Create a company in Cyprus — or move your company from Japan

The two numbers that decide a move from Japan to Cyprus are not on the corporate tax return. They are 国外転出時課税, the exit tax that deems a disposal of your securities once covered assets reach ¥100,000,000, and an inheritance tax that follows a departing Japanese national's worldwide estate for ten years. Both are survivable. Neither is optional.

Updated for 2026 Cyprus tax law and regulations.

From Japan to Cyprus, with the whole Cyprus side handled by one team

Sumly is the one-stop, fully digitalized way to create your company in Cyprus, relocate the business out of Japan and operate it from the first day it exists. We register the company, open your books the day you order, prepare every Cyprus return box by box, and deliver the tax residency and non-dom application as one fixed-price service — one partner, one dashboard, one price agreed before anything starts. What we will not do is pretend the Japanese side is simple, because on this route the Japanese side is where the money is.

This is Sumly — and what we actually do for you

Sumly is the fully digital provider for founders moving a company to Cyprus. You do not need to learn Cypriot company law, find a local auditor, or work out which form goes where. You get in touch, and we do the rest.

And we stay with you on both sides of the move. The Cyprus side we own outright. For the side you are leaving, we put you straight in front of an adviser or lawyer from our network who works on exactly your problem — company law, exit taxation, inheritance, employment — and we hold the thread between them and us. One point of contact for the whole move, however many specialisms your case turns out to touch. If your case is simple, we do all of it for a fixed price.

Part 1: What leaving actually costs you

Your home country does not let go the moment the plane does. What still runs after you have left, and in which order it has to be handled.

What does a Japanese company actually pay, once you count everything?

Not 23.2%. That is the national corporation tax rate and roughly three-quarters of the bill. The Ministry of Finance publishes the composed figure itself, calls it the 法人実効税率, and puts it at 29.74% — rising to 30.64% for fiscal years commencing on or after 1 April 2026 once the new defence surtax is in. Any page that quotes you the national rate and stops has told you the truth and misled you anyway.

Five taxes stack, and two of the names are misleading:

Now reproduce the ministry's own figure rather than trusting it. Corporation tax is 23.2 points. Local corporation tax adds 23.2% × 10.3%, or 2.390 points. Inhabitant tax adds 23.2% × 7.0%, or 1.624 points. Enterprise tax and its national companion add 3.600 points directly. That sums to 30.814 points — and because enterprise tax is itself deductible, the standard formula divides by 1.036, which lands on 29.74%. Add the defence surtax at 4% of the corporation tax base above an annual ¥5,000,000 deduction and the same arithmetic gives 30.64%. We show the working because nobody else does, and because a number you can rebuild is worth more than one you have to accept.

Three qualifications belong with it. A small company pays less: the reduced rate on the first ¥8,000,000 of income for a company capitalised at ¥100,000,000 or under is 15%, though it is a time-limited measure running to business years commencing by 31 March 2034, it is displaced at 17% where annual income exceeds ¥1 billion, and it becomes 19% for an excluded business operator. Second, those local figures are standard rates and Tokyo does not use them: the metropolitan government has adopted 10.4% for the corporate inhabitant tax levy, with a reduced 7.0% for companies capitalised at ¥100,000,000 or less whose corporation tax is ¥10,000,000 a year or less, so a Tokyo company above the small-company line sits above 29.74%. We are not printing a combined Tokyo effective rate because no official page publishes one. Third, the defence surtax obliges even a company that owes nothing under it to file a nil return.

A Cyprus company pays 15% from tax year 2026 on the first euro and the last, with no bands and no surtaxes waiting in April.

Who does Japan's exit tax actually catch on the way to Cyprus?

Fewer people than fear it, and the fear is usually attached to the wrong number. 国外転出時課税 — the special rule on capital gains for a person leaving the country, in force since 1 July 2015 — sits at article 60-2 of the Income Tax Act, and the statute states its scope as a negative, which is exactly why it is so often mis-stated.

Read positively, the charge applies only when both limbs are true. The National Tax Agency's own leaflet puts them affirmatively: the total value of covered assets you hold must be ¥100,000,000 or more, and you must, as a rule, have had a domicile or residence in Japan for more than five years within the ten years before the departure date. Fail either and the charge does not apply at all.

Three things about that pair are routinely got wrong. The ¥100,000,000 is a gross market value across all covered assets in aggregate — not the gain, not per holding, and not your net worth, so a founder with ¥120m of shares showing a ¥5m gain is comfortably inside it. "Five years" means more than five, counted cumulatively inside a rolling ten-year window, not five consecutive years and not five years since you arrived. And there is no nationality element anywhere in the provision: a Japanese founder and a foreign executive with the same portfolio and the same history are treated identically, which is why the popular framing of it as a rule about foreigners, or a rule about Japanese people, is wrong twice over.

What counts as a covered asset is a closed list. The leaflet gives it as securities such as shares and investment trusts, silent-partnership contribution interests, and unsettled margin, when-issued and derivative transactions. Listed and unlisted shares are both in, which is why an owner-manager's own holding is the standard case. Real property, bank deposits, precious metals, insurance policies and unincorporated business assets are not on the list — and neither are crypto-assets, which are not securities under Japanese law. We put that as a statement about what the list contains rather than citing a page for the negative, because no official page states it as a negative.

The trigger moment is worth pausing on. 国外転出 is defined as ceasing to have both a domicile and a residence in Japan — the mirror image of the residence test itself. The tax fires when residence ends, not when your flight leaves and not when a visa changes.

How does the exit-tax deferral work, and what makes it collapse?

It works, it lasts a long time, and it is not free. Article 137-2 grants the deferral only where four conditions are cumulatively met, and each of them is a separate act with its own deadline.

First, the 納税管理人の届出書 has to reach the competent tax office before you depart. Second, the return itself must claim the deferral and carry a schedule of the deemed disposals and the computation of the deferred tax. Third, you must lodge security — 担保 — covering the deferred income tax and the interest tax on it, by the filing deadline. Fourth, every year you must file a 継続適用届出書 reporting which covered assets you still held at 31 December.

