Relationship between Japanese social insurance premiums and asset formation

By 08/09/2020Real Estate

By Masahiro Fukai, USCPA/ Realtor

In Japan, all employees who work as a corporation must take out social insurance operated by the country of Japan. Corporate representatives must also take out social insurance. There are two types of social insurance operated by the Japanese country. One is National Pension Insurance (Kokumin Nenkin) and the other is Welfare Pension Insurance (Kosei Nenkin). The former has a low monthly payment, while the latter has a high monthly payment.

Previously, self-employed people had no problems with national pension insurance (Kokumin Nenkin), but a few years ago, the Japanese country changed the system. If it is a corporation, even one person is obliged to join the welfare annuity insurance (Kosei Nenkin), which has a high monthly payment.

In fact, as a result, Japanese micro-enterprises have become extremely burdensome and have a major impact on management. Among small businesses, the amount of social insurance premiums paid is heavy and the number of cases of bankruptcy is increasing.

So, I would like to introduce a method for small business owners to reduce the burden of social insurance premiums.

Welfare pension insurance (Kosei Nenkin) is charged for “salary”. Therefore, social insurance premiums are charged against the salary received from your corporation. However, if the president of a corporation purchases real estate by himself and gets rent income, social insurance premiums are not charged for the rent income.

Therefore, the president of a corporation should purchase real estate as an individual, rather than as a corporation buying real estate. I would recommend that the corporate president increase the personal property rent income while at the same time setting the corporate salary low.

Social insurance premiums must be paid until the age of 65, or even 75, for many years. The burden of continuing for this long period every month is extremely large. I think that the size of assets in Japan will change greatly depending on whether you adopt the above method of reducing social insurance premiums.