Investing in Japan Q&A

Foreign companies generally establish a business presence in Japan in one of three forms; representative office, branch office, or subsidiary company. Please see the details of each form.

Foreign companies generally conduct business operations in Japan by establishing a branch office or a subsidiary company. Representative offices are not permitted to engage in sales activities. Please see the details of each form for legal differences.

In the case of a branch office, it takes about two months after the information to be registered as a branch is determined. For a subsidiary company, it takes about two to three months after the particulars of the company to be established are determined.

The initial costs to be considered include expenses related to company incorporation, tax notifications, hiring local personnel, setting up a permanent office, securing permanent housing for foreign residents, obtaining visas, etc. As for the incorporation and tax notifications, it costs about one million JPY to establish a subsidiary company, whereas it costs about 700 thousand JPY to establish a branch. These cost figures are estimates and include both actual expenses and fees for professional proxies. You can find detailed information on our Cost Estimation page.

While a company can be registered with a capital of as little as 1 JPY under the Companies Act of Japan, having capital of 30 million JPY or more is one of the requirements for obtaining the "Business Manager" status of residence.

For a branch office, at least one representative in Japan must have an address in and be resident in Japan.

For commercial registration, documents evidencing the existence of the applicant foreign company's head office (such as the registration in its home country or certificates of competent authorities), documents certifying appointment of the representative in Japan (such as minutes supporting a decision by the appropriate governing body of the applicant foreign company), the articles of incorporation, etc. should be examined. Please consult commercial registration experts for more detail.

A branch office or a subsidiary company is established through commercial registration with the Legal Affairs Bureau. Please see the general flow of procedures for establishing a business presence in Japan.

Having an office in Japan will make it possible to provide more prompt and smoother sales assistance, technical support and after-sales care, etc. to customers, clients and business partners. In practice, foreign companies need to establish a branch office or a subsidiary company to engage in their overall business operations in Japan.

Non-resident person can be a representative of a subsidiary company.

For a branch office, at least one representative in Japan must have an address in and be resident in Japan.

Anyone can engage in the commercial registration procedures, however, outsourcing the procedures to experienced commercial registration experts will, generally speaking, make it easier and more certain.

Applications for commercial and corporate registration can be submitted online. However, only certain procedures are eligible: registration applications (including the delegation of filing for registration), notifications regarding the submission or abolition of a registered seal, and requests for the issuance of electronic certificates. Please note that filing an appeal for examination is not eligible for online application. For further details, please refer to the information on online applications for commercial and corporate registration.

In addition, since 2020, a "within 24 hours processing" service for incorporation registration filed through a fully online application has been available for cases that meet certain conditions. Please review this information as well.

Because a branch office cannot be directly reorganized into a subsidiary, the branch office closure procedures and the subsidiary company establishment procedures must be carried out concurrently. In such instances, however, the branch office's assets may be transferred to the subsidiary through contribution in kind. Please see the closure of a branch office, dissolution and liquidation of a subsidiary company for more information. 

In principle, working visas cannot be obtained before establishing the business base since working visas are issued for applicants (foreign nationals) on the premise that they have a secured place of employment in Japan. However, if applying for a 4-month "Business Manager" visa or if using the "Foreign Entrepreneurship Promotion Program" or "Program to promote the reception of foreign entrepreneurs" in the National Strategic Special Zones, it is possible to obtain a visa before the establishment of the business base.

Foreign nationals wishing to enter Japan must have a valid passport, which, in principle, contains a visa corresponding to his/her purpose of entry into Japan obtained in advance from a Japanese embassy, consulate or other Japanese diplomatic mission abroad (hereinafter, "Japanese diplomatic mission abroad"). Upon landing in Japan, they must undergo an examination by an immigration officer at the port of entry, receive a landing permission stamp, and have their status of residence and period of stay determined.

A visa is similar to a letter of recommendation required for entering Japan. It is issued by a Japanese diplomatic mission abroad prior to entry, certifying that the passport is valid and that there are no impediments for the passport holder to enter Japan within the scope of the visa. On the other hand, a status of residence is determined when a foreign national who wishes to enter and reside in Japan receives landing permission at a port of entry. In other words, a status of residence constitutes the grounds on which a foreign national is permitted to stay in Japan; it is a qualification enabling the foreign national to engage in the activities stipulated in the Immigration Control and Refugee Recognition Act and to reside in Japan for the purpose of carrying out such specific activities. The scope of activities in which a foreign national may engage during his/her stay in Japan is determined according to his/her status of residence, and in principle, except in cases where a permit to engage in an activity other than that permitted by the status of residence is obtained, the foreign national must not engage in any income-generating activities other than those permitted by his/her status of residence.

