This article is written by a Japanese local.
“To secure the company’s profits, I’ll set my executive compensation to 100,000 JPY per month.”
This is a fatal misunderstanding easily made by foreign entrepreneurs who have just established a corporation in Japan. Even if it is legal from a tax perspective, during the Immigration Services Agency’s screening, this extremely low setting triggers visa denials or rejection of renewals.
This article explains the objective screening criteria for the “ability to maintain a livelihood,” which is essential to keep the Business Manager Visa, and the logical procedure for setting executive compensation to balance corporate and personal cash flows.
1. The Absolute Relationship Between Compensation and the “Ability to Maintain a Livelihood”
[Summary] Immigration strictly screens not only corporate performance but also the independent living foundation of the business owner.
In the Business Manager Visa screening, Immigration does not only check “business continuity.” Equal importance is placed on the “ability to maintain a livelihood”—whether the business owner can live stably in Japan.
If your executive compensation is 100,000 JPY per month, the examiner will harbor a strong suspicion: “How are they paying rent and living in Japan on this amount? Are they secretly engaging in activities outside their visa status (illegal labor) to earn living expenses?” The premise of the Business Manager Visa is that you can make an independent living. A compensation setting that causes personal bankruptcy negates the credibility of the business plan itself.
2. The Practical Defense Line: “250,000 to 300,000 JPY” per Month
[Summary] Although there is no legal minimum, a setting of 250,000 to 300,000 JPY or more per month is strongly recommended practically.
Under the Immigration Act, there is no explicit minimum stating “executive compensation must be at least this much.” However, as a practical safe zone (objective defense line), it is recommended to set it to “at least 250,000 to 300,000 JPY per month or more.”
This is equivalent to or higher than the starting salary of a Japanese university graduate. Especially now that the law requires a business scale of “30 million JPY capital and at least 1 full-time employee,” it is unnatural for the representative’s compensation to be lower than their own employees’ salaries or general starting salaries. This figure serves as a crucial indicator to persuade examiners that it is a “rational minimum amount to live independently in Japan.”
3. [Planned Design] The Trap of Social Insurance and “Net Income”
[Summary] Do not look at the gross amount; calculate whether you can live on the “net income.” Enrollment in social insurance is an absolute obligation.
When deciding the compensation amount, you must not look only at the gross amount. Japanese corporations, even those with only one manager, are legally required to enroll in Social Insurance (Health Insurance and Welfare Pension).
| Executive Compensation (Gross) | Social Insurance & Tax Deductions (Approx.) | Personal Net Income |
|---|---|---|
| 250,000 JPY/month | Approx. 40,000 – 50,000 JPY | Approx. 200,000 JPY |
| 300,000 JPY/month | Approx. 50,000 – 60,000 JPY | Approx. 240,000 JPY |
Immigration strictly checks whether you can cover rent and living expenses with this “net income after deductions.” Furthermore, failure to pay social insurance premiums results in a fatal negative evaluation during visa renewals. Therefore, you must logically calculate backward to set an amount that “the corporation can afford including the company’s share of social insurance, while you can still live on it personally.”
4. Practical Q&A (Compensation Changes and Proving Deficits)
Q. Paying 250,000 JPY per month in the first year of establishment puts the corporation in a deficit. What should I do?
A. It is somewhat tolerated in the screening if the first term falls into a deficit due to heavy initial investments, but you are not exempt from proving your ability to maintain a livelihood. You must objectively prove that you can sustain your livelihood even with low compensation from the company using the following “physical facts.”
- Proof of Personal Savings: Presenting a bank balance certificate showing sufficient savings in your personal account to cover living expenses in Japan for over a year.
- Proof of Spouse’s Income: If your spouse works in Japan under a work visa, proving through tax certificates that the household’s total income is sufficient.
- Proof of Passive Income: Proving through tax returns or remittance records that you have legal income sources not dependent on labor, such as real estate income or stock dividends in Japan or abroad.
Q. Visa renewal is approaching. Can I raise my executive compensation in the middle of the fiscal year?
A. No. Under Japanese tax law, there is a strict rule that executive compensation “must remain the same amount for one year from the start of the term (Fixed Periodic Remuneration).” If you hastily raise your compensation mid-year, it will not be recognized as an expense, and you will suffer a penalty of heavy corporate taxes.
Conclusion: The Decision at Establishment Determines the Visa’s Fate
The setting of executive compensation is not something that can be easily amended later. In your initial decision right after establishing the company, meticulously plan and set an amount that satisfies the logic of both Tax Law (Fixed Periodic Remuneration) and the Immigration Act (Ability to Maintain a Livelihood) with foresight.