The period runs five years from the departure date plus four months, and it can be extended to ten by filing an extension notice before the fifth anniversary — the leaflet frames the extension as being for someone whose circumstances actually require a long overseas stay. Note the shape: it is not "ten years", and it is not "five years automatically". It is five, with a positive act required to get the second five.

On rate, we are going to be more careful than the pages ranking above us. The statute deems a disposal and leaves the rate to the ordinary separate regime for share disposals, which is 15% income tax and 5% inhabitant tax, with the reconstruction surtax adding 2.1% of the income tax on top. Neither the leaflet nor the tax answer page states an exit-tax percentage. The national component of 15.315% is certain. Whether the 5% inhabitant tax attaches to a deemed disposal by someone who has ceased to be resident turns on the 1 January assessment date and is genuinely unsettled, so we will not print a single all-in figure. Budget the national component, ask a Japanese adviser about the local one, and treat any page that gives you one confident number as a page that did not look.

The interest tax on the deferral is not optional either — the security has to cover it, and it accrues across the whole period. We are not quoting a rate for it, because we did not find an official page that states the rate applicable here.

What happens to the exit tax if Cyprus does not work out?

This is the part of the Japanese regime that almost nothing written in English gets to, and it materially changes the risk of trying. The leaflet sets out four reduction measures, each claimed by a 更正の請求 — a claim for correction — within four months of the triggering event.

The third row is the one to read twice. The leaflet's own parenthetical extends it to a person who did not take the deferral and returned to Japan within five years of leaving. So a founder who simply paid the exit tax, tried Cyprus for four years and came home can claim the whole charge back. That is real option value, and it is why the honest framing of Japan's exit tax is "a cash-flow problem with a deferral and a refund" rather than a wall.

The second row deserves a note of its own. It is a domestic foreign tax credit written into the Japanese rules, not a treaty credit. A reader who has absorbed the fact that Japan and Cyprus have no treaty will otherwise assume it is unavailable to them. It is not.

Does Japan's exit tax also catch shares you leave behind for family?

Yes, and this is where the plan most founders arrive with quietly fails. Two parallel charges reach transfers to people who are already abroad.

On the gift side, a donor who meets the same two conditions — more than five years of Japanese residence in the preceding ten, and ¥100,000,000 or more of covered assets — and who gives any of those assets to a relative resident outside Japan is deemed to have disposed of the gifted assets, with income tax falling on the donor. On the inheritance side, where an heir living outside Japan acquires covered assets from a decedent who met the same conditions at death, the decedent is deemed to have disposed of them and the charge is declared on the estate's final return.

Work out what that means for the obvious plan. A founder moves to Cyprus and leaves the Japanese shares with a parent in Tokyo, intending to deal with them later. When the parent eventually gifts or bequeaths those shares to the now-Cyprus-resident founder, the Japanese transferor takes a deemed-disposal income tax charge on the unrealised gain — on top of gift or inheritance tax on the same transfer. "Leave the shares behind and sort it out later" is precisely the arrangement these two limbs were written to defeat.

Is Japan's inheritance tax the real reason to leave?

For a founder with a company of any real value, yes — and by a distance. This is the largest number on the page, it is not the exit tax, and it is the one most content treats in a sentence.

相続税 runs on a rapid scale applied to each statutory heir's share slice, not to what anyone actually receives, and it tops out at 55% on the slice above ¥600,000,000, having already reached 50% above ¥300,000,000 and 40% above ¥100,000,000. Against that, the basic exemption is ¥30,000,000 plus ¥6,000,000 for each statutory heir — ¥48,000,000 for a spouse and two children, which against an estate that is mostly shares in an operating company is not a shelter at all. Where the recipient is anyone other than a spouse, parent or child, the computed tax is increased by 20%. Gift tax runs to the same 55% top rate above ¥30,000,000, over an annual deduction of only ¥1,100,000. Giving assets away in life is not an exit either: the add-back window for lifetime gifts is moving from three years to seven years for deaths occurring on or after 1 January 2031, and gifts inside the window come back whether or not gift tax was paid.

Cyprus levies no inheritance tax and no gift tax. So the comparison is not one rate against another. It is 55% against nothing.

And here is the honesty test the rest of the internet fails. The benefit does not arrive on the day you land. A Japanese national with no Japanese address is still taxed on all property acquired, worldwide, if they had an address in Japan at any time in the ten years before the inheritance began. The identical ten-year test applies to a Japanese-national heir. Both sides count, and the family only leaves the worldwide charge when the later of the two clocks expires. Move to Cyprus and die eight years later and worldwide taxation applies to you; survive eleven years while your children left Japan only six years ago and worldwide taxation applies through them. The clock runs on 住所 rather than on nationality or tax residence, so renouncing citizenship neither restarts nor shortens it, and a temporary absence for study or a posting does not break a Japanese address at all.

Then the structural point that outlives the ten years. If the family is outside the window, only Japan-situs assets are taxed — and situs for shares follows the location of the head office or principal office of the issuing company. Shares in a Cyprus company are Cyprus-situs. Shares in a Japanese kabushiki kaisha stay Japan-situs however long everyone has been away — forever. Deposits follow the branch that took them, so money in a Japanese bank stays Japanese, and loan claims follow the debtor's address, so lending to a Japanese company keeps that asset in Japan too. Getting outside the ten-year window is necessary and not sufficient; migrating the value itself into a Cyprus company is what changes the situs. That is the strongest honest argument for the whole relocation, and it has nothing to do with rates.

Two practical notes. The filing deadline is ten months from the day the death became known, which is very short for a cross-border estate holding unlisted shares that have to be valued. And a filer with no Japanese address must appoint a tax agent and file and pay through the tax office for the place of tax payment.

When does your Japanese tax residency actually end?

Not on a day count, and this is where a large share of readers arrive with the wrong model in their head. Japan has three categories, not two. A 居住者 is an individual who has a domicile in Japan, or who has had a residence in Japan continuously for one year or more; a 非居住者 is everyone else; and between them sits the 非永住者, the non-permanent resident.

