Investing in Japan
Latest UpdatesBusiness Support Seminar for Taiwanese Companies in Japan Calling for investment in Japan amidst fair winds for Taiwanese companies
May 02, 2016
Japan-Taiwan Tax Agreement expected to improve dual taxation issue. More Taiwanese companies expected to enter Japanese market.
The seminar started with a lecture by JETRO’s Overseas Research Division on the subject of “recent Japanese-Taiwanese economic relations.” The speaker explained that Japan is the world’s second biggest importing country for Taiwan, following China, and that Japan is the top investor for Taiwan, excluding tax haven regions. On the other hand, he also explained that Taiwan’s export composition ratio to Japan ranks in fourth place, and mainly includes mainstream commodities such as electronics, metal and metal products and chemical products. He went on to explain the situation surrounding Japanese companies investing in Taiwan in FY2015 and gave examples of Japanese companies (such as KH Neochem, Mitsui Fudosan and GungHo Online Entertainment) which recently entered or plan to enter the Taiwanese market. He explained that the total investment amount of a joint venture company which was jointly established by KH Neochem and CPC Corporation, Taiwan, among other firms, was as large as 50 billion yen and is the biggest investment made between Japan and Taiwan in the petrochemical field. He also spoke on a merger between Mitsui Fudosan and the major Taiwanese conglomerate Farglory which this January resulted in the opening of the largest outlet mall in northern Taiwan, the “Mitsui Outlet Park Linkou,” in Linkou, New Taipei. He emphasized that “Japanese-Taiwanese businesses are growing closer and closer in recent years.”
Next, Masashi Yokoi, a partner of Deloitte & Touche, gave a lecture on the Japan-Taiwan Tax Agreement, which was concluded in November of 2015. Japan’s investment amount toward Taiwan was 18.58 billion dollars by September of 2015, and Taiwan’s investment amount toward Japan has reached as large as 3.75 billion dollars (see JETRO Daily “Conclusion of the Japan-Taiwan Tax Agreement – Toward the resolution of dual taxation”, in Japanese only). This agreement enables individuals and companies to avoid being subjected to dual taxation on their various sources of income through trade and investment if meeting applicable conditions. It is expected to be a boon for trade and investment in both directions. In light of this, Mr. Yokoi gave an explanation on dividends, interest, reduction of the royalty withholding tax rate, expansion of the exemption scope for business tax, the increase in the number of days before personal income is subject to taxation for income sources outside of Taiwan from 91 days to 183, coordination of taxation authority between Japan and Taiwan, and the rules on the removal of dual taxation within the tax agreement. He gave case studies to help illustrate, such as a comparison between how the current taxation rules and those scheduled to go into effect apply in the case of a Taiwan-based company which has a branch in Japan and in the case of one with a subsidiary in Japan.
Newly established division that exclusively supports business expansion of foreign-based companies
In April of last year, JETRO established the “Foreign Affiliate Support Division,” which exclusively provides services to help foreign-affiliated companies that have already entered the Japanese market to expand their operations by establishing new bases, increasing personnel or expanding business into local areas.
Takeo Nakajima, Director of the Foreign Affiliate Support Division, gave examples of many issues that international companies face when they expand business in Japan (such as in terms of increased sales, employment-related issues, PR activities, supply chains, customer management, production activities and new business bases), stating that JETRO provides services to comprehensively support such issues. He also brought up how JETRO successfully petitioned the government to relax restrictions on the establishment of subsidiaries by foreign-affiliated companies, and how the organization conducts activities to support business matching between foreign affiliates and Japanese SMEs.
Director Nakajima, Foreign Affiliate Support Division, Invest Japan Department
Investment in Japan by Taiwanese companies increasing
The current rate of increase for Asian companies entering the Japanese market is notable. In 2014, it expanded to approximately 700% that of 2000 (Diagram 1). For its part, JETRO has been hosting seminars on investment toward Japan in Asian countries and regions, such as China, Hong Kong, Taiwan, Thailand, Singapore, Indonesia, India and Malaysia, since 2015. JETRO has also launched full-scale support to help Asian companies, including Taiwanese companies, enter the Japanese market. In addition, Taiwan’s inward direct investment in 2014 was approximately 1 billion dollars, which is ranked third in Asia (excluding Japan), following Hong Kong and Singapore, underscoring the country’s growing prominence in recent years (see “JETRO Global Trade and Investment Report 2015”).
Keibun Chen, who is a Taiwanese staff member of the JETRO Foreign Affiliate Support Division, reported that 4.4% of the foreign-based companies (3,151 companies) in Japan are Taiwanese, which amounts to 138 companies. He also emphasized that the number is expected to increase in the future. Citing several of the aforementioned examples regarding economic relations between the countries as well as the Japan-Taiwan Tax Agreement, he stated that it will become easier for Taiwanese companies to conduct business in Japan and encouraged Taiwanese companies in the country to expand the scale of their local operations.
Encouragement to consult JETRO when expanding businesses in Japan
In the networking event after the seminar, opinions were proactively exchanged among participants. Guests also had a number of questions for JETRO regarding expansion of investment and business operations in Japan. While responding to each inquiry, members of JETRO encouraged participants to consult with JETRO whenever considering expanding business in Japan.