Can Sole Proprietors in Japan Apply for Subsidies? A Detailed Guide to Eligibility

The Definition of a Sole Proprietor and Residency Requirements in Japan

In Japan, a sole proprietor (個人事業主) is someone who conducts business in their own name without establishing a corporation. Compared with a corporation, tax handling is simpler for a sole proprietor, but you still need to meet specific conditions when applying for subsidies.

Key status requirements:

First, you must be formally registered as a sole proprietor with the Japanese tax office. This means you must have already filed the "Notification of Commencement of Business" (個人事業の開始等の届出書). Many Chinese business owners overlook this step in the early days of starting up, assuming that small-scale operations don't require formal registration. This is a mistake — one of the prerequisites for applying for a Japan subsidy is having a formal tax status.

Second, if you are a foreign national (including Chinese nationals), you generally need a valid status of residence in Japan. Most sole-proprietor subsidies do not impose strict limits on your status of residence, as long as your residence card status is "permitted." However, certain programs (such as the Business Improvement Subsidy) require at least one year of tax-filing history in Japan.

Third, you need a Japanese bank account. This is a necessary condition for receiving subsidy funds. As a Chinese national, you can open an account at most Japanese banks, but you will need to provide your residence card and passport.

The Main Types of Subsidies Sole Proprietors Can Apply For

Japan's subsidy system is highly diverse. Not all subsidies are open to sole proprietors, but the following categories are explicitly open to sole proprietors:

Business Improvement Subsidy (経営改善補助金)

This is the largest and most widely available subsidy program in Japan. The Business Improvement Subsidy is administered by the Chamber of Commerce and Industry (商工会議所) or the Society of Commerce and Industry (商工会), and its purpose is to help small and medium enterprises and sole proprietors improve their business results.

Subsidy amount: Typically 500,000–2,000,000 JPY, with a subsidy rate of 2/3 of eligible expenses.

Eligibility:

• Completed sole-proprietor registration
• At least one year of sales performance or tax-filing history
• A recommendation from the Chamber of Commerce and Industry (you must be a registered member of your local chamber)
• The subsidized project must be an investment aimed at improving the business (such as purchasing equipment, running promotions, or training staff)

Application window: Applications are usually accepted April–June each year, with a 6–8 week review.

Small Business Sustainability Subsidy (小規模事業者持続化補助金)

This subsidy is designed specifically for small businesses, and sole proprietors are the primary target group.

Subsidy amount: Up to 500,000 JPY (subsidy rate 3/4). Since 2023, special provisions have been added under which some regions can reach 750,000 JPY.

Eligibility:

• A sole proprietor or a company with fewer than 5 employees
• Registered with the local Society of Commerce and Industry
• A "Business Plan" (経営計画書) prepared before applying for the subsidy
• The subsidized target is an investment aimed at expanding sales or improving products

Special advantage: The process for this subsidy is relatively streamlined and especially friendly to Chinese sole proprietors. It does not require complex financial statements — you only need to submit basic filing documents.

Employment Adjustment Subsidy (雇用調整助成金)

If, as a sole proprietor, you have hired employees and encounter business difficulties, the government will subsidize part of the wages you pay them.

Subsidy amount: On average, up to 15,000 JPY per employee per month (subsidy rate of 1/2 to 2/3 depending on circumstances).

Eligibility:

• You have hired regular or contract employees
• Sales have declined due to economic factors
• You have adjusted working hours in order to maintain the employment relationship

Note: This subsidy is generally only available during periods of economic hardship (such as the pandemic).

Startup Support Subsidy (創業支援補助金)

If you are a newly established sole proprietor (in business for no more than 2 years), some local governments and Societies of Commerce and Industry offer startup subsidies.

Subsidy amount: 500,000–3,000,000 JPY (varies by region).

Eligibility:

• In business for no more than 2 years
• A clear business plan
• A commitment to continue operating in the area for at least 3 years
• Some regions require attendance at startup training

Specific Eligibility Requirements and Common Obstacles

Financial and Tax Requirements

The most common obstacle when applying for a sole-proprietor subsidy is the financial requirement. Japan's subsidy system requires applicants to:

1. Have a formal tax-filing record — This is a hard requirement. If you have not yet completed an annual tax filing (確定申告), we recommend preparing one immediately. For Chinese sole proprietors, if you did not file formally in prior years, you can file retroactively with the tax office (going back up to the most recent 3 years).