Get the middle category right, because it is the one most misunderstood. A 非永住者 is a resident who does not hold Japanese nationality and whose aggregate domicile or residence in Japan over the past ten years is five years or less. Not holding Japanese nationality is a condition of the category, so a Japanese founder is never a non-permanent resident, never has been, and cannot become one. Every article about "using non-permanent resident status" is addressed to foreigners living in Japan. For those it does apply to, the scope is all non-foreign-source income plus foreign-source income paid in Japan or remitted from abroad — and "remitted" is broader than a bank transfer, with a card payment in Japan drawn on a foreign account the standard example. One further trap: gains on foreign securities acquired while the person was already a Japanese resident are pulled out of the foreign-source category by cabinet order and taxed whether or not anything is remitted, which closed the buy-here-sell-there route. We describe the mechanism rather than quote a sub-paragraph, because we verified the parent statute and not the order.

Now the test that actually decides a departure. Japan has no 183-day rule for becoming resident; the tests are domicile, or one continuous year of residence. The National Tax Agency defines 住所 as a person's base of life, judged on objective facts — home, occupation, where assets are, where relatives live, nationality — and then says the quiet part out loud: because the judgement is not made on days of stay alone, a person can be a resident of Japan even while staying abroad for more than half a year, and even a so-called perpetual traveller who moves between several countries in a year is a Japanese resident if their base of life is in Japan. The tax authority has pre-emptively answered the exact plan a lot of readers arrive with. Because there is no treaty with Cyprus, there is also no tie-breaker article to fall back on — you have to actually break Japanese residence, which makes the unglamorous steps load-bearing: the family, the home, the Japanese employment, the place your life is actually run from.

There is no split-year election in Japan. The resident period is taxed as a resident period and the non-resident period as a non-resident period inside the same calendar year. And there is a filing obligation people miss: a resident leaving mid-year must file a 準確定申告 covering 1 January to the moment of departure by the time of departure. Appointing a 納税管理人 moves that back to the ordinary March deadline — and since the tax agent is a precondition of the exit-tax deferral anyway, a founder above the threshold has no real choice about it.

Then the one that catches almost everyone, and that we have not seen on a competing page. 個人住民税 is charged on whoever had an address in the municipality on 1 January, at a flat 10% of the previous calendar year's income. The departure guidance says it plainly: you owe it if you had an address in Japan on 1 January, and the same applies even if you left Japan on or after 2 January. Leave on 2 January and you still owe a full year of inhabitant tax on the whole of the previous year's income. For a founder who took a large dividend or realised a gain in year one and plans to move in year two, that is a fixed liability with nothing to do with where they live. The only planning is to time the departure before 1 January, and the only administrative fix is a second, separate tax agent — a municipal one, filed with the city office rather than the tax office. Almost nobody mentions it and readers reliably miss it.

How are dividends and share sales taxed while you are still in Japan?

Two ways, and the split is exactly the wrong way round for a founder. Dividends on listed shares held by someone who is not a major shareholder are withheld at 15.315% national plus 5% local, a total of 20.315%, with the option to take no further action at all. Dividends on unlisted shares, and listed dividends paid to a major shareholder, are withheld at 20.42% with no local tax and then go into aggregate taxation at progressive rates, relieved only by the dividend tax credit.

That is the line that matters. An owner-manager taking money out of their own unlisted company is in the second column, not the first. The aggregate schedule runs to 45% above ¥40,000,000 of taxable income, the reconstruction surtax adds 2.1% of the income tax amount through to 2037, and individual inhabitant tax adds a flat 10 points. The top combined marginal rate on ordinary income is therefore about 55.9%, and 45% is not Japan's top rate.

And the trap inside the trap: the major-shareholder line is 3% or more of the issued shares, and for listed dividends paid on or after 1 October 2023 the test aggregates the individual's holding with holdings of a 同族会社 determined by reference to that individual. A founder who holds listed shares partly through a family company can be pushed over 3% by the aggregation and lose both the 20.315% rate and the no-return option in one move, without buying a single extra share.

Selling shares is cleaner but not generous. Capital gains on shares are separately self-assessed at 15% income tax and 5% inhabitant tax, again with the reconstruction surtax on the income tax component. Two baskets exist and they do not mix: a loss on listed shares cannot be deducted from gains on general (unlisted) shares, so a founder selling their unlisted company cannot shelter the gain with listed portfolio losses, and the listed-basket reliefs — the three-year loss carry-forward, the offset against listed dividends, the special account, NISA — do not reach across.

There is also a change from the 2025 tax year that we have not seen on any competing page in either language. Where a broad base of income that includes financial income normally excluded from the return exceeds ¥330,000,000, and 22.5% of the excess is greater than the income tax and reconstruction surtax otherwise payable, the difference is added. A very large one-off share sale used to cost 20.315% and nothing more. From the 2025 tax year, a 22.5% floor bites on the slice above ¥330,000,000. That is a genuine push factor and it lands on exactly the profile this guide is written for.

Will Japan's CFC rules attribute your Cyprus company's profits to you?

On the tax-burden test, always. On the substance tests, it depends entirely on you — and if the company licenses intellectual property, it fails before substance is even reached. Japan's article 40-4 of the Act on Special Measures Concerning Taxation is the individual provision, so a founder is squarely in scope in their own name.

Step one is easy and unhelpful. A foreign corporation is a 外国関係会社 where Japanese residents and domestic corporations hold, directly and indirectly, more than 50% of it. A wholly-owned Cyprus company of a Japanese-resident founder qualifies with nothing to argue about. Step two brings the individual in at a 10% direct-plus-indirect holding, or through a family-shareholder group holding 10%, or — with no percentage floor at all — through a relationship of de facto control, meaning broadly an entitlement to substantially all of the residual value. A founder holding a token stake but entitled to the value is caught.

