Risks for Executives Receiving Remuneration from Corporations Not Enrolled in Social Insurance#

When a foreign national establishes a corporation in Japan or participates in management as an executive officer of an existing corporation, maintaining their residence status (visa) is of paramount importance. Specifically for foreign executives holding the “Business Manager” visa, whether the company they manage complies with Japanese laws and regulations is directly linked to the results of visa renewal applications and future applications for Permanent Residence.

Among the various compliance requirements, the status of enrollment in “Social Insurance” (Shakai Hoken), which comprises Employees’ Health Insurance and Employees’ Pension Insurance, is frequently scrutinized. This article explains the specific risks and how the Immigration Services Agency of Japan (ISA) evaluates cases where a corporate officer receives remuneration from a corporation that has failed to enroll in the mandatory Social Insurance system.

The Legal Obligation for Corporate Social Insurance Enrollment in Japan#

First and foremost, under Japanese law, a “corporation” (such as a Kabushiki Kaisha or Godo Kaisha) is compulsorily designated as a covered establishment for Social Insurance, regardless of its size or the number of employees. This obligation applies even to a company with no employees other than the president (Representative Director or Representative Member), provided that the executive receives remuneration from the company.

It is a common misconception among owners of small businesses or newly established corporations that “Since I am the only person in the company, enrolling in National Health Insurance (Kokumin Kenko Hoken) and National Pension (Kokumin Nenkin) is sufficient.” This is legally incorrect. As long as an individual receives remuneration as a corporate officer, the corporation is obligated to enroll in Social Insurance, and the premiums must be split between the corporation and the individual.

Risks Regarding the Renewal of “Business Manager” Visa#

The Immigration Services Agency strictly examines the fulfillment of public obligations by the applicant during the application for an extension of the period of stay. In the case of a “Business Manager” visa, the scope of examination extends not only to the individual applicant’s tax and payment status but also to the “compliance status of the corporation being managed.”

1. Shortened Period of Stay or Denial Due to Legal Violations#

The ISA considers receiving remuneration from a corporation not enrolled in Social Insurance as a “state of legal violation.” If a company records “Officer Remuneration” in its financial statements but fails to record “Statutory Welfare Expenses” (the company’s portion of insurance premiums) or cannot produce receipts for Social Insurance payments, the fact of non-enrollment is easily detected during the screening process.

In such cases, even if the applicant might otherwise be eligible for a 3-year or 5-year period of stay, it is common for the period to be restricted to “1 year” due to the violation of laws. In malicious cases, or where non-enrollment continues despite guidance from the Immigration Bureau, there is a tangible risk that the application for extension will be denied entirely, leading to the loss of residence status.

2. Stricter Guidelines and Enforcement#

In recent years, the guidelines of the ISA have become increasingly strict. In the past, there were instances where renewals were permitted despite minor deficiencies in social insurance status. However, enrollment in and payment of Social Insurance are now treated almost as mandatory requirements for renewal. Since business managers are deemed to have the “ability and responsibility to conduct business in compliance with labor and social insurance laws,” the responsibility for non-enrollment falls heavily on them.

Fatal Impact on Permanent Residence Applications#

If a foreign executive aspires to obtain Permanent Residence (PR) in Japan in the future, non-enrollment in Social Insurance by the corporation or the executive individually serves as a fatal obstacle.

The guidelines for Permanent Residence explicitly state that the applicant must be “properly fulfilling public obligations.” This requires that pension and health insurance premiums for the most recent period (typically the last two to five years, depending on the route) have been paid “at the proper time and in the proper amount.”

If a corporate officer has been enrolled in the National Pension and National Health Insurance instead of the mandatory Employees’ Pension and Employees’ Health Insurance (Social Insurance), this is judged as “enrolling in an inappropriate system,” even if the premiums for the National system were paid. Consequently, this leads to the disapproval of the application. In PR screenings, examiners verify not only that there are no unpaid premiums but also that the applicant is enrolled in the legally correct insurance system commensurate with their status as a corporate officer.

The Relationship Between Officer Remuneration and Enrollment Obligations#

A question often arises: “If I set my officer remuneration to zero, can I avoid enrolling in Social Insurance?” It is true that if the remuneration is zero, there is no basis for calculating social insurance premiums, so the obligation to enroll does not arise (or is technically suspended).

However, in the examination of residence status for foreign nationals, there is a requirement to have sufficient income to live stably in Japan (Independent Livelihood Requirement). If officer remuneration is zero or extremely low, while the issue of Social Insurance might be technically sidestepped, a different significant risk emerges: the ISA may judge that the applicant lacks the financial ability to maintain their livelihood in Japan. This often results in the denial of the visa renewal. Therefore, setting an appropriate level of remuneration and properly enrolling in Social Insurance is the only correct path to maintaining residence status.

Remedial Actions When Non-Enrollment is Discovered#

If an executive is currently receiving remuneration from a corporation not enrolled in Social Insurance, immediate action must be taken to complete the “New Application for Coverage” procedure at the jurisdictional Pension Office.

During the visa renewal application, the ISA may question the past period of non-enrollment. The priority is to establish a track record proving that “the company is currently properly enrolled and payment has commenced.” In some cases, the Japan Pension Service may require retroactive payment of premiums for up to two years. To demonstrate a stance of legal compliance, it is necessary to accept this and make the payments.

When submitting documents to Immigration, simply submitting the insurance card or coverage certificate is often insufficient. It is advisable to attach a written statement of reasons (Riyusho) expressing reflection on why the company was not enrolled (e.g., ignorance of the system) and pledging that the status has been rectified and payments will be made without delay in the future. This effort helps to minimize the negative impression on the examiner.

Conclusion#

For a corporate officer to receive remuneration while the corporation remains unincorporated in Social Insurance is not merely a cost-saving measure; it is a serious compliance violation that undermines the very foundation of their residence status. The Japanese immigration system places great weight on the fulfillment of public obligations, such as taxes and social insurance, as “proof of reliability” for granting residence. To protect both the continuity of the business and the executive’s own life in Japan, it is essential to enroll in and pay for Social Insurance properly in accordance with the law.