Tokyo Special Economic Zone – Part 1 Advantages for Entrepreneur

Tokyo Special Economic Zone – Part 1 Advantages for Entrepreneur

From our previous posts regarding starting business in Japan, we have highlighted the main difficulties that entrepreneurs face when they attempt to set up a company in Japan.

On January 29, 2016, the Program to Increase Foreign Entrepreneurs was officially launched by the Tokyo Metropolitan Government (TMG). Under this program, prospective foreign entrepreneurs who meet specific criteria are eligible for a 6-month preliminary business manager visa.

This 6-month visa can be granted before the incorporation of company which provides the eligible person better access and resources in completing the procedures required.

The eligible person’s progress is monitored and assessed by TMG and failure to finish incorporation and operate the business would result in non-renewal of visa once the initial 6-months visa expires.

The usual conditions required for business manager visa are still the same for the eligible person, however, having a 6-months in Japan have various advantages for entrepreneurs who don’t have a Japanese collaborator.

Entrepreneurs who wants to be cost-efficient can now perform various tasks themselves without the need to hire an agent. For example:

Opening the Company’s bank account

Ordering the Company stamp

Securing the Company premise

Market research and promotions

The program has been expanded since its launch to cover the whole of the Tokyo area and well as the establishment of the Tokyo One Stop Business Establishment Centre.

The Business Development Center Tokyo (BDCT) and the Tokyo One-Stop Business Establishment Center both provide resources and support to entrepreneurs on matters such as labour, health and pension insurance, immigration and taxes.

As of October 2016, the Tokyo One-Stop Business Establishment Centre also has a notary service that provides certification of Articles of Incorporation.

Although this program is still under development, it is a good starting point for foreigners who would like to set up business in Tokyo, especially those who already living in Tokyo.

http://www.seisakukikaku.metro.tokyo.jp/invest_tokyo/english/invest-tokyo/fhr.html

“My Number” system: the basics

 

  1. Scope of application for My Number

The My Number system requires every resident in Japan to be issued with a 12-digit Individual Number. Individual Numbers are allocated on a permanent basis (i.e. they remain allocated to that individual for their lifetime) and will be used for administrative procedures related to social security, taxation, and disaster response. For example, such tasks might include procedures related to unemployment and medical insurance, receipt of welfare benefits, and filing income tax returns. Residents can also apply for a card with their Individual Number on it (an “Individual Number Card”).

Private businesses, within the scope of the law, will also handle the Individual Numbers, for example for the purposes of withholding tax for their employees.

  1. Timeline

The system will become effective on October 5th, with Individual Numbers beginning to be used for applicable administrative procedures from January 2016.

2015 October 2016
System Notification of Identification Numbers to residents Deliver Individual Number Cards to residents
Utilization of Individual Number system
Entrepreneurs Preparation for implementation of the system Can obtain in bulk
May obtain Individual Numbers from employees etc. Execution (use Individual Numbers in necessary procedures e.g. for withholding tax)

 

  1. Relationship with Personal Information Protection Acts

This system is established under the Act on the Use of Numbers to Identify a Specific Individual in the Administrative Procedure (an English translation of which can be found on the website of the Cabinet Secretary here: http://www.cas.go.jp/jp/seisaku/bangoseido/pdf/en3.pdf).

In the first Article of that Act, it specifies that its purposes are to provide special provisions for the Act on the Protection of Personal Information Held by Administrative Organs, the Act on the Protection of Personal Information Held by Incorporated Administrative Agencies, and the Act on the Protection of Personal Information so that Specific Personal Information, such as Individual Numbers, is handled safely and appropriately, as well as efficiently.

Note that inappropriate obtaining and use of an Individual Number are punishable acts.

  1. Goals of the My Number system

The Government hopes that the implementation of the My Number system will:

  • Improve administrative efficiency, by saving time and labor to compare various types of information in administrative agencies,
  • Enhance public convenience, by simplifying administrative procedures and the number of documents required to be submitted by residents, and
  • Contribute to a fairer and more just society, by helping to prevent tax evasion and unfair receipt of benefits, as well as facilitate the proper provision of assistance to those who are truly eligible.

 

  1. Guidelines

The Specific Personal Information Protection Commission has issued guidelines in Japanese here: http://www.ppc.go.jp/legal/policy/

For a brief summary of the new system in English, please see the website of the Cabinet Secretary here: http://www.cas.go.jp/jp/seisaku/bangoseido/pdf/en1.pdf

Foreign entrepreneurs in Japan

One of leading foreign entrepreneurs is Gengo.

http://gengo.com/ja/?utm_source=GOJP&utm_medium=CPC&utm_campaign=Brand&gclid=CMaQ-I_jg8YCFREDvAodUUIAzA

However, please note that there are many foreign entrepreneurs in Japan.

The founder of Softbrain, a listed company in Tokyo Stock Exchange, is Chinese.

http://ja.wikipedia.org/wiki/%E5%AE%8B%E6%96%87%E6%B4%B2

Thus, I still believe that even if you cannot find any solutions to raise the fund due to the economic circumstance of your home country you might find the solution in Japan and can have listed companies. There are many obstacles for you to find exits such as IPO, but it is worth to try.

The Visa Headache

For foreign investors in Japan, one big headache is obtaining a visa.

To obtain a visa based on a Business Manager Status of Residence, investors usually need to invest 5 million yen, which is huge money. If you have a company in your home country, you may consider an alternative choice such as the Specialist in International Service or Intra-company Transferee Visa.