Step three is where the numbers live, and they are the numbers the brief asked us to put on the page:

There is no version of a Cyprus company that passes Japan's tax-burden test. Cyprus's 15% is five points below the ordinary line and twelve below the paper-company line, and the IP Box is not remotely close to either. So the entire question is the economic-activity tests, and there are four.

The business test asks that the company's principal business is not holding shares or bonds, not providing industrial property rights, know-how, special production methods or copyright, and not leasing ships or aircraft. The substance test requires a fixed facility in Cyprus appropriate to the actual business. The management and control test requires that the company itself conducts its management, control and operation in Cyprus — a registered office and a nominee director satisfy neither. And the fourth test branches by industry: wholesale, finance, insurance and transport businesses have to trade mainly with unrelated parties, while everything else — software, consulting, services, substantially every business our readers run — has to conduct its business mainly in the country where it is based, which here means mainly in Cyprus. We are not printing a percentage for "mainly", because the quantitative test sits in a cabinet order we did not verify.

Three more details separate a competent reading from a careless one. The burden of proof is reversed: if the tax office asks for documents showing the activity tests are met and none are produced, the company is presumed to fail, so substance has to be documented as it happens rather than reconstructed on audit. The de minimis reliefs — a partial inclusion amount of ¥20,000,000 or less, or 5% or less of pre-tax book income — apply only to partial inclusion, and rescue nothing for a company that failed the activity tests and suffers full inclusion. And there is a filing obligation even where nothing is attributed: an in-scope individual must attach the foreign company's balance sheet and profit and loss account to their return whenever the tax burden ratio is below the applicable line, which for a Cyprus company it always is.

The mechanics of the charge are worth knowing before you meet them. The attributed amount is not treated as a dividend and not treated as a capital gain — it is miscellaneous income, which means it goes straight into the aggregate schedule with everything else and picks up the reconstruction surtax and the 10% inhabitant tax alongside it. It lands in the year containing the day four months after the foreign company's own year-end, so a Cyprus company with a December year-end feeds a Japanese return for the following calendar year. There is no credit mechanism that makes this neutral, and there is no way to defer it by not distributing: the whole point of the regime is that a distribution is irrelevant. Read as a decision tree, the regime asks three questions in order — is the company a paper company or cash box, in which case the line is 27%; if not, does it pass all four activity tests, and if it does not it is fully included at the 20% line; and only if it passes all four do you reach partial inclusion, where the de minimis reliefs finally exist. Most readers who believe they are in the third box are in the second.

The one-line version: Japanese CFC is not a reason to avoid Cyprus. It is the reason the move has to be real, and the reason to stop being a Japanese resident before the Cyprus company starts earning.

Does a Cyprus company run from Tokyo become a Japanese company?

No — and this is the one structural point where Japan is friendlier than most of the alternatives. A domestic corporation is defined as a corporation having its head office or principal office in Japan, and the identical definition appears in the Income Tax Act. There is no place-of-effective-management limb anywhere in it. Managing a Cyprus company from Tokyo does not turn it into a Japanese corporation, which is the opposite of the position in a number of neighbouring jurisdictions and worth saying out loud.

Do not over-read it, though. A permanent establishment in Japan is a live risk on the domestic definition — a fixed place of business, a construction site, or a dependent agent with authority to conclude contracts — and because there is no treaty, that domestic definition applies unmodified with no negotiated thresholds or carve-outs to soften it. And the controlled foreign company rules above attach to you personally regardless of where the company is managed, so corporate-residence cleanliness buys much less than it appears to.

The mirror of the rule matters too: your Japanese company does not move when you do. A KK or GK stays a domestic corporation and stays taxable on worldwide income however far its owner goes, because there is no mechanism by which a Japanese company ceases to be Japanese short of liquidation or a cross-border merger. There is consequently no residence-migration exit charge on the company itself. We put it that narrowly on purpose — we are not claiming Japan has no charge of any kind on a cross-border reorganisation, because we did not verify the reorganisation provisions.

So what should happen to the Japanese company? There are three honest answers and the right one depends on where your customers are. Keep it as a genuine Japanese operating company if it has Japanese customers, Japanese staff and Japanese revenue — it will carry on paying the composed effective rate, and there is nothing wrong with that. Wind it down if it was only ever a vehicle for you personally, remembering that the shares stay Japan-situs for inheritance tax right up until they no longer exist. Or leave it in place as a shell while you decide, which is the option that quietly costs the most: it keeps filing obligations alive, keeps a Japan-situs asset on your estate, and keeps a set of facts that a Japanese examiner can point at when arguing that your base of life never really moved. "We'll leave it running for now" is a decision with a price attached, and it deserves to be made on purpose rather than by drift. Whatever you choose, the value question is separate from the entity question: as long as the operating value sits in Japanese shares, the ten-year inheritance clock buys the family less than they think.

What does it mean that Japan and Cyprus have no tax treaty?

It means more than most readers expect, and it is the single most useful correction on this page. The Ministry of Finance's own register of Japan's tax conventions — a network the ministry puts at 91 instruments applying to 157 countries and regions — contains no Cyprus entry in any category: not an income tax treaty, not an information exchange agreement, not an air transport agreement.

Four consequences, and they should be planned around rather than discovered:

• No reduced withholding, in either direction. Japanese domestic withholding at 20.42% applies to dividends, interest, royalties and most service income paid from Japan to a Cyprus resident, with nothing to claim it down to. A Cyprus company invoicing a Japanese customer for royalties or technical services takes that haircut at source where a company in most other EU states would reduce it substantially. If a meaningful share of your revenue is invoiced into Japan, price this in before anything else.
• No residence tie-breaker. If both states claim you under their own law, there is no Article 4 to resolve it. You have to break Japanese residence on the domestic test, which raises the evidentiary bar and makes the practical steps real rather than cosmetic.
• No negotiated permanent-establishment definition and no mutual agreement procedure. Double taxation, if it happens, is relieved by unilateral foreign tax credits or not at all.
• But information still flows. Both states participate in the multilateral convention on mutual administrative assistance in tax matters and both report under the common reporting standard. The absence of a bilateral treaty is not the absence of visibility, and anyone selling it to you as such is selling you a risk.

