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Setting up a branch of foreign corporation in Japan

Posted on September 25, 2018 By user
Investing in Japan, Starting a business in Japan

外国会社の日本支店の設置は本国で用意できる書類によって色々なバリエーションが考えられるのですが、一番簡単なのは宣誓供述書で登記に必要な事項をすべて記載してもらう方法です。
Registering a branch in Japan is a little bit trickier than establishing a company from the scratch. But you may have reasons to choose a branch structure. Your reasoning might be tax efficiency where you would like to use its operating expenses in Japan against taxable income in your home country. Or I know that many Australians use branches as a business entity in Japan to use their tax benefit of superannuation fund.

Required Documents

1) Application form (登記申請書). The following below is the link to a template the ministry of justice provides.
Ministry of Justice Website
There seem to be lots of documents required. But actually, one affidavit can cover all that.
2) An affidavit(宣誓供述書) that states the following:
Registered company name in its home country and address,
Paid-in capital,
Number of shares authorized to be issued and the number of shares already issued,
Name, address and birth date of the representative director(s),
Name, address and birth date of the representative manager in Japan.
Adopted method of public notice (you can choose from a gazette or website. The gazette is more recommendable because there are some requirements if you choose a website as a method of public notice),
3) Its translation in Japanese. The representative manager has to state on it like “これは宣誓供述書の真実で正確な翻訳です。”.
This affidavit has to be notarized by a governmental body in its own country.
4) Seal certificate of the representative manager (the official seal of the branch has to be linked to the representative manager.
5) Registration form for the branch seal,
6) Letter of proxy, if you use somebody for the registration.

Steps

1) Elect the representative manager of the branch,
2) Prepare an affidavit that states all the required information for its registration,
3) Buy a branch seal and prepare all the documents,

Two possible taa structures that can work for you

Even though it is a branch of a company from their home country, it can pretend as though it was a separate entity and file the tax return accordingly. You can adopt either a trader model or a liaison manager model. The trader model is where the branch acts as an independent entity buying and selling things or services. It can end up losing money.
The liaison office model is to provide services to help the head office sell their products. The branch must not have an authority to determine the price or other trade conditions to close a deal. If it does, it will be regarded to have its own right to buy and sell and therefore all the income from the transactions (even though it might belong to the head office) should be regarded to belong to the branch.
The branch should book a virtual revenue only for the tax calculation because the head office and the branch are the same entity. You can not have an actual transaction between you and you. The amount of the virtual revenue is what is expected to make if it was an independent entity. The typical rate of its revenue is 105-107% of its actual cost of operation. You will always have a small profit and pay tax on it but you will always receive a refund of the consumption tax because the revenue is from overseas and the service was provided to someone overseas (export of service).

Foreign Tax Credit

In either way, when the branch pays corporate income tax on its profit in Japan, the tax will be deductible as foreign tax credit in its home country. It is logical because it is a part of the tax the same entity pays to the source country.

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