With the 3rd largest market for e-commerce with a revenue of US$ 105 billion in 2020, Japan is a strategic location to set up an e-commerce business. This can also be attributed to the high internet penetration rate of approximately 91%. The e-commerce industry continues to grow annually. The disruption caused by the Covid-19 pandemic has and will continue to accelerate this economic growth even further as many individuals turn to online shopping to reduce their interactions with the public.
In this article, we highlight some regulations set by the Japanese government in order to conduct your business in the e-commerce industry in Japan.
Regulations for e-commerce business in Japan:
There are multiple regulations set by the government in Japan. Some of these regulations apply to all businesses regardless of their industries and some are specific to the e-commerce industry. The organisations that govern the e-commerce industry include the following:
- Ministry of Economy, Trade, and Industry (METI)- in charge of regulating the e-commerce market
- Ministry of Internal Affairs and Communications (MIC)- in charge of general communication for the internet
- Ministry of Finance (MoF)- in charge of businesses’ meeting tax requirements
- IT Basic Act:
With an aim to make Japan more focused on Information Technology, the government introduced the IT Basic Act in 2001. This Act comprises policies important to the governing of internet-related issues.
- Civil Code:
The Japanese Civil Code comprises various policies that your business must abide by. One such policy is that businesses can claim the validity of a contract despite the mistake of the customers, provided he or she shows negligence. Other policies include the cancellation of contracts if there is evidence of fraud, the second party is a minor, or if the contract goes against the public order.
- Act on Specified Commercial Transactions:
According to this Act, e-commerce businesses are required to inform the consumers about certain policies including the cancellation policy, prevents businesses from sending junk emails to consumers, and more.
- Intellectual Property Laws:
Japan has various intellectual property laws to protect businesses from other businesses. These include the following:
- Unfair Competition Prevention Act which prevents the copying of content electronically, highlights how businesses must manage secrets (confidentiality), and more
- Copyright Act prevents other businesses to benefit from the work of the e-commerce business. Individuals engaging in activities prohibited by this act can result in up to three years in prison or fines up to three million yen.
- Act on Protection of Personal Information:
Amended in 2020, this Act showcases the responsibilities that businesses must take to protect and handle the personal information and data of individuals. It ensures that the personal data of any individual cannot be leaked to other individuals or entities. Moreover, it also sets security control measures to prevent the loss or damage of personal data.
- Act on Improvement of Transparency and Fairness in Trading on Specified Digital Platforms:
Issued in 2021, this act requires businesses with digital platforms to disclose the conditions of the contracts, take certain measures to ensure that there is an understanding between the business and its customers, and submit reports about the activities of the business to the Ministry of Economy, Trade, and Industry on an annual basis. This Act was issued with the purpose to improve the transparency of the businesses in the e-commerce industry and to ensure that established businesses cannot take advantage of their market power against small businesses.
How to incorporate an e-commerce business in Japan?
There are no additional requirements that e-commerce businesses need to meet to be established. The process of incorporation remains the same. In order to begin an e-commerce business in Japan, you must follow these steps:
Step 1: Plan your business:
You must first decide on the product or service you wish to sell online to your customers. This decision must be based on your knowledge base and skill set. Moreover, you need to ensure whether you have adequate resources needed to conduct an e-commerce business in Japan.
Step 2: Choose an optimum business structure
Once you have decided on the activities you wish your business to conduct in Japan, you need to decide on a suitable business structure for your business. In Japan, the following business structures are available:
- Sole Proprietorship (Kojin Jigyo)
- General Partnership (Gomei Kaisha)
- Limited Liability Partnership (Goshi Kaisha)
- Limited Liability Company (Kabushi Kaisha)
- Joint Stock Company (Godo Kaisha)
- Branch Office (Shiten)
- Representative Office (Chuzaiin Jimusho)
- Japanese Free Zone Company
Our team of experts at Tetra Consultants will understand your business activities, requirements, and long-term business goals before recommending a suitable business entity for you. We will also inform you about the requirements of each of these entities you will need to meet.
For more information on the various forms of business structures available in Japan, please refer to our webpage.
Step 3: Meet all the pre-registration requirements:
Once you have decided on a suitable business entity, Tetra Consultants will proceed to check for the availability of your preferred business name and reserve the same with the Registry Office.
We will also assist you in depositing the minimum required paid-up capital into your bank account.
Our hardworking team at Tetra Consultants will prepare all the documents that will be required during the incorporation process, including the Articles of Incorporation, business plan, proof of deposit of paid-up capital, and more. We will then get the same notarised.
Step 4: Register your business
Tetra Consultants will then register your business with the Japanese Legal Affairs Bureau (Homukyoku). Once the government grants approval, we will collect the incorporation documents, including the Registry Certificate, the Memorandum of Association, and more, and courier them to your preferred address. Since these documents will be in Japanese, we can get them translated on your behalf.
Step 5: Register your business for tax
Following the incorporation of your business, you must register your business for tax with the National Tax Authority in Japan to obtain a tax registration number.
Step 6: Open a corporate bank account
Tetra Consultants will leverage our extensive banking network to open a corporate bank account for your newly incorporated business.
Step 7: Staying compliant with the local laws
Even after the registration of your business, Tetra Consultants will continue to ensure that your business remains compliant with the government policies by filing for annual tax returns, preparing the business’s financial statements, and more.