Part 2: What Cyprus gives you

This is the straightforward half, and the half we build end to end. What you actually get on the other side.

What does the Cyprus side look like for a founder arriving from Japan?

Much flatter, and much shorter to describe. A Cyprus limited company pays 15% from tax year 2026 on taxable profit, and income qualifying under the IP Box comes down to an effective 3% from tax year 2026. There is no local corporation tax, no inhabitant tax levy on the corporation tax amount, no enterprise tax and no defence surtax arriving in April — the composed figure and the headline figure are the same number, which after Japan takes some getting used to.

The shareholder side is where the gap is widest. A Cyprus tax resident who is not domiciled in Cyprus — the non-dom position nearly every arriving founder qualifies for — pays no Special Defence Contribution on dividends for 17 years of Cyprus residence, and dividends sit outside Cyprus personal income tax entirely. What remains is GeSY at 2.65% on income up to €180,000 a year — at most €4,770 whatever you distribute. Set that beside 20.42% withheld and then aggregated at up to about 55.9% on an unlisted Japanese dividend and the comparison stops being close. Miss the non-dom registration and a Cyprus-domiciled shareholder pays 5% on dividends from 2026 profits instead, which is why it is done at the start.

Salary runs on a progressive scale from 0% to €22,000 rising to 35% above €72,000, which is far below Japan's top combined marginal rate. VAT registration starts at turnover of €15,600 at a standard rate of 19%, which is a lower entry point and a higher rate than a Japanese founder used to consumption tax will expect — so a Cyprus company is inside the VAT system from the start rather than growing into it. And Cyprus levies no net wealth tax, no inheritance tax and no gift tax at all. The broader picture is in Cyprus tax benefits for foreigners, the shareholder detail in Cyprus non-dom status, and what changed this year in the 2026 Cyprus tax reform.

What happens to your Japanese pension when you leave?

The headline is a negative, and it is the most common question a Japanese founder asks on the way out. The lump-sum withdrawal payment — 脱退一時金 — is available only to a person who does not hold Japanese nationality, who has lost insured status and left Japan. If you hold Japanese nationality there is no refund, in any amount, on any timescale. Your contributions stay in the system and come out under the ordinary rules.

For a foreign founder leaving Japan for Cyprus it is a live claim. The window is within two years of ceasing to have an address in Japan, you need at least six months of contribution-paid months, you must not have met the ten-year qualifying period for the old-age pension, and the multiplier used in the calculation now runs to 60 months, raised from 36, for contributions paid from April 2021. The employees' pension lump sum paid to a non-resident has 20.42% withheld at source, and a refund route exists through a tax agent and the retirement-income election — a claim most people never make.

On health insurance and on whether Japan and Cyprus have a social security agreement, we make no claim in either direction. We did not verify either point against an official source, and inventing an answer on a page people plan around is worse than saying nothing.

How does a founder from Japan become Cyprus tax resident?

Through the 183-day route, or through the 60-day rule — which got easier from tax year 2026. Four conditions now apply, the old fifth having been removed from the 60-day rule: at least 60 days in Cyprus; no more than 183 days in any other single state; a business, employment or office in a Cyprus tax-resident person held through the year; and a permanent home in Cyprus you own or rent.

The dropped condition — not being tax resident anywhere else — matters more here than almost anywhere, because with no Japan–Cyprus treaty there would have been no tie-breaker to resolve a competing claim. Its removal means another state's claim no longer disqualifies you from the Cyprus side by itself. What it does not do is end your Japanese residence: that still turns on 住所, and a founder who keeps a Tokyo home, a Japanese family and a Japanese business while nominally living in Limassol is exposed on the National Tax Agency's own words about the base of one's life. In practice the formation and the residency application are one piece of work, because holding an office in your own Cyprus company is the ordinary way the third condition gets satisfied. How the days are counted and how the certificate is issued is set out in the Cyprus 60-day rule.

There is a documentation habit worth starting on day one, and it does double duty. Everything that proves you genuinely live and decide in Cyprus — where board decisions are actually taken and minuted, where the material spending is authorised, where the staff and the office are, which country's calendar your working week runs on — is the same evidence that answers Japan's substance and management-and-control tests for the controlled foreign company rules. Build it as it happens. Reconstructing a year of it under examination is both harder and less convincing, and on the Japanese side the presumption runs against you if the file is not there.

On immigration, be precise: the Yellow Slip is a registration certificate for EU citizens under EU law, so it is not available to a Japanese national and this guide promises nothing about it. Japanese founders use the routes that apply to third-country nationals, and where a file needs specialist immigration input we bring it in rather than improvise.

Can a Japanese e-commerce brand sell into Europe through Cyprus?

Yes — and for a store, where the seller is established usually decides more than what rate it pays. A Japanese company shipping into the European Union is a third-country seller for EU VAT, meeting import VAT on consignments and appearing to European customers as an entity outside the bloc; a Japanese consumption tax registration does nothing about that. A Cyprus company changes the seller's legal status to an EU-established taxable person with an EU VAT number, a VIES presence a customer can verify, and access to the Union one-stop shop rather than only the import route.

We are not publishing EU-side thresholds here, because the intrinsic-value limit, the deemed-supplier rule for electronic interfaces and the application dates all move and we did not verify them against the primary legislation while writing this page. What we can say is where it breaks in practice: a store produces thousands of small transactions in several currencies whose VAT treatment shifts by customer type and destination, and reconstructing that from an export at quarter end is where the time goes. Sumly's Shopify and WooCommerce plugins pull orders, refunds, fees and payouts into the ledger with the right VAT codes already attached, so the return is built from the sales as they happen.

Why do people choose Cyprus over other tax havens?

Because it is a country you can actually live in, which most of the shortlist is not.