Please see the documentation that is generally needed when applying for a Certificate of Eligibility for all working statuses.

Visas are applied for and received at Japanese diplomatic missions abroad. However, when applying for a visa for long-term stay, such as for employment purposes, the screening process at a Japanese diplomatic mission abroad may be difficult and time-consuming, as it may not be fully familiar with local conditions in Japan. For this reason, in many cases, a regional Immigration Services Bureau in Japan examines whether the activities intended by the foreign national wishing to enter and reside in Japan meet the requirements of the applicable status of residence. If the activities are deemed to meet those requirements, a Certificate of Eligibility is issued. By presenting this Certificate of Eligibility to a Japanese diplomatic mission abroad together with a visa application, the applicant is generally recognized as meeting the conditions for entry and residence in Japan, enabling the visa to be issued more quickly. Please note that the Certificate of Eligibility is not applicable to temporary visitor visas. A Certificate of Eligibility is not applicable to a temporary visitor visa.

Please see the flowchart from application for Certificate of Eligibility to visa acquisition and entry into Japan (general example).

Previously, online applications were limited to certain users, such as staff members of the accepting organization and licensed professionals including attorneys and administrative scriveners.

However, in order to further improve convenience, online applications can now also be submitted by foreign nationals themselves who hold a My Number Card, subject to certain conditions. (This excludes individuals who are not mid- to long-term residents—such as those with "Diplomat" or "Temporary Visitor" status, as well as individuals under 15 years of age.)

For information on the digitization of entry procedures and online residence application procedures, please refer to online residence application procedures.

The main statuses of residence related to investment in Japan include Business Manager, Intra-company Transferee, Engineer/Specialist in Humanities/International Services, Legal/Accounting Services, Skilled Labor, and Specified Skilled Labor. Please see the activities (list of statuses of residence) authorized in Japan for each status.

A foreign company can establish a business presence in Japan, typically, by establishing a representative office, branch, or subsidiary company.

A status of residence is determined by the applicant's activities in Japan, and not by the type of establishment of the foreign company. In general, however, the relationship between the type of establishment and the status of residence of expatriate staff or representative in Japan is as follows.

Expatriate staff of representative office: "Intra-company Transferee"(Note)

Representative of branch: "Intra-company Transferee" or "Business Manager"(Note)

Representative of subsidiary company: "Business Manager"

(Note) If the office has other employees, the representative’s status may instead be "Business Manager."

In addition, the status of residence of a foreign resident (excluding those who fall under the status of residence of "Business Manager") employed by a representative office, branch, or subsidiary shall be "Intra-company Transferee," or if they engage in work in Japan related to their academic background or professional experience based on a contract with a public or private organization in Japan, they may qualify for a status such as "Engineer/Specialist in Humanities/International Services."

Please refer to the Commentary describing the series of procedures normally required for a foreign company to launch and register a new subsidiary or branch office in Japan. This includes procedures for obtaining visa and residence status.

When a foreign national residing in Japan wishes to cease the activities currently being undertaken and instead engage exclusively in activities that fall under a status of residence different from the one they presently hold, they must apply and receive permission for a change of status of residence. For example, a foreign national dispatched from a parent company in a foreign country to a subsidiary in Japan and currently residing in Japan under the "Intra-company Transferee" status of residence resigns from the host company and starts running a company through their own investment, they need to apply and receive permission for a change to "Business Manager" status of residence.

However, applications for permission to change the status of residence are not automatically approved, and it will not be approved unless the applicant meets the eligibility requirements and criteria for the new activity they intend to undertake. In addition, applications for permission to change status of residence of a foreign national residing in Japan under the Temporary Visitor status will not be approved unless they are based on unavoidable special circumstances. If an application for permission to change status of residence is submitted and a decision on the application is not made by the expiration date of the period of stay associated with the applicant's status of residence, the foreign national may, in principle, continue to stay in Japan under the current status of residence until earlier of the date on which a decision is made on the application or the date two months after the expiration of the previous period of stay. the

The spouse or children who are financially dependent on a foreign national working in Japan may be eligible for the status of residence "Dependent." This status permits them to engage in daily activities as the dependent spouse or child of a foreign national who holds a working status of residence and resides in Japan.

it is possible to submit the application at the same time as the application of the foreign national who will be working in Japan. With regard to the application for a Certificate of Eligibility for the "Dependent" status of residence, and the subsequent visa application, it is possible to submit the application at the same time as the application of the foreign national who will be working in Japan, or alternatively, after the working foreign national has obtained an appropriate working status of residence in Japan.

For further details, please refer to residence status "Dependent."

