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Company Formation in Japan

Overview :

The economy of Japan is the third largest national economy in the world. In the years following World War II, government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defence allocation helped Japan develop a technologically advanced economy. Japan is often ranked among the world’s most innovative countries leading several measures of global patent filings.

Advantages of Incorporating Business in Japan
  • An increasing number of companies around the world are partnering with Japanese companies to develop products and services, create innovative technologies and create R&D projects.
  • Japan remains one of the world’s leading industrial powers, making doing business in Japan an excellent location for international companies.
  • It also offers an exciting yet stable business market open to trade and foreign investment.
  • Globally competitive, especially in the fields of environment, healthcare, IT and automotives, Japan’s huge economy already boasts an established base of the world’s top companies.
  • The presence of over 600 prestigious universities in Japan makes available a highly educated workforce for the businesses.
  • In the Japanese corporate world, loyalty and cooperation are valued over aggressiveness and competitiveness. Japanese tend to take pride in their jobs and work long hours to demonstrate their dedication.

Tax Regime

Taxes in Japan are broken up into two major categories: National Tax and Local Tax. The Japanese tax system applies relatively low marginal tax rates on most economic activities which, in combination with moderate tax elasticity of the bases, indicate that the overall distortion from the tax system is probably the modest compared with other OECD countries. The personal income tax system identifies ten different kinds of income that are taxed at different effective rates. Japan generally applies marginal personal rates for top income earners.

Types of Entities :

The main business structures by which foreign companies generally establish a business presence in Japan are :

Representative Office :

Representative offices are established as locations for carrying outpreparatory and supplemental tasks aimed at enabling foreigncompanies to engage in full-scale business operations in Japan.These offices may conduct market surveys, collect information,purchase goods and implement publicity/advertising efforts, but theyare not permitted to engage in sales activities.

Branch Office :

The simplest means for a foreign company to establish a base forbusiness operations in Japan is to set up a branch office. The branch office can begin business operations as soon as office location is secured, the branch office representative determined, and the necessary information registered.

Subsidiary Company :

A foreign company establishing a subsidiary company in Japan mustchoose to establish the subsidiary company as a joint-stockcorporation, limited liability company,  or similar entity stipulated by JapaneseCorporate Law. Other methods by which a foreign company may invest in Japan using a Japanese corporation but without establishing a subsidiary are by establishing a joint venture with a Japanese enterprise or investment company and by equity participation in a Japanese enterprise.

Limited Liability Partnership :

It is also possible to do business by using a limited liability partnership. LLP is not a corporation, but a partnership formed only by the equity participants who have limited liability. LLPs are also distinguished by the fact that internal rules can be freely determined by agreement between the equity participants, and that taxes are levied on profits allocated to equity participants without LLPs themselves being liable for taxation.

Time Required

It usually takes 23 days to set up a business in Japan.