Foreign companies considering expanding to Japan and engaging in business on an ongoing basis must establish a Japanese branch office or set up and register a Japanese corporate entity. In addition, executives and employees seconded to Japan by a foreign company must first obtain an appropriate status of residence for the category of work he or she will engage in.
Kobe Legal Partners Shiho-shoshi Law Office, with its experienced English-speaking staff, provides one-stop support and services for everything from incorporation and registration to obtaining statuses of residence.
Corporate Entity Forms for Overseas Expansion
Foreign companies contemplating the establishment of a base in Japan may choose from among the following corporate entity forms, taking into consideration the nature of the business activities as well as tax and accounting matters.
| Representative Offices | Branch Offices (Foreign company’s business office) | Japanese Corporations | ||
| Stock company | Limited liability company | |||
| Business Activity | X | ✓ | ✓ | ✓ |
| Capital | n/a* | n/a | Required (no fixed minimum amount) | |
| Registration | n/a | ✓ | ✓ | ✓ |
| Representative | n/a | Branch representative required | Required (corporate entities not eligible) | Required (corporate entities are eligible) |
| Representative’s Authority | n/a | All activities related to business in Japan | All activities related to company business | |
| Scope of Corporate Taxes | n/a | Domestic sourced income | Worldwide income | |
| Accounting Process | n/a | Need to consolidate with income of foreign company | Accounting process for Japanese corporate entity only | |
| Overseas Remittance Taxation | n/a | No taxation on overseas remittances made after collection of corporate taxes | Withholding taxes assessed on dividends, interest, and royalty | |
| Legal Liability | Foreign corporation | Foreign corporation | Japanese corporate entity | |
*”n/a” means not applicable.
Establishing a Representative Office
A representative office is not permitted to engage in revenue generating business activities on an ongoing basis. However, a representative office may generally engage in the following activities:
- Information collection
- Market research
- Advertising and publicity
- Purchasing products
To engage in revenue generating business activities, it is necessary to establish a Japanese branch office or set up and register a Japanese corporate entity. Since representative offices are not considered a separate legal entity, it is not possible to open a bank account or enter into a contract (or lease) in the name of the representative office.
The procedures required for setting up a representative office are:
1. Opening an office
2. Acquiring the appropriate status of residence and entering Japan
3. Registration is not required.
Setting up a Branch Office
For a foreign company to establish a business office and continuously engage in business in Japan, it must designate and register its representative in Japan. Please note that the “foreign companies” referred to in this section are legal entities or organizations established under the laws of a foreign country. This includes not only entities with the juridical personality, but also entities such as partnerships, which do not have the juridical personality in the home country, are subject to register. A final requirement is that the designated representative must be a resident of Japan with an address in Japan. In general, a representative of a branch office should be in Japan for 6 months each year. There is no nationality requirement for the representative.
Since a registered branch is not considered a legal entity, all its credits and debts are attributed to the foreign company who has ultimate responsibility for them. However, a branch office can open a bank account and lease property in the name of the branch.
The procedures required for setting up a Japanese branch of a foreign company are:
1. Advance preparation
(1) Provide us with a certificate from a public authority, such as the registration of a company in a foreign country, and documents evidencing the details of the company, such as articles of incorporation
(2) Draft of an affidavit prepared by our office based on the information provided in item (1) above, and confirmation of same our office
(3) Approval of the affidavit by a notary public or governmental official with a similar function
2. Registration application of the branch office submitted to Japan’s Legal Affairs Bureau (approximately one week to finalize)
3. Post-registration procedures
(1) Notification to the tax and social security insurance offices
(2) Report of inward direct investment to the Bank of Japan*
(3) Obtain a status of residence and enter Japan
Depending on the nature of the foreign company’s business, it may be necessary to make the report to the Bank of Japan prior to submitting the registration application.
Setting up a Corporation
To set up a Japanese subsidiary of a foreign company, the procedures and processes specified in the Japan’s Companies Act must be followed as it is basically considered to be the establishment of a domestic company. A company is formed by registration of incorporation.
Procedures for Setting up a Japanese Subsidiary (stock company)
1. Advance preparation
(1) Decision to the details of incorporation, such as a corporate resolution (or copy thereof)
(2) Determination of whether a prior notification is required under the Foreign Exchange and Foreign Trade Act
2. Procedures for registration of incorporation
(1) Draft articles of incorporation, certification by a notary public
(2) Payment of capital
(3) Application for registration of incorporation (approximately 1 week to complete)
3. Post-registration procedures
(1) Notification to the tax and social security insurance offices
(2) Report of inward direct investment to the Bank of Japan
(3) Obtain a status or residence and enter Japan
(4) Applications for approvals and authorizations, if required
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