2. Demonstrate business continuity — Most subsidies require applicants to have at least one year of operating history. This is to prevent arbitrage behavior.

3. Provide proof of sales performance — This can be a bank statement, invoice records, or a tax return. If you operate a cash-transaction business (such as food service or beauty), you need to keep complete daily bookkeeping.

A real case: Mr. Wang runs a Chinese beauty salon in Tokyo. He opened two years ago but never filed taxes formally. In 2024, he wanted to apply for a subsidy to buy new equipment, but was told he first had to file the past two years' tax returns retroactively. With the help of a Zeirishi, and after spending about 50,000 JPY, he completed the retroactive filing and only then could apply for the subsidy.

Business Premises Requirements

Although sole proprietors generally do not face the strict office-address requirements that corporations do, when applying for a subsidy:

• You need a clear business premises (it cannot be merely a virtual address)
• It can be your own residence, a rented shop, or a shared office
• You need to be able to prove that you conduct business activities at that location (such as property proof, a lease contract, or utility bills)

The Application Process and Required Documents

Standard Application Steps

Step 1: Confirm eligibility and select a program (1–2 weeks)

First, visit the website of Japan's Small and Medium Enterprise Agency (chusho.meti.go.jp) or your local Chamber of Commerce and Industry website to see the programs currently open for applications. Search for keywords such as "個人事業主 補助金" or "小規模事業者補助金."

List 3–5 programs that match your industry and needs, and compare:

• Subsidy amount
• Application deadline
• Eligible industry scope
• Restrictions on how the subsidy can be used

Step 2: Prepare application documents (2–3 weeks)

Core document checklist:

• Sole-proprietor registration proof (issued by the tax office)
• Tax returns for the past 2 years (確定申告書)
• Bank statements for the most recent 3 months
• Business plan (free-form, usually 1–3 pages, explaining how you will use the subsidy to improve your business)
• A quotation (見積書) or purchase plan for the subsidized expenses
• Identification documents (residence card + passport)
• Bank account information

Step 3: Consult the Society of Commerce and Industry or a support organization (1 week)

This step is very important. During the Japanese government subsidy application process, the advisors at the Society of Commerce and Industry will help you refine your application documents. This consulting service is usually free.

Book a meeting with a business advisor at the Society of Commerce and Industry, and tell them:

• Your industry and current business situation
• Which program you want to apply for
• What you plan to do with the subsidy

The advisor will offer suggestions for improvement and may even help you reorganize your business plan. Some Chinese business owners, unfamiliar with Japanese phrasing, ask the Society of Commerce and Industry to help translate and adjust their documents.

Step 4: Formally submit the application

This is usually submitted together, witnessed by the Society of Commerce and Industry advisor. Submission methods:

• Online submission (through the Japanese government's subsidy management website "J-Net21" or each society's system)
• Or by mailing paper documents

Step 5: Review and evaluation (4–8 weeks)

The Society of Commerce and Industry and relevant departments conduct a document review and possibly an interview. If supplementary materials are needed, you will be notified. Review criteria typically include:

• The reasonableness of the business plan
• The necessity of the subsidy
• The competence and integrity of the business owner

Step 6: Receive the review result and disbursement (1–2 weeks)

Once approved, you will receive a "Notice of Subsidy Grant Decision" (補助金交付決定通知書). Following the notice's requirements, you purchase or pay the relevant expenses within the specified period, then submit proof documents such as invoices. The subsidy is usually deposited into your Japanese bank account within 4–6 weeks after you submit the proof documents.

A Closer Look at a Key Document: Writing the Business Plan

The business plan is the most important document in a subsidy application and determines whether you are approved. For Chinese sole proprietors, here are some specific suggestions:

Framework structure:

1. Current situation analysis (1–1.5 pages)

   • Your industry, current business situation, and main customer base
   • Sales trends over the past 1–2 years
   • The challenges you currently face (competitive pressure, rising costs, etc.)

2. Subsidy usage plan (1 page)

   • Specifically explain what equipment you will buy or what investment you will make
   • How this investment solves the challenges above
   • Expected results (how much sales will increase, more customers, etc.)
   • A detailed budget allocation table

3. Three-year goals (0.5 page)

   • Expected sales targets within 3 years
   • Profit targets
   • Staff increase plan (if any)

A numerical example: Suppose you run a small Japanese-food takeout shop with sales of 3,800,000 JPY in 2023. You apply for a 500,000 JPY subsidy to buy kitchen equipment and develop a takeout app. Your business plan should read something like this:

"The most common issue customers report is slow order processing and high dish costs. By investing in new equipment (250,000 JPY) we will improve cooking efficiency, and by developing a takeout app (250,000 JPY) we will expand our sales channels. We expect first-year sales to grow 15% to 4,370,000 JPY, and second-year sales to grow 20% to 5,250,000 JPY."