Violent crime is among the lowest in the European Union. English is the working language of banking, professional services, contracts and the courts, which for a Japanese founder removes the language transition that most of the EU would impose. The island is already full of people from everywhere, so nobody arrives as the curiosity. Both the business economy and the property market are running hot, and the regulatory habit here is to let you trade rather than to wrap the attempt in procedure — which after Japanese administrative practice takes some adjusting to in both directions. Groceries — meat, fruit, vegetables — cost noticeably less than in Tokyo or Osaka. And the beach is not decoration on a brochure. A Cyprus winter still has beach days in it, and the summer is the one people fly across the world to sit in.

The push list from the Japanese side is specific, and none of it is a complaint about the corporate rate alone. Inheritance and gift tax reach 55% and reach worldwide assets for ten years after you leave, against nothing at all in Cyprus. An owner-manager's dividend from their own unlisted company is withheld at 20.42% and then aggregated at up to about 55.9%. The composed corporate rate is going up in April 2026, not down. From the 2025 tax year a 22.5% floor applies above ¥330,000,000 of a broad income base, which closes the one route by which a large exit used to be taxed lightly. Inhabitant tax at 10% of last year's income follows the calendar rather than the person, so leaving in January buys nothing. And the major-shareholder aggregation across a family company since October 2023 quietly moves people over a line they believed they were under.

We will not tell you Japan is bad at everything, because it is not. Corporate residence is incorporation-only, so your Japanese company does not become someone else's problem when you move. The exit tax has a genuinely high floor and a five-year refund if you come back. The tax authority publishes clear, dated, freely accessible guidance and a statute service that is among the best in the world. If your assets are below the exit-tax threshold and you have no meaningful estate, the honest answer is that Japan is not costing you what you think it is. This page is written for the founder for whom it is.

Which Japanese founders should not make this move?

We would rather sort the audience honestly than sell to all of it, and on this route the sorting lines are unusually clear.

If your covered assets are well under ¥100,000,000, the exit tax is not your problem and no amount of content about it should make you think otherwise. Neither is the ten-year inheritance tail, if the estate you expect to leave is inside or close to the ¥30,000,000 plus ¥6,000,000 per heir exemption. A founder in that position is comparing a composed 30.64% against 15%, and a 20.42%-then-aggregated dividend against a non-dom's GeSY — a real difference, but one that has to be weighed against uprooting a life, and often does not win.

If your customers, staff and revenue are all in Japan, the case is weaker still. A Cyprus company selling into Japan meets 20.42% Japanese withholding on royalties and much service income with no treaty to reduce it, and the domestic permanent-establishment definition applies unmodified to whatever you still do in Japan. You would be adding a cross-border structure to a domestic business and paying for the privilege.

If you cannot actually leave — because the family stays, the Tokyo home stays, the Japanese employment stays — then on the National Tax Agency's own words about the base of one's life you are likely to remain a Japanese resident, and a Cyprus company owned by a Japanese resident is the worst of the available outcomes: below the CFC tax-burden lines, exposed to full attribution if the activity tests are not met, and taxed as miscellaneous income at up to about 55.9%.

The move earns its keep for a specific reader: someone with real unrealised value in securities, an estate large enough that 55% against nothing is the dominant number, customers who are already outside Japan, and a genuine willingness to move their life rather than their letterhead. If that is not you, the most useful thing this page can do is say so.

Two worked examples

A profitable operating company, ¥100,000,000 of taxable profit. In Japan, above the small-company band, the composed effective rate is 29.74% now and 30.64% for fiscal years commencing on or after 1 April 2026 — call it about ¥30,600,000 of tax on the later basis, before anything the shareholder does. Take the profit out as an unlisted dividend and 20.42% is withheld and the whole amount then goes into aggregate taxation, where the top marginal combination is about 55.9%. Run the same business through a Cyprus company earning €600,000 of taxable profit and the company pays 15%, or €90,000. The non-dom shareholder distributing all of it meets no income tax and no Special Defence Contribution, only GeSY, capped at €4,770. The corporate line roughly halves; the shareholder line is the one that changes the founder's life.

A founder holding ¥1,500,000,000 of unlisted shares. Covered assets are far above ¥100,000,000 and the residence history is long, so the exit tax applies. The deemed disposal is computed on the market value at departure — provided the tax agent was appointed first — and the national component of the charge is 15.315% of the deemed gain, which on a gain of that order is a nine-figure yen number. The deferral is available for five years, extendable to ten, against security covering the tax and the interest tax, with a 継続適用届出書 every 15 March. If the founder returns to Japan inside the deferral period, the charge on shares held continuously across the whole span is cancelled outright. Now set that against the alternative of staying: on the same ¥1,500,000,000 of value, the inheritance tax scale reaches 55% on the slice above ¥600,000,000, the exemption for a spouse and two children is ¥48,000,000, and Cyprus charges nothing. The exit tax is a one-off with a deferral and a refund. The inheritance charge is not.

Both examples use headline rates and assume full distribution. Your own reliefs, timing, capitalisation and shareholding will move the answer, and the calculator at the top of this page shows the shape of the difference rather than predicting your result.

Part 3: How the move runs

From the decision to the first invoice out of the Cyprus company: the order, the mistakes people make before you, and two calculations worked through in full.

What does the move look like, month by month?

The order below matters more than the months do, because several of these steps stop being available once the one before it has happened. Read it as a sequence, not a calendar.

• Before anything else — and this is where we start. We bring in a Japanese adviser from our network to value your covered assets against the ¥100,000,000 line and confirm your five-in-ten residence history. If you are anywhere near either, we sequence the whole decision around the exit tax and tell you so plainly.
• The year before you go. Where it is possible, your adviser times large dividends or realised gains so you can leave before the following 1 January, because inhabitant tax follows the calendar. Together we settle what the Japanese company is for after the move.
• Two to three months before departure. Your Japanese adviser files the 納税管理人の届出書 with the tax office — before you leave, not after — and the separate municipal tax agent notification with your city office, and arranges the security for the deferral so it can be lodged by the filing deadline. We hold the Cyprus schedule to those dates.
• Month 1. We register the Cyprus company; books open the day you order, and we start the residence paperwork. Your adviser files the 準確定申告 if a tax agent has not moved the deadline.
• Months 1–3. We register for VAT and, where relevant, social insurance, employees and UBO, and get banking and EU payments moving. You take up the directorship that anchors the 60-day rule.
• Months 3–6. You rent or buy the permanent home the 60-day rule requires, and we tell you what qualifies. You move the decisions and the board to Cyprus properly, and we keep the minutes and open the contemporaneous substance file the CFC tests will be judged on.
• Month 12 onward. We apply for the Cyprus tax residency certificate and the non-dom registration. Your Japanese adviser files the exit-tax return with the deferral claim, then the 継続適用届出書 every 15 March without exception — and we keep that date in the calendar with them.