Temporary Visitor status covers activities such as tourism, recreation, sports, visits to relatives, field trips, participation in training sessions or meetings, business liaison and other similar activities undertaken while staying temporarily in Japan. Holders of Temporary Visitor status may not engage in employment activities. Within the scope of activities permitted under this status, examples of specific purposes related to business activities include the following:

Preparatory activities such as market research for investment in Japan or starting business are generally considered to fall within the scope of activities permitted under the Temporary Visitor status. In addition, the period of stay granted for a Temporary Visitor is basically either 90 days, 30 days, or 15 days.

Please see the Ministry of Foreign Affairs website for information on countries eligible for visa exemption for Temporary Visitor status.

The effective corporate income tax rate varies depending on the scope of taxable income and the tax system of the local government to which the corporation belongs. Please see the details of the corporate income taxes.

Taxes levied in Japan on income generated by the activities of a corporation include corporate tax (national tax), local corporate tax (national tax), corporate inhabitant tax (local tax), enterprise tax (local tax), and special enterprise tax (national tax, although filings and payments are made to local governments along with those for enterprise tax) (hereinafter collectively referred to as "corporate taxes"). Please see the details of corporate income taxes.

Corporations engaged in economic activities in Japan are subject to taxation in Japan on the profits arising from such activities. Even if there are no taxable income/profits, corporate inhabitant taxes are levied not only on income but also on a per capita basis using the corporation's capital and the number of its employees as the tax base. Corporations having paid-in capital of more than 100 million JPY are subject to enterprise tax on a proforma basis as a general rule. For details, please see the details of corporate income taxes.

Japan's tax filing system is based on the so-called self-assessment tax system where individuals (tax payers) calculate their annual income and tax amount, and file tax returns by themselves. However, a tax withholding system where companies (salary payers) collect income tax on the date of payment and pay the tax on behalf of individuals (income earners) or corporates is also introduced for specific incomes.

Withholding income tax is assessed against payments of certain taxable income, whether paid to an individual or a corporation. Income subject to withholding income tax is determined in accordance with the type of income and the classification of the recipient of that income. Please see the details of tax withholding and payment procedures.

Individuals must file a final tax return and pay the corresponding tax on their income for the year during the period from February 16 to March 15 of the following year. However, as a general rule, individuals whose total income does not exceed the total amount of applicable deductions, or those who receive salary subject to withholding tax (year-end adjustment) from only one payer, whose annual salary does not exceed 20 million JPY and whose other income does not exceed 200,000 JPY are not required to file a tax return.

All individuals, regardless of nationality, are classified as either residents or non-residents. Please see the details of individual tax system.

A Representative offices, etc., through which a foreign corporation engages in business in Japan are not supposed to derive any income subject to corporation tax from publicity/advertising, information provision, market surveys, basic study and other activities auxiliary to the performance of its business. It is not permitted to engage in sales activities.

When the activities exceed the auxiliary functions described above, the representative office is subject to taxation as Permanent Establishment (PE)*. Furthermore, it is important note that, since the business year commencing on or after January 1, 2019, even where the activities of the foreign corporation or a person who has a special relationship with the foreign corporation are preparatory or supplementary in nature, they may fall under the category of PE if they fulfill a complementary function as part of an integrated business.

Consumption tax is levied on the following domestic and import transactions, except for certain transactions that are treated as non-taxable. Effective October 1, 2019, the standard consumption tax rate is 10% (inclusive of local consumption tax rate of 2.2%). At the same time, a reduced consumption tax rate system was introduced, under which a reduced rate of 8% (including 1.76% local consumption tax) applies to food and beverages, except for alcoholic drinks and dining out, as well as newspapers published at least twice a week (based on a subscription contract).

Overview of consumption tax

Basically, corporations must file a final tax return for its corporate income taxes, etc. within two months from the day following the last day of each fiscal year. Please see the details of tax returns.

Tax payers file tax returns by themselves. However, it is generally easier and more reliable to entrust the filing to professionals such as certified public tax accountants or certified public accountants.

Japan has a foreign tax credit system and dividend exclusion system in order to avoid international double taxation. Japan also has concluded tax treaties with many countries for the purposes of avoiding cross-border double taxation and preventing tax evasion.

The provisions of tax treaties take precedence over domestic law. With regard to Japanese taxation of individuals or corporations residing in a treaty partner country, the source of various types of income—which are defined as taxable income under Japanese law (provisions that define the place where the income arises as the basis for taxation) may be adjusted from Japan to the treaty partner country (or from the partner country to Japan) pursuant to the provisions of the tax treaty (definitions regarding the place where income arises as the basis for taxation). In addition, tax relief provisions are in place in Japan, the source of the income, for various types of income. Through the application of tax treaties, cross-border income may be exempt from taxation or subject to a reduced tax rate.

Although not all cases can be addressed, these measures make it possible to eliminate most instances of international double taxation.