A plan like this is specific and measurable, and easily earns the approval of the reviewing advisor.

Special Considerations for Chinese Sole Proprietors

Language and Cultural Barriers

As a Chinese national in Japan, you may face difficulties understanding Japanese or filling out forms. Suggestions:

• Use the free translation and guidance from the Society of Commerce and Industry — most societies in major cities have advisors for foreigners
• Consider hiring a Zeirishi — the cost is about 20,000–50,000 JPY, but it can significantly reduce the risk of a failed application
• Attend subsidy briefings organized by the Society of Commerce and Industry — usually free, explained in Japanese and simple English

Remittance and Tax Issues

The tax treatment of subsidies in Japan has some particularities:

• Subsidies are generally not included in taxable income — under Japanese tax law, a subsidy used to purchase fixed assets is generally not taxed as income
• Equipment purchases require correct asset recording — we recommend communicating with a Zeirishi to ensure equipment investments are correctly recorded as fixed assets
• Remittances back to China are restricted — if the subsidy is ultimately used for domestic (China) spending, you need to keep all invoices and proof

A reminder: Although a subsidy may be easy to obtain, the subsequent bookkeeping and tax filing are equally important. We recommend hiring a Zeirishi familiar with subsidies. Although the cost is about 30,000–80,000 JPY per year, it can help you avoid future tax problems.

Frequently Asked Questions (FAQ)

Q1: I'm a Chinese national newly arrived in Japan and haven't filed taxes yet. Can I apply for a subsidy?

A: Strictly speaking, a sole proprietor with no tax-filing record cannot apply for most subsidies. But this is not a dead end. First, you need to immediately register your sole proprietorship with the tax office (if you haven't already), then prepare the current year's tax filing. If you have been in business for no more than 2 months, some startup subsidies may not require prior-year filing records, but they still require preliminary financial records for the current year. The recommended approach is to consult your local Society of Commerce and Industry about whether there are programs aimed at new entrepreneurs. Many local governments, in order to promote entrepreneurship, offer startup subsidies with lenient conditions. Even if you don't currently qualify, prepare thorough financial records to be ready for next year's application. At the same time, we recommend contacting a Zeirishi to file all filings retroactively since you started your business, so that you meet the eligibility requirements for more subsidies.

Q2: My subsidy application was rejected because "the business plan wasn't specific enough." How should I reapply?

A: This is the most common rejection reason among Chinese business owners — business plans are often too broad and lack specific data support. When reapplying, you need to make fundamental improvements based on the review comments. Specific methods: First, gather detailed financial data. If the reviewer thought your target sales-growth rate was unreasonable, you need to provide market-research data or industry-benchmark data to demonstrate feasibility. Second, add a detailed timeline — explaining when each investment will occur and when it will produce results. Third, add quantitative metrics. Don't say "customer satisfaction will improve"; say "according to our survey, the new equipment can reduce order-processing time from 20 minutes to 10 minutes, and we expect to serve an additional 30 customers per day." Fourth, request a one-on-one, in-depth consultation from a Society of Commerce and Industry advisor to have them review your revised plan. Many applicants achieve a 60–70% approval rate when they reapply.

Q3: Should the subsidy be reported as income? Will the tax office investigate?

A: This is an important question involving your personal interests. Japanese tax law provides that subsidies related to business activities are generally not taxed as ordinary income, but are treated as capital subsidies or special income. Specific rules: if the subsidy is used to purchase fixed assets (such as equipment), that subsidy is not included in taxable income for the year but instead delivers a tax benefit by reducing the asset's base value. If the subsidy is used to pay current expenses (such as employee wages or advertising), depending on when it is received, part of it may need to be included in income, but it is generally treated as special income at a lower tax rate. Do not conceal subsidy income — this is the biggest risk. Japan's tax office database contains records of all subsidies, and concealment leads to heavy taxes and penalties. The correct approach is to accurately report it in the appropriate subsidy-income field on your annual tax filing, and consult a Zeirishi on how to classify and handle it. An experienced Zeirishi knows how to legally minimize the tax burden a subsidy creates.