What mistakes do Japanese founders actually make?

The expensive ones are ordinary rather than exotic.

Leaving first and taking advice second, and losing the exit-tax deferral permanently because the tax agent was appointed a week too late. Budgeting the exit tax from a page that quotes 15.315% flat, without asking about the inhabitant tax component. Believing the deferral is automatically ten years, and missing the extension notice before the fifth anniversary. Missing a 継続適用届出書 and watching the whole deferred amount fall due four months later, with the reduction measures lost alongside it. Assuming the ten-year inheritance clock starts at the airport for the whole family, when the heirs have a clock of their own. Leaving the Japanese shares with a parent and discovering that the gift and inheritance limbs were written for exactly that plan. Buying a Cyprus IP Box structure while still Japanese-resident, and converting a 30% corporate charge into a 55.9% personal one. Trusting a Cyprus-side page that still quotes 12.5%, which has not been the Cyprus rate since the 2026 reform. Assuming a treaty exists, and pricing Japanese-source royalties at a reduced rate that is not available. And appointing the national tax agent while forgetting that inhabitant tax needs a second, municipal one.

Every one of them comes from treating the move as a single event instead of two tax systems handing over to each other.

Part 4: Who does the work

You can do all of this yourself. Below is what that costs in time and in money, against what it costs to let us do it.

Do it yourself — or have Sumly do it

Both work. The self-run version means the Registrar's forms and fees, a registered office you arrange, VAT and VIES registration, provisional tax twice a year, annual statements and a ledger an auditor will sign — all on top of a two-country move you are already managing, in your second language. The Sumly version has four published prices: formation from €950 one-time, the bookkeeping software from €39 a month, a Sumly certified bookkeeper at €390 a month, and tax residency with non-dom at €750 per person.

The software on its own runs the whole company, whether you are already in Limassol or still in Tokyo: invoicing, AI double-entry bookkeeping, live open-banking feeds, every VAT, VIES, provisional and corporate return prepared box by box, live reports, a document inbox with its own email address, mobile receipt capture that books itself, multi-currency invoicing, team roles and the AI assistant — plus payroll at €15 per employee per month, IP Box tracking at €50 a month, Projects at €10 a month, and the e-commerce plugins.

Sumly offers all of this to everyone: a virtual address with a PO box and your mail scanned into the dashboard wherever you are that month; nominee director and secretary where a structure genuinely needs them; the Yellow Slip for EU citizens, which is not the Japanese route; and the whole registrations bundle — VAT, social insurance, employees and UBO — filed properly the first time.

Each of those is an extra, scoped to your case. Tell us what you need in the meeting and you get one clear package-deal offer covering the lot, the IP Box application included where it belongs, because that is complex expert work and exactly the sort of thing that should be examined with you before a price is attached to it. No hourly billing and no surprises afterwards.

Sumly, a law firm, and a traditional bookkeeping firm

Law firm vs Sumly — and what happens when it gets complicated

Sumly is cheaper and faster, and we work WITH lawyers, not against them. When a case gets too complicated for what Sumly handles directly, we simply connect you with the right expert in exactly the legal field you need help in, and everything gets done according to best practice, always. Either way, it starts the same place: contact us.

For a founder leaving Japan that split is the whole proposition. The Japanese half of this move — the exit-tax valuation, the deferral security, the residence file — needs a Japanese adviser, and we will say so every time you ask. The Cyprus half comes from one provider, on one dashboard, at four published prices. That is what makes Sumly the best choice for Japanese founders creating a company in Cyprus and relocating their business to it.

Why is Sumly the best bookkeeping system for a Cyprus company?

Sumly is the best accounting software for a Cyprus limited company — because it is built for exactly one thing, Cyprus tax law: all 16 Cyprus VAT codes mapped to the official VAT return boxes, VIES and provisional tax native, not a localization. That is a claim we are happy to have tested, and the evidence follows.

The two Cyprus-built alternatives a Japanese founder will be pointed at are Cybooks and Balabook. We meet their former customers every week — what they tell us, again and again: workflows that made simple bookkeeping overly complicated, rough edges and glitches, support that left them waiting — a messy experience they were relieved to leave behind.

On every one of these checkable dimensions, Sumly leads. That is a factual comparison — not a matter of taste.

Said plainly: the best support, the best bookkeeping software, the best AI for bookkeeping, the best bookkeeper, the best prices — everything done easily. We publish the detail rather than assert it: Sumly vs Cybooks and Sumly vs Balabook, and for the international tools a Japanese business is more likely already running, Xero, QuickBooks and Sage.

One line bears repeating for a product company. The IP Box is the largest single line in a Cyprus product company's tax position — and the easiest one to forfeit through bookkeeping that was never set up for it. For a Japanese founder there is the extra sequencing point above: the claim belongs after Japanese residence has properly ended, not before. The application starts as a conversation about what your licensing income is actually made of, which is one more reason the meeting comes before any number does. What that involves is set out at the IP Box service.

What happens when you get in touch

You do not need to have decided anything before you speak to us, and you do not need your paperwork in order.

1. The meeting. Fifteen minutes. You tell us what you own and when you want to move. We tell you which rules at home catch you, and what the Cyprus side costs.
2. We tell you what kind of case you have. If it is simple, we do all of it — company, books, residency, non-dom — at a fixed price. If it is not, we say so immediately and bring in the specialist it needs.
3. We start. The company is registered, your books open the same day, and you have one point of contact for the whole thing.