When a corporation engages in transactions with a related company located outside Japan, such as a foreign parent company (foreign related parties), the transaction prices are required to be set at an arm's length price. If the prices are not considered appropriate, the transfer pricing taxation rules apply, under which income is calculated and taxed as if the transactions had been conducted at arm's length prices.

There are over 500 government-run employment service offices known as "Hello Work" throughout Japan. Hello Work provides free job placement and job-seeking support for all types of occupations. In addition, local governments offer free employment services for the general public, and educational institutions such as colleges and universities provide employment services to their students for free. On the other hand, there are various types of private employment agencies, including executive search agencies and talent registration agencies that operate on a success-fee basis. Furthermore, job postings are widely published in newspapers, magazines (job search magazines, industry journals, etc.), and on the Internet.

When hiring employees, an employment contract must be concluded with each employee. At that time, the employer is required to clearly specify the following working conditions in writing: contract term, work location, working hours, job duties, days off, closing date and payment date of wages, resignation and dismissal and other relevant matters. Please see details of employment conditions.

When hiring workers, companies must carefully consider employment standards such as wages, working hours, breaks and days off. For instance, employers must pay wages in legal tender, directly to the employee, not less than once per month, and on a specified date. In addition, working hours must, in principle, not exceed 40 hours per week or eight hours per day excluding break times (statutory working hours). However, if a labor-management agreement (an agreement between the company and employee representatives) is concluded, employees may be required to work beyond the statutory working hours within the scope of such agreement. Please see the details of employment standards (Wages / Working hours, breaks, days off).

In order for an employer to dismiss an employee—that is, for a company to unilaterally notify an employee of its intention to terminate the employment contract—there must be objective and reasonable grounds. For example, redundancy is justifiable only after satisfying several criteria, such as the necessity of the dismissal, efforts made to avoid dismissal, the appropriateness of selection of employees to be dismissed, and the appropriateness of the dismissal procedures. Please see the details of restrictions on dismissal.

Japan has a universal insurance system, and as a general rule, anyone residing in Japan must enroll in the public health (medical) insurance and pension insurance schemes. Please see the details of Japan's social security system.

The insurance premium rate borne by companies is about 15% of total annual wages. This includes premiums for workers' accident compensation insurance, employment insurance, Health Insurance and Nursing Care Insurance, Employees' Pension Insurance and the Child and Child-Rearing Contribution.

If they receive remuneration in Japan, such persons are, in principle, mandatorily covered by social insurance system (health insurance and employees' pension insurance). On the other hand, as a general rule, they are not eligible for labor insurance (worker's compensation insurance and employment insurance). However, in the case of a Representative in Japan, if their status is deemed to have a strong employee-like character, enrollment in labor insurance may be permitted.

With respect to an office that conducts market research, liaison and coordination, or procurement in Japan without registering a company or branch office, social insurance is, in principle, to voluntary coverage. In other words, it can be determined by agreement between the company and the employees whether to be enrolled into the social insurance as a whole. In such cases, there are two possible approaches: excluding the representative of the Japan office from coverage by treating that person as the business owner, or enrolling the representative as an employee together with other staff.

As for labor insurance, coverage is mandatory for employees other than the Representative in Japan. The applicability of labor insurance to the Representative is, in theory, determined based on whether the Representative is deemed to have employee status. However, in practice, it is currently difficult for administrative procedures to accommodate such treatment.

In Japan, a "worker dispatching business" refers to having workers employed by one company work under the direction and supervision of another party. In order to engage in such a business, it is necessary to obtain a license from the government. To obtain such a license, certain asset-related and financial requirements must be satisfied. In addition, if a company conducts worker dispatching without obtaining the required license, or if the same dispatched worker continues to be dispatched to the same organizational unit for more than three years, the "deemed offer of employment system" applies. Under this system, as a general rule, a direct employment relationship is deemed to be established between the dispatched worker and the client company.

Under the Labor Standards Act of Japan, persons who are in managerial or supervisory positions and persons who handle confidential matters are excluded from the application of regulations on working hours, etc., except for regulations concerning late-night work. Whether an employee falls under such an exemption is determined based on factors including:

In addition, as a general rule, an agreement stating that "the base salary includes overtime pay for a certain number of hours" is invalid. For a wage system that includes a fixed amount of overtime pay (so-called fixed overtime pay system) to be valid, it is necessary that the portion of wages attributable to regular working hours and the portion attributable to fixed overtime clearly be distinguished, and that any excess overtime worked beyond the fixed amount be compensated by paying the additional amount. Furthermore, in an employment contract with a worker who does not qualify as a managerial or supervisory employee, any agreement stating that "no overtime allowance will be paid" is invalid.