Q4: I want to use a subsidy to hire employees, but I'm unsure of the process. What conditions are required?

A: Using a subsidy to pay employee wages directly has very strict limits. First, you need to apply for a dedicated "employment-related subsidy" (such as the Trial Employment Incentive 《トライアル雇用奨励金》 or the Human Resource Development Grant 《人材開発支援助成金》); the purpose of these subsidies is precisely to help companies expand employment. Most Business Improvement Subsidies cannot be used directly to pay wages — they can only be used for business-related investments. There is one exception, however: if you invest in automation equipment that reduces workload, you can increase staff without a proportional increase in labor costs, in which case the subsidy indirectly supports employment. If you want to expand your workforce through a subsidy, we recommend consulting your local Employment Service Center (ハローワーク) and Society of Commerce and Industry about whether there are dedicated employment subsidy programs. For Chinese business owners, there is an additional advantage — if you hire interns or trainees from overseas, the Japanese government has special subsidy support (such as the "Project to Improve the Environment for Accepting Foreign Talent" 《外国人材の受け入れ環境整備事業》).

Q5: I've already received 500,000 JPY from Subsidy Program A. Can I still apply for Subsidy Program B? Will it be seen as a duplicate application and rejected?

A: This is an important question about whether subsidies can be stacked. Japan has strict limits on duplicate subsidy applications. The basic principle is: the same investment expenditure cannot be subsidized by multiple subsidies at the same time. For example, if you bought a piece of equipment with Subsidy A, you cannot use Subsidy B to subsidize the same piece of equipment. However, different investment projects can apply for different subsidies. For instance: using the Business Improvement Subsidy (500,000 JPY) to buy kitchen equipment, and then using the Small Business Sustainability Subsidy (500,000 JPY) for store renovation or promotion — this is allowed, because they involve different expenditure items. The key is to clearly disclose, in the application form, the subsidies you have previously received as well as the specific scope of use of the current subsidy. The reviewing organization will cross-check, and if it finds concealed information, you will be blacklisted and permanently barred from applying for government subsidies. Recommended practice: before each application, proactively explain to the Society of Commerce and Industry or the reviewing organization the details of the subsidies you have received and the intended use of the current application, and let them confirm whether there is a conflict. Honesty and transparency generally earn favorable evaluation.

Pre-Application Checklist

Before formally starting a subsidy application, make sure you have completed the following preparations:

• ☐ Registered as a sole proprietor with the tax office
• ☐ Completed at least one annual tax filing (or preparing a retroactive filing)
• ☐ Have an active Japanese bank account
• ☐ Collected and organized the past 2 years' sales data and bank statements
• ☐ Clarified the specific use of the subsidy and the procurement plan
• ☐ Drawn up a preliminary business improvement plan and 3-year goals
• ☐ Registered as a member of the local Society of Commerce and Industry (if not yet registered)
• ☐ Set aside at least 4–8 weeks for the application process
• ☐ Contacted a local Society of Commerce and Industry advisor or consulted a Zeirishi

Summary and Recommendations

Sole-proprietor subsidies are absolutely worth applying for. Each year the Japanese government invests hundreds of billions of yen to support small and medium enterprises and sole proprietors. If you don't apply, that money simply flows to someone else. As a Chinese sole proprietor, although language and cultural differences may pose challenges, by fully utilizing the free guidance services of the Society of Commerce and Industry, you are fully capable of successfully obtaining a subsidy.

Final recommendations:

1. Start early — subsidy applications have deadlines; miss one and you wait a year
2. Consult thoroughly — the guidance of Society of Commerce and Industry advisors and Zeirishi is worth the investment
3. Prepare thoroughly — detailed financial records and a clear business plan are the foundation of success
4. Stay honest — subsidies involve public funds, and any false reporting brings serious consequences
5. Keep filing — after obtaining a subsidy once, keep complete tax-filing records to be ready for future applications

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Free Consultation

If you still have specific questions about applying for a sole-proprietor subsidy, or want to know whether your industry meets the application requirements, feel free to contact us for a free preliminary consultation. We have a professional team of Japan subsidy advisors who can answer your questions in detail in Chinese and help you plan the application approach that best fits you. Whether you are in the early startup stage, a growth phase, or looking to expand your business, we can provide targeted advice.

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