Guidelines for Clarification of Operation of "Management and Administration" Status of Residence

1. basic requirements for "Management and Administration" status of residence

The status of residence "Management/Administration" applies to foreign nationals who start a business in Japan or engage in the management or administration of an existing business. The following basic requirements must be met in order for this status to be granted.

• Substantial participation in management:. Substantial participation in the decision-making of important matters concerning the operation of the business, the execution of the business, or the auditing of the business. Simply being an officer is not sufficient.

• Compliance with Landing Standards Ordinance:. The following requirements set forth in the Standard Ministerial Ordinance of the Immigration Control and Refugee Recognition Act, Article 7, Paragraph 1, Item 2, shall be met.

    ◦ Secure or exist at the place of business

    Requirements for business size, etc.

• Business continuity:. In an application for extension of period of stay, etc., the applicant will be examined to determine whether or not he/she can continue to engage in the activity of residence of managing and operating a business.

• Legal Compliance:. Proper fulfillment of various public obligations (tax payment, social insurance, etc.) as a business entity.

2. standards for securing business premises

Securing a place of business is one of the key requirements in the Landing Standards Ordinance. The criteria for determining this are as follows.

Definition and Requirements for Business Establishments

Based on the Japan Standard Industrial Classification established by the Ministry of Internal Affairs and Communications, establishments must meet the following two criteria

1. economic activities are conducted under a single management entity, occupying a certain location (a parcel).

(2) The company has personnel and facilities, and the production or provision of goods and services is continuously carried out.

Unacceptable Business Forms

Since continuity of business is required, the following forms do not, in principle, conform to the requirements for securing a place of business.

- Short-term rental space on a month-to-month basis

- Easily disposable stalls

Points to keep in mind for rental properties

If the business is a rental property, the following points must be clarified

• Intended use: To The lease agreement must clearly state that the use is for business purposes, such as "business use," "store," "office," etc.

• Subscriber's name (2) The lease contract is in the name of a legal entity, etc., and it is clear that the use is by such legal entity.

Special Exception for Use of Incubation Facilities

When supported by an incubator (a group or organization that provides management support), the following facilities are treated as meeting the "secure a place of business" requirement.

- Japan External Trade Organization (JETRO) Invest Japan Business Support Center (IBSC)

- Other incubation offices, etc. temporarily leased for the purpose of supporting entrepreneurship

- In this case, the applicant is required to submit a letter of approval for use, etc. for the business site in question.

3. examination of joint management by multiple foreign persons

When multiple foreigners jointly manage a business, the applicability of status of residence is examined for each foreigner individually.

Basic Principles of Screening

- Even if more than one foreigner is appointed as an officer, each person must be a director or an executive officer of the business.Substantial participationThe company must have a

- The specific activities to be engaged in will be examined for eligibility for status of residence and conformity to landing criteria.

Reasonableness Requirements

Regarding the management or control of a business by more than one foreigner,Reasonable Reasonsmust be recognized. Reasonableness will be determined by considering the following factors

- Scale of business

- amount of work (to be) done

- Sales, etc.

Criteria for determining applicability

If all of the following conditions are met, it is possible to determine that all of the respective foreign nationals fall under the status of "management/administration".

1. Rationale:. Reasonable grounds must be recognized for each foreigner to manage and control the business, taking into consideration the size of the business and the volume of business.

2. Clarification of the work:. The duties related to management and administration must be clearly defined for each foreigner.

3. Payments:. Each foreign national is to be paid a reasonable remuneration for his/her management and administrative services.

(4) Criteria for business continuity

The continuity of the business is judged comprehensively based on the financial results of the most recent two fiscal years, including the balance sheet status, as well as the financial results of the single fiscal year.

(1) Gross profit in the most recent fiscal year or the most recent previous fiscal year

financials	judgment	remarks
a. No deficit at the end of the most recent fiscal year<br>(There is a surplus, or there is neither a surplus nor a deficit)	No problem with business continuityIt is judged to be	Even if there is a net loss in the most recent period, continuity is permitted to the extent that surplus is not reduced and a deficit is not created.
b. has a deficit at the end of the most recent fiscal year
(a) Not insolvent	In principle, there is continuity of businessIt is recognized that	The applicant will be required to submit a business plan for the next one year and materials showing projected revenues. Depending on the content, additional evaluation documents from a third party, such as a small business consultant, may be required.
(a) Insolvent at the end of the most recent fiscal year, but not insolvent at the end of the previous fiscal year.	The continuity of the business is permitted subject to specific prospects for improvement within one year.	A third party, such as a small business consultant or a certified public accountant, is required to submit a written evaluation of the expected improvement (elimination of insolvency within one year).
(c) Excess liabilities both at the end of the most recent fiscal year and at the end of the previous fiscal year.	In principle, the business is not considered to have continuity of operations.	Special exception for startups. See "Special Measures for Emerging Enterprises" below.

