Foreign companies generally engage in business operations by one of three types below.：
Pros
Representative Office
1. No special registration is generally required for establishment and taxation.
2. Expenses can be deducted from the income of the parent company, resulting in tax saving effects in the home country.
Branch Office
1.No starting capital is required (※ Working capital is still required. If your country has foreign currency regulations, they shall also be considered when setting up a Branch Office.)
2.As the profit and loss of a branch is included in the taxable income of the Head Office, there may be tax saving effects in the home country if the Branch Office makes a loss.
Subsidiary Company
1.Deemed to have high creditworthiness, hence it may be easier to obtain credit in Japan (as a Japanese company), which will be advantageous for business development.
2. Representatives can apply for an investment visa.
3. As an independent entity, the company’s liabilities do not affect the Parent Company.
4. As an independent entity, litigation cases may not affect the Parent Company.
Cons
Representative Office
1. Carrying out business activities in Japan is not allowed. The office can only be used for preparatory and auxiliary work such as market research, information collection and advertising,
2. Should there be a lawsuit filed in Japan, the representative office is a part of the Head Office. Therefore, the liability may extend to the Head Office.
Branch Office
1. The establishment procedure is similar to that of a Subsidiary Company.
2. Deemed to have low creditworthiness, which may be disadvantageous in obtaining financing and in business development.
3. Liabilities incurred may extend to the Head Office.
4. Unable to engage in certain businesses which have capital requirements.
5. The Head Office’s financial statements are to be submitted for tax declaration in Japan.
6. The Branch’s corporate tax is calculated based on the Head Office’s capital, which may increase tax payable.
7. As the financial statements of the Branch Office need to be consolidated and reconciled with the Head Office, this may take up additional time and resources.
8. The tax authorities of the Head Office’s country have the right to access the Branch Office in Japan.
9. Litigation and disputes of the Branch Office will extend to the Head Office.
Subsidiary Company
1. Relatively more procedures for incorporation and liquidation compared to the Representative Office and Branch Office.
2. As an independent entity, it is responsible for its own accounting, financing and tax in Japan. Tax planning may be necessary to give rise to tax savings by legally reducing the tax to be paid.
3. The remittance of profits from the Subsidiary Company is considered as dividends.
Our Services
- Company Incorporation
- Management & Growth Support
- Accounting & Taxation Support (Tax Planning・Bookkeeping・Financial Reports・Tax Returns)
- HR・Labour Consulting（Payroll・Social Insurance/ Rules of Employment・HR System/ HR Advisory）
- Business Incubation & Growth in Japan（Market Research/ Business Due Diligence/ Business Plan/ Advisory on Incubation/ IPO）
- Corporate Secretarial Services (Management on behalf of company/ Marketing activity/ Training)
- M & A
- Audit & Assurance, Compliance
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