Scheme for Foreign Corporations to Expand in Japan

Scheme for foreign corporations interested to expand in Japan

Learn more on what schemes are available for foreign entities and companies to expand their business in Japan.

When a foreign company decides to set up a corporation in Japan, they must choose to establish either one of the three types of corporate entities below:

(1) When setting up a Japanese company, you can choose between a “company limited” entity or a “limited liability company” entity.

Corporation Entity Types & Comparisons

When a foreign company decides to expand in Japan, it will choose one of the following types of entity according to the content of its activities in Japan.

■ Types of Corporation Entities and Comparisons

Incorporating a Japanese company (Company Limited / Limited Liability Company)

When setting up a Japanese company, you can choose between a “company limited” or a “limited liability company”.

The differences between a company limited and a limited liability company are summarized below.

(Although there are other company types such as general partnerships and limited partnerships, they are rarely used by foreign entities, so they will not be explained here.)

Learn more on how to set up the company by type

→ Incorporating and Establishing a Company Limited company

→ Incorporating and Establishing a Limited Liability Company

Setting up a Japan branch

A "Japan branch" is an entity to choose when conducting business activities under the name of the company in the home country. Since the Japanese branch is legally a part of the home country company, the accounting treatment will be combined with the home country company, and the lawsuits will fall the home country company.

The Japanese branch can also conduct business activities and generate profits. A Japanese branch is not recognized as a legal company in Japan, but registration under the entity of “Japan branch” with the authorities is required. In addition, since there is no required capital as a Japanese branch, no new investment is required. The capital of the home country company (headquarters) will be the capital as it is.

Regarding the status of residence, or visa, the manager of the Japanese branch can either apply for "Business Manager" or "Intra-company Transferee" visa, and the other employees can apply for the "Engineer/Specialist in Humanities/International Services" or "Intra-company Transferee" visa.

Setting up a Representative office

In principle, a representative office cannot conduct business activities. Even if you set up a representative office, you will not be able to make a profit in Japan because you cannot conduct business activities. Inability to conduct business activities means that transactions that are subject to taxation are not possible, so there is basically no need to notify the tax office. In addition, it is not necessary to apply for registration to the Legal Affairs Bureau to set up a representative office, nor is it possible.

The business scope of a representative office is limited to market research, marketing, advertising, purchase of goods, and contact work. Even if you want to open a bank account for a representative office, you have no choice but to use the expatriate's personal account. When opening a bank account as a personal account, it is possible to include your trade name. For example, depending on the bank, it is possible to open an account with the name of the bank as "Representative Office (trade name) under Representative (individual name)".

It is pragmatically difficult to obtain a status of residence (visa) under the representative office’s name. It is common for expatriates to come to Japan on a “short-term stay” to conduct market research, contact work, etc. If you want to obtain a valid status of residence (visa) to stay in Japan, you should consider setting up a company limited company, limited liability company, or a Japanese branch from the start.