Management visa, Business sustainability.

If you are a foreigner residing in Japan on a business administration visa, here is what you need to know when you renew your visa.

The most important aspect of the business management visa extension is the financial status of the business. If the business is not deemed stable and sustainable, the business management visa will not be renewed, and the foreigner will not be allowed to stay in Japan.

How do you evaluate the stability and continuity of a business?

According to the “Clarification of Residency Criteria for Foreign Business Owners,” which is disclosed on the Ministry of Justice website, the business’s stability and continuity will be treated as follows. nyukan_nyukan43.html

(1) Gross profit

First, the company is checked to see if its gross profit is positive or negative.

If the gross profit is negative for two consecutive fiscal years, the company is considered to be unsustainable.

Gross profit is calculated by subtracting the cost of goods sold from sales. Even if the sale of land or stock was profitable, if the gross profit is negative, then the main business is not considered to be sustainable.

Therefore, it is assumed that the gross profit is positive in two consecutive fiscal years.

On top of that, the following.

(2) If retained earnings are positive

The final net profit or loss is calculated at the end of each fiscal year. The cumulative net profit or loss from the past is called retained earnings, and if the retained earnings are negative, it is called a deficit. In the case of positive retained earnings, the company is considered to be in business continuity.

(3) If the company is deficient but not insolvent

If the net loss continues to be negative in each fiscal year, the company will be in a deficit and become “insolvent.” Insolvency is defined as total assets – total liabilities in a negative state.

If the company is deficient but not yet insolvent, the company shall be required to submit a business plan and materials showing projected earnings for the next one year, taking into account the possibility of business continuity in the future due to the status of business plans, financing, etc., and, in principle, the company shall be deemed to have a business continuity

(5) The company is insolvent at the end of the most recent fiscal year, but not in the previous fiscal year.

If there is a prospect that the company will cease to be insolvent within one year, the business’s continuity will be recognized.  In this case, a third party, such as a certified public accountant, is expected to evaluate the possibility.

(6) If the company is insolvent for two consecutive fiscal years
It is not considered to be a sustainable business.

For people residing in Japan on a business administration visa, it is essential to be in the black. To make the business profitable, for example, you can reduce the amount of director’s remuneration and reduce expenses. If executive compensation is less than 200,000 yen per month, it won’t be easy to live in Japan, and the business will not be sustainable. The more executive compensation, the more business continuity, is judged to exist. The more compensation paid to executives, the more likely it is that the company will be judged to have business continuity.

By the way, it is not limited to the management residence but to all the residence extension of period, “Applicants must have sufficient assets or ability to make an independent living”.
An applicant’s living situation must not be a burden to the public and the applicant must have the possibility of continuing to live a stable life in the future, considering his/her assets or ability (both on a personal basis and on a household basis). However, even in the case where an applicant’s living situation is a burden to the public, when there are humanitarian reasons to grant permission to stay in Japan, the decision will be made giving due
consideration to such reasons.

(Guidelines for Permission for Change of Status of Residence and Extension of Period of Stay Immigration Services Agency)