(2) If there is no gross profit for both the most recent fiscal year and the most recent previous fiscal year

If there is no gross profit for two consecutive fiscal years, it is difficult to recognize that the firm has the ability to continue to perform its principal business,In principle, the business is not considered to have continuity of operations.

Special measures for emerging companies

For domestic unlisted companies (start-ups) that have been in business for less than five years, a flexible judgment will be made regarding business continuity, since it is expected that the company will be in the red when it is first established. In the following cases, continuity may be recognized if it is determined that there are reasonable grounds based on the contents of the submitted documents.

• Subject case:.

    ◦ If the company is insolvent both at the end of the most recent fiscal year and the end of the previous fiscal year

    ◦ No gross profit at both the most recent and previous year-end

• Documents required to be submitted:.

    1. Written third-party evaluation:. A document in which a small and medium-sized business consultant, certified public accountant, etc. evaluates the prospects for improvement (elimination of insolvency within one year or assurance of gross profit).

    2. Proof of Funding Documentation:. Documents showing efforts to raise funds through investments and loans from investors, VCs, banks, etc., and subsidies and grants from public support.

    3. Business Development Certification Documents:. Documents that demonstrate the company's efforts to develop products and services, expand its customer base, etc.

Definitions of key terms

terminology	Description.
most recent period	Period for which the most recent financial results have been finalized
Most recent previous term	One term prior to the most recent term
Gross profit	Net sales less cost of sales
surplus	All capital surplus and retained earnings, including legal reserves
deficit	Unsettled losses at end of period, losses carried forward
insolvency	Total liabilities exceed total assets

5. fulfillment of official obligations as a business

Foreigners with "business/administrative" status are required to operate their businesses properly and comply with laws and regulations regarding various official obligations. Failure to comply with these obligations will be subject to review by theNegative factorsIt is evaluated as a

(1) Compliance with tax-related laws and regulations

• Obligations: Obligations: Obligations Properly pay national taxes (income tax, corporate tax, etc.) and local taxes (inhabitant tax, enterprise tax, etc.).

• Negative evaluation:. Punishment for non-payment of tax obligations, large amounts or long periods of non-payment. In particular, the decision to levy heavy additional tax due to fraudulent consumption tax refunds, etc., is considered highly malicious.

(2) Compliance with labor and social insurance laws and regulations

• Obligations: Obligations: Obligations

    ◦ The working conditions of the employees employed comply with labor-related laws and regulations.

    ◦ Proper enrollment procedures and payment of insurance premiums if the business is covered by labor insurance.

    ◦ If the business is covered by health insurance and employee pension insurance, proper enrollment procedures, employee qualification procedures, and premium payment.

• Negative evaluation:. If it is deemed that these laws and regulations are not being complied with.

6. evaluation of financing by stock acquisition rights

Funds raised through the issuance of paid-in subscription rights used by startups, etc. may be included in the business size requirement (30 million yen or more) of the Landing Standards Ordinance, provided that certain requirements are met.

Counting requirements

The amount of the portion that satisfies both of the following is eligible for inclusion

1. paid in by the issuance of stock acquisition rights,Payments that are not required to be repaid(2) The company shall be

2. if such paid-in amount is exercised in the future andpaid-in capitaland the right is not exercised and lapses.grace (of God, Buddha, etc.)In any case where theRecognized as capital(2) The company shall be responsible for the following.

Documents to be submitted

The following documents are required when applying for inclusion.

1. Investment Agreement:. J-KISS type subscription agreement, etc.

2. Proof of payment: (1) A copy of the bankbook or transaction statement that proves the amount actually disbursed.

3. Pledges, etc.:. A pledge that the amount paid in, which is recorded as a business size requirement, will be capitalized when exercised in the future.