Want To Start A Business In Japan Or South Korea?

Japan and South Korea are economic powerhouses of Asia, drawing in entrepreneurs from all over. Japan boasts the world’s third-largest economy, with a prominent presence in robotics, electronics and automobiles.

While home to multinational companies such as the likes of Toyota and Sony, the economy is equally as driven by small to medium enterprises (SMEs).

Likewise, South Korea has experienced rapid economic growth in technology, K-pop and entertainment. So much so, the popular streaming service Netflix has invested billions of dollars into South Korean drama and films.

It’s also home to global brands like Samsung, Hyundai and LG, securing South Korea’s spot as a top innovator amongst the rest of the world.

It’s no surprise then that you may be unsure of which country to choose for starting a business. Let’s take a look at a side-by-side comparison of Japan and South Korea to see their offerings, some challenges along the way and what you can expect on the whole.

 

How Startup-Friendly Are Japan And South Korea?

 

Japan was traditionally a harder environment to break into for startups, given its bureaucracy and bias for established businesses. However, the government has taken considerate steps to welcome entrepreneurs by developing startup programs.

One of these programs is the J-Startup Initiative, aimed at assisting startup founders with support and financial resources. The development of special economic zones also offer tax benefits and some reduced regulations in an effort to attract more entrepreneurs to the country.

South Korea has a lively startup environment, especially in Seoul’s Gangnam and Pangyo Techno Valley. To make it easier to work in the country, foreign entrepreneurs are able to apply for a Startup Visa Program specifically designed for business owners.

Moreover, the Tech Incubator Program For Startups (TIPS) and K-Startup Grand Challenge are incubator and accelerator programs to help startups enter the Korean market.

 

The Cost Of Living And Working In Japan And South Korea

 

Japan: The country is known for its costly living and work expenses, particularly in the capital of Tokyo. If you go outside of the major cities, you will find that housing and office rent can be quite a bit lower. The expenses for registering and running a business will vary depending on which industry you’re in, but the general range is $3,500 – $7,000 for the initial setup.

South Korea: Seoul can also be a pricey city to live in, but slightly more affordable than Tokyo. Busan and Daegu have cheaper rent, utilities and day-to-day expenses compared to the country’s capital. To initially set up your business here, you can expect to pay between $800 – $4,000.

 

What Are The Tax Rates In These Countries?

 

Japan: The corporate tax rate is around 23.2% but this will depend on the size of your business and where you are located while Value Added Tax (VAT) is set at 10%. If you require employees, your contributions could add up to approximately 30% of salary costs.

South Korea: Here, the corporate tax rate ranges between 10% and 25% with VAT also at 10%. Employers need to contribute to employee pensions, as well as health and employment insurance. This can amount to around 16% to 20% of salary costs.

 

 

Will There Be Any Language Barriers?

 

Japan: Japanese is the official language and is largely spoken across business, day-to-day interactions and legal procedures. Although you may find some English-speaking professionals in areas like Tokyo, the ability to converse in Japanese will be essential.

South Korea: Similarly, Korean is used as the primary language for communicating both in and outside of business. English is widely incorporated into their education systems, but an understanding of Korean is still a necessity.

Overall, you may encounter language barriers in both countries so you will need to consider hiring translators, hiring bilingual staff or try to learn the language yourself to settle in comfortably.

 

Visa Requirements For Entrepreneurs

 

Japan: Foreign entrepreneurs usually need to apply for a Business Manager Visa which has some requirements. You will need to invest a minimum of $35,000 or commit to hiring two full-time employees. Along with this, you will also need a registered office, a detailed business plan and approval from Japan’s immigration authorities. Some cities like Fukuoka offer startup visas, and the investment requirements will be lower there.

South Korea: The country offers an Entrepreneur D-8 Visa which needs an initial investment of $75,000, proof that your business is viable and approval from local authorities. You could also apply for a D-10 Visa first which will allow you to scout out business opportunities before you actually register the company.

 

Some Challenges To Consider Before Going Ahead

 

Both Japan and South Korea have appealing business opportunities in their own right, but they also have their own distinct challenges. Before you make your final decision, consider some of these potential challenges and how they could affect you.

Japan: Starting a business here comes with an extensive amount of paperwork which can slow down your registration process. For startups, the expensive costs for rent and salaries can be a major barrier to getting off the ground. Japan is also very traditionally conservative, valuing hierarchy and strong relationships. A startup founder trying to break into this may find it harder to navigate, especially with the added language barrier.

South Korea: The country is highly competitive and known to have a very intense work culture. For new entrepreneurs, this means working long hours and adapting quickly to changes in what their customers want. Industries like finance, e-commerce and technology also have strict legal frameworks which need to be adhered to.

 

How To Start A Business In Japan Or South Korea

 

Japan: Although it is a fairly straightforward process, it may require some patience on your part as processes can be slow. The first step is to decide on your business structure and then register the company. After this, you can open a business bank account and get your Business Manager Visa. The last step is to register for any taxes or permits that apply to you and your industry.

South Korea: Similarly, you will first choose your business structure and then register with the Korean Business Registration Office. You can then open up a corporate bank account and apply for the D-8 Entrepreneur Visa. If you require any additional licenses or need to register for tax, that will be your last step.

 

Where Should You Start A Business?

 

As an entrepreneur looking to expand into Asian markets, both Japan and South Korea are top contenders.

If you are after high-quality infrastructure and stability, Japan could benefit you more despite the high costs of living and working.

However, if you are a fast-moving startup particularly in the tech industry, South Korea will be the perfect choice.

Either way, it will be exciting to watch these two dynamic countries grow their startup environments in the coming years.