Here, for your reference, is a public notice issued by the Ministry of Justice, regarding the Business Manager, Specialist in International Service or Intra-company Transferee.

http://www.moj.go.jp/nyuukokukanri/kouhou/nyukan_nyukan20.html

  • Business Manager

A person obtaining Business Manager status shall substantially manage and administrate the business activity, or engage in such management. To obtain such a visa one of the following criteria must be met:

  • The person shall employ at least 2 full-time employees in Japan (excluding foreign nationals residing in Japan under the statuses of residence listed in Appended Table I of the Immigration Control Act) in addition to those who operate and/or manage the business.
  • The amount of capital or investment shall be 5 million yen.
  • Cases similar to the above

You do not need to invest more than 5 million yen each year. Once you invest the said amount, as long as you keep the said amount without recouping it later, you can continue the business.

In cases where the activities seem to overlap between that of Business Manger, Engineer and Humanities and International Services the Business Manager status should prevail. If the former does not cover such activities, only then will the latter be applicable.

When you are promoted to become a business manager, you are not immediately required to change your visa status. However, you might need to change status soon.

2)  Specialist in International Service or Intra-company Transferee

Of course, as it is mentioned above, if the Business Manager status is applicable, you have no choice but to apply for that status.

But if you have no intention to substantially manage and administrate the business activity, or engage in such management, you might choose the Intra-company Transferee or Specialist in International Services status as an employee etc.

The difference between Specialist in International Service or Intra-company Transferee  is that Intra-company Transferee is applicable to activities during the specific term in which the person is dispatched and he/she cannot provide services except in the specific business location where he/she is transferred.

A contractual relationship between a public or private organization in Japan and an applicant is not limited to an employment contract but also to a contract of mandate, service agreement etc.

However, such a  contract shall have the characteristic of continuing the activity.

3) If you are interested in the management of business, you do not need to look at this option. However, if you consider the development of business in the future, the information above might be helpful.

Changing the environment in Japan and creating an ecosystem for venture

  1. Currently, our atmosphere in Japan is not inducive to enabling people to take risks. People are afraid to take risks in order to pave the way against a difficult future such as aging problems and competition with emerging countries.
  2. My purpose is to help create an ecosystem for venture in Japan. Regardless of nationality, we should accommodate ventures to boost innovations in Japan.
  3. Israel is one of the leading innovative and risk-taking countries in the world. We believe mutual collaboration between Japan and Israel may facilitate healthy and peaceful innovation for the World, which may eventually contribute to World peace.

Last night I met with Mr. Boaz Golany, Vice President at Technion Israel Institute of Technology. Mr. Golany is currently in Japan and is working to create a Technion Open Innovation Center at the University of Kyoto. I enjoyed our engaging conversation and hope that we might be able to collaborate to achieve my above aims. According to him, in order to boost startups, he offered the following points:

  • Set deadlines
  • Respect team work
  • Take and respect leadership
  • Work with limited resources
  • Enjoy the uncertainty
  • Take risks

It was really meaningful for me to meet with him.

IMG_0891

“My number” system will be effective soon.

1)Though the law itself seems to be very strict, I am wondering what will happen if companies located in a foreign country try to steal  Japanese “my number” using some fraudulent website.

2)Private sector’s support is necessary but it seems not many in the private sector are willing to provide the Government with such support. The use by private sector is very important. I am wondering whether the government thinks about the use of the private sector in a detailed manner.

I will review this law more closely about these two issues and if possible I will make additional comment.

http://www.cas.go.jp/jp/seisaku/bangoseido/english.html

An era where “law firms invest in ventures” comes to Japan

As American law firms are used to investing in ventures, it is not surprising but one of leading venture law firms AZX law firm published the news that they invested in a venture. In this sense, I believe many Japanese law firms will provide the same service soon.

http://jp.techcrunch.com/2015/05/19/150619-bizer-azx/

Israeli people

Israel is one of the most interesting and innovative countries in the world, with regards to venture. The population is only 8 million. However, there are 1 million entrepreneurs. The investment amount per person is 10 times as high as that in Japan.

Of course, one of the purpose of this blog is to help foreign people to succeed in Japan. However, another purpose is to bridge venture oriented countries such as Israel and Japan.

http://www2.deloitte.com/global/en/pages/technology-media-and-telecommunications/articles/technology-fast-500-emea.html

I will visit there soon.

Venture Capitals in Japan

(Legal issues)

We sometimes use Limited Partnerships for Investment to establish venture capital, though we have other forms such as the joint stock company, which is often used for the said purpose.

Although the translation in the following site is not updated and people need to check amendments, it might be useful for your reference.

Limited Partnership Act for Investment:

http://www.japaneselawtranslation.go.jp/law/detail/?id=96&vm=04&re=01&new=1

Enforcement Order of the Limited Partnership Act for Investment

http://www.japaneselawtranslation.go.jp/law/detail/?id=154&vm=04&re=01&new=1

You may find a model contract was provided by Ministry of Economy, Trade and Industry, at the following link:

http://www.meti.go.jp/policy/economy/keiei_innovation/sangyokinyu/lps_model2211.pdf

(list of Venture Capitals and Accelerators)

The following site provides a list of venture capitals in Japan.

http://www.turnyourideasintoreality.com/2013/12/vcinjapan/

For your reference, the Accelerators are as follows.

http://www.turnyourideasintoreality.com/2014/01/vcs_for_seedstartups/