has no bearing on doing your taxes and the tax office isn't interested at all about these terms. There are basically only two types of people with income the tax office needs to deal with - (A) those employed by a company (seishain) (the company does your tax return for you) and (B) those that aren't (you do your tax return yourself). It doesn't matter what you are (contractor, freelancer etc) if you fall in the (B) category.
I asked about registering as a sole proprietor, as I have read several times about doing that. Am I registered as a sole proprietor? He said yes of course I am registered with the tax office because I submit my own tax returns every year, but registering as a sole proprietor isn't really a formal "thing" as the tax office doesn't care about that term, as mentioned above. When you do your first tax return, you are essentially registering with the tax office that you are in the (B) category. Or you can register in advance of doing your first tax return so they send you the tax return forms around this time of year. So it's less formalised than it seems to be in the UK - you don't have a company number or anything. You can choose how your name is written too, so I don't have my middle name registered.
I asked about generating other income. I am now a "contractor" and I want to start a small side business. He said I don't need to do anything as it all falls in the (B) category. As long as it all goes on my tax return in the right place, they don't care about the nature of how it's generated.
I also asked a few extra questions. Should I have a separate bank account for my "business" and my "personal" money. He said it's a good idea but it certainly isn't a tax office requirement and they don't care about that.
Also asked about charging clients consumption tax in my side business. He said I can just say it's included in the price or I can add it on the price. He said I don't really need to worry too much about it until I earn more than 10 million yen on that (I wish).
So, in summary, it's annoyingly simple and I have overthought it! And in essence, I don't need to do anything different to what I'm already doing. Posting just in case this is useful for anyone else, but the usual caveats apply - this is what one person at the tax office said and it's my understanding of what he said.
In answer to my question above, he said it doesn't matter at all. The difference between being a contractor, being self-employed, being a sole proprietor and being a freelancer has no bearing on doing your taxes and the tax office isn't interested at all about these terms. There are basically only two types of people with income the tax office needs to deal with - (A) those employed by a company (seishain) (the company does your tax return for you) and (B) those that aren't (you do your tax return yourself). It doesn't matter what you are (contractor, freelancer etc) if you fall in the (B) category.
I asked about registering as a sole proprietor, as I have read several times about doing that. Am I registered as a sole proprietor? He said yes of course I am registered with the tax office because I submit my own tax returns every year, but registering as a sole proprietor isn't really a formal "thing" as the tax office doesn't care about that term, as mentioned above. When you do your first tax return, you are essentially registering with the tax office that you are in the (B) category. Or you can register in advance of doing your first tax return so they send you the tax return forms around this time of year. So it's less formalised than it seems to be in the UK - you don't have a company number or anything. You can choose how your name is written too, so I don't have my middle name registered.
I asked about generating other income. I am now a "contractor" and I want to start a small side business. He said I don't need to do anything as it all falls in the (B) category. As long as it all goes on my tax return in the right place, they don't care about the nature of how it's generated.
I also asked a few extra questions. Should I have a separate bank account for my "business" and my "personal" money. He said it's a good idea but it certainly isn't a tax office requirement and they don't care about that.
Also asked about charging clients consumption tax in my side business. He said I can just say it's included in the price or I can add it on the price. He said I don't really need to worry too much about it until I earn more than 10 million yen on that (I wish).
So, in summary, it's annoyingly simple and I have overthought it! And in essence, I don't need to do anything different to what I'm already doing. Posting just in case this is useful for anyone else, but the usual caveats apply - this is what one person at the tax office said and it's my understanding of what he said.
Re: Contractor vs Self-Employed vs Sole Proprietor
Thank you for taking the time to talk to the tax office and get this information.Gareth wrote: ↑Tue Feb 01, 2022 11:21 am So, in summary, it's annoyingly simple and I have overthought it! And in essence, I don't need to do anything different to what I'm already doing. Posting just in case this is useful for anyone else, but the usual caveats apply - this is what one person at the tax office said and it's my understanding of what he said.
This is more simple than I thought too. I do wonder how working remotely for a foreign company ... will that change anything? From the feedback you got, as long as you are in category B and make under 10M JPY, you can file as if you worked at a domestic Japanese firm/clients.
Once you get over that 10M JPY threshold and then require more robust consumption tax reporting, it would complicate a bit.
I do think there are some benefits to being a registered company, related to investment/pension contributions? Someone smarter than me would need to confirm that.
Re: Contractor vs Self-Employed vs Sole Proprietor
I asked if I should make myself a proper limited company. He said I really don't need to bother based on what I told him. That's good enough for me.
Will happily cross that bridge when I get to 10M!vapid wrote: ↑Wed Feb 02, 2022 6:34 am I do wonder how working remotely for a foreign company ... will that change anything? From the feedback you got, as long as you are in category B and make under 10M JPY, you can file as if you worked at a domestic Japanese firm/clients.
Once you get over that 10M JPY threshold and then require more robust consumption tax reporting, it would complicate a bit.
Glad the post was of some use to you. Cheers!