Questions Japanese founders actually ask

Frequently asked

Who actually pays Japan's exit tax when they leave for Cyprus?

Only someone who meets both conditions at once. Your covered assets — securities, investment trusts, silent-partnership interests and open margin or derivative positions — must total ¥100,000,000 or more at the moment you cease to have both a domicile and a residence in Japan, and you must have had a domicile or residence in Japan for more than five years within the preceding ten. Miss either limb and the charge does not apply at all. Nationality is irrelevant: Japanese nationals and foreign residents are treated identically. The ¥100m is measured on gross market value across all covered assets, not on the gain and not on your net worth, and real property, cash and crypto-assets do not count toward it.

What rate does Japan's exit tax charge on the deemed gain?

The statute deems a disposal and then leaves the rate to the ordinary rules for share disposals, so no single all-in figure is published and we will not invent one. The national component is 15% income tax plus the 2.1% reconstruction surtax on that tax, giving 15.315%. Whether the 5% inhabitant tax also lands is genuinely unsettled, because inhabitant tax is assessed on where you lived on 1 January and the whole point of the transaction is that you have left. Budget for the national component with certainty and take Japanese advice on the local one — the two competing pages we checked both quote 15.315% flat and neither mentions the question.

Can I get Japan's exit tax back if Cyprus does not work out?

Yes, and this relief is more generous than almost anything written about it admits. If you return to Japan within the deferral period, the charge on covered assets you held continuously from departure to return is cancelled outright on a claim for correction filed within four months of the return date — and the National Tax Agency's own leaflet says expressly that this covers someone who never took the deferral and simply paid the tax, provided they come back within five years. In practice that makes a four-year attempt at Cyprus reversible on the exit-tax line, which is not true of most European exit charges.

Does moving to Cyprus get me out of Japanese inheritance tax?

Eventually, and not for a decade. A Japanese national who no longer has a Japanese address is still taxed on worldwide assets if they had an address in Japan at any point in the ten years before the death, and the same ten-year test applies to a Japanese-national heir. Both clocks must run out, so the family leaves the worldwide charge only when the later of them expires. And even then, shares in a Japanese kabushiki kaisha stay Japan-situs forever, because situs follows the issuing company's head office. Moving yourself is necessary; moving the value into a Cyprus company is what actually changes the situs.

Will Japan's CFC rules attribute my Cyprus company's profits to me?

While you are still a Japanese resident, almost certainly on the tax-burden line, and then it comes down to substance. Japan exempts an ordinary controlled foreign company only where its tax burden ratio reaches 20%, and a paper company or cash box only at 27%. Cyprus at 15% is below both, and the IP Box at around 3% is nowhere near. So the whole question becomes whether the company passes the four economic-activity tests. If it does not, its entire income is attributed to you as miscellaneous income and aggregated at up to about 55.9%. This is the reason to break Japanese residence first rather than to avoid Cyprus.

Does the Cyprus IP Box work for a founder who is still living in Japan?

No, and this is the correction with the highest cash value on this page. Japan's controlled foreign company rules treat a company whose principal business is providing industrial property rights, know-how or copyright as fully attributable regardless of how much substance it has — the business test is failed before substance is even examined. A Cyprus IP-licensing company owned by a Japan-resident founder therefore produces a worse result than doing nothing at all: the whole income lands on a Japanese return at aggregate rates instead of sitting in a Japanese company at the corporate rate. The IP Box is an argument for after the move, not a reason to make it.

Does a Cyprus company become Japanese if I run it from Tokyo?

No. Japan defines a domestic corporation purely as one with its head office or principal office in Japan — there is no place-of-effective-management limb in either the Corporation Tax Act or the Income Tax Act. Managing a Cyprus company from Tokyo does not make it a Japanese corporation, which is a real structural advantage of this route over several others. But do not read too much into it: a permanent establishment in Japan is still a live risk, there is no treaty to soften the domestic PE definition, and the controlled foreign company rules attach to you personally regardless of where the company is managed.

Is there a tax treaty between Japan and Cyprus?

There is not. The Ministry of Finance's own list of Japan's tax conventions, covering 91 instruments applying to 157 countries and regions, contains no Cyprus entry in any category — no income tax treaty, no information exchange agreement, no air transport agreement. Four things follow: Japanese withholding on payments out of Japan applies at the full domestic 20.42% with no reduction, there is no residence tie-breaker if both states claim you, there is no negotiated permanent-establishment definition, and there is no mutual agreement procedure. Do not infer that information does not flow, though — both states are in the multilateral assistance convention and both report under the common standard.

Can I get my Japanese pension contributions back when I leave?

Not if you hold Japanese nationality. The lump-sum withdrawal payment is available only to people who do not hold Japanese nationality, so for a Japanese founder there is no refund at any amount and on any timescale — the contributions stay in the system and come out under the ordinary rules. A foreign founder leaving Japan for Cyprus can claim within two years of ceasing to have a Japanese address, subject to the contribution-month conditions, and the calculation multiplier now runs up to 60 months for contributions paid from April 2021. We have not verified whether Japan and Cyprus have a social security agreement, so we make no claim about totalisation either way.

Keep reading

• Every country's route to Cyprus — the departure guide for wherever you are now
• Cyprus non-dom status — how the 17-year exemption works
• The Cyprus 60-day rule — the day counts and the certificate
• Cyprus tax benefits for foreigners — the full list, in one place
• How to register a company in Cyprus and what it costs
• Nominee director in Cyprus — what a nominee can and cannot carry
• What changed in the 2026 Cyprus tax reform

Japanese figures on this page are stated for the 2026 position on the pages cited, and Cyprus figures for tax year 2026. The calculator at the top runs on headline rates, full distribution and an assumed 10% annual return, so read what it produces as an illustration of the gap between two systems and not as a prediction about your own return. All Sumly prices exclude VAT, and government expenses on a formation are invoiced separately once your application is approved.