How Sole Proprietors Can Obtain Permanent Residency

Permanent Residence Applications for Sole Proprietors

The most important points for sole proprietors seeking to obtain Permanent Residence are income and the payment of taxes. In the case of company employees, the employer reports income to the government and taxes are withheld from wages, but sole proprietors must handle all of this themselves.

This page explains the income and tax matters that are critical for sole proprietors when applying for Permanent Residence.

Income of Sole Proprietors

Sole proprietors are required to file a final tax return every year between February and March. By declaring the previous year’s income on the final tax return and submitting it to the tax office, the income amount for that year is finalized.

If You Have Not Filed a Final Tax Return, You Cannot Apply for Permanent Residence

First, as a prerequisite, if you have not filed a final tax return, you are considered to have no income and therefore cannot apply for Permanent Residence. We often receive inquiries asking whether it is acceptable to file all at once later, but if you have not filed a final tax return, you have failed to pay the required taxes at the appropriate time, so filing all at once later will not allow you to obtain Permission for Permanent Residence.

Be sure to file your annual final tax return within the deadline each year.

For Sole Proprietors, Income Is Assessed Based on the Income Amount on the Final Tax Return

Furthermore, for sole proprietors, income is assessed based on the income amount shown on the final tax return. The “income amount” refers to the money remaining after deducting expenses from sales. If you offset your sales with expenses, you will not be able to meet the income requirement even if you actually earn the income required for a Permanent Residence application. As a guideline, you need to retain an income of at least 3 million yen.

In addition, for general foreign nationals applying for Permanent Residence, you must submit taxation certificates for the most recent 5 years, so a sufficient income amount is required for all 5 of those years.

If your income falls below 3 million yen in even one year, it will be difficult to obtain Permission for Permanent Residence. It is necessary to record an income of at least 3 million yen for 5 consecutive years at minimum, so please be careful. Also, reporting an income amount higher than the actual figure for the purpose of a Permanent Residence application constitutes false declaration, so please do not do so.

Payment of Pension and Insurance Premiums

When sole proprietors apply for Permanent Residence, they are required to submit documents showing that pension and insurance premiums have been paid for the most recent 2 years. It is not enough simply to have paid; payments must also have been made at the appropriate time.

Sole proprietors are required to enroll in the National Pension and the National Health Insurance. For this reason, we recommend setting up automatic bank transfer payments to avoid accidentally forgetting to pay.

If your payment is delayed, it will be difficult to obtain permission if you apply for Permanent Residence immediately. We recommend waiting 2 years after the delay before applying without any further late payments.

Be Careful Not to Miss Payment Deadlines

If you pay the National Pension and National Health Insurance using payment slips, be careful not to miss the deadlines. Also, be sure to keep the receipts when you make payments. The receipts show the payment date and serve as documents proving that payments were made at the appropriate time.

Receipts for National Pension and National Health Insurance premiums are difficult to reissue if lost. If you are considering applying for Permanent Residence, be sure to keep them. In the unlikely event of loss, you would need to explain in a written statement, but it is best to have the receipts.

Payment of Resident Tax

Payment of resident tax is divided into two categories: special collection and ordinary collection. Generally, company employees pay through special collection, with the tax withheld from wages, but sole proprietors pay through ordinary collection, directly paying resident tax using payment slips, etc.

With special collection, the tax is withheld from wages each month, so there are no late payments. However, since sole proprietors use ordinary collection, the tax is not paid automatically and they must take the steps to pay it themselves. Please be careful not to accidentally miss payments.

If a payment is delayed, unlike pension and insurance premiums, the payment status for the most recent 5 years (when applying for Permanent Residence from a work-related Status of Residence) is examined, so we recommend applying for Permanent Residence after paying resident tax for 5 years without any delays. Unlike pension and insurance premiums, a 5-year record is required, so even an accidental delay will significantly delay your ability to obtain Permission for Permanent Residence.

For a Permanent Residence application, you are required to submit documents showing that all resident tax payments were made within the deadlines. Be sure to keep these records.

Summary of Permanent Residence Applications for Sole Proprietors

This page has explained the most important points for sole proprietors applying for Permanent Residence: income and taxes. The key points are filing the final tax return by the designated deadline each year and recording an income of at least 3 million yen.

Then, if you make payments of National Pension, National Health Insurance premiums, and resident tax at the appropriate times, and can submit documents proving this (receipts or copies of bankbook entries showing automatic withdrawals), it is possible to obtain Permission for Permanent Residence.

If you are a sole proprietor considering a Permanent Residence application, please feel free to contact our office.