Unraveling the Tax Maze: How AI Legalese Decoder Can Simplify Your Side Gig Tax Questions
- November 11, 2023
- Posted by: legaleseblogger
- Category: Related News
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Questions on Taxation and Sole Proprietorship for a Side Business
I am in the process of starting a side business and have some questions regarding taxation. I have been working on a website for several years, and it has now gained a significant number of users. I am considering monetizing it through advertisements and am uncertain about the potential net profit. According to the network I have been in contact with, I could potentially earn between 235-500k Yen per month, although I am skeptical of this estimate. My main concern is how this income would be taxed and whether I need to establish a sole proprietorship for this venture. Based on my research, it seems that this income could be classified as miscellaneous income, especially since it is uncertain how much I will earn from this side business.
Additionally, I am currently employed full-time, and there is a possibility that the income from this side gig may surpass my earnings from my main job, which currently amounts to 400k Yen per month. I am unsure if this would present any issues. Moreover, there is uncertainty surrounding my visa status, as it is set to expire in early January. I have been awaiting a response from immigration for approximately six months, and if my visa is not extended, I may have to return to my home country, further complicating the situation.
Thank you for taking the time to address my inquiries.
Best regards
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You would declare the income as misc. Though of course it might be beneficial to operate as a sole proprietor and use the blue form, it isn’t necessary.
However you indicate you currently have a standard work SOR. Do the actions of running a website fall under the permission granted by your status? If not you may wish to apply to immigration for permission in advance.
> My primary question now being how would I tax this income and do I need to create a sole proprietorship for this?
When a taxpayer generates income from selling advertisements on their website, the income will either be classified as “business income” or “miscellaneous income”. Which category the income falls into depends on the scale of the operation and what kinds of records the taxpayer is maintaining. See [this post](https://www.reddit.com/r/JapanFinance/comments/y120o5/new_nta_guidance_business_income_vs_miscellaneous/) for more details.
If the income qualifies as “business income”, the taxpayer is supposed to [notify the NTA](https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/shinkoku/annai/04.htm) within one month. If the income qualifies as “miscellaneous income”, notification is not required.
In either case, you would declare the income (and associated expenses) on your annual income tax return, to be filed by March 15 each year.
> I might earn more using this side gig than with my main job (although I am doubtful) which earns me currently 400k a month, don’t know if that would be a problem
Not a problem in terms of tax. Could be a problem in terms of your visa conditions, though.
Note that the “engineer, etc.” visa only covers work performed for *Japanese businesses*. Selling advertising on a website you are running would normally fall outside the scope of activities covered by that visa. You could ask for permission from the ISA to engage in the work on the side, but if you are earning significantly more from the website than your visa-designated job, the ISA may not look favorably on your application.
However, it’s worth noting that what the ISA primarily cares about is how you are spending your time, not how much money you are making. It’s not clear from your post how much time you actually spend maintaining the website. If the amount of time you are spending on it is small, there should be no problem obtaining approval from the ISA.