Doing business in Japan
Since 2003, Healy Consultants Group has been efficiently and effectively assisting our Clients with i) business registration ii) business licensing iii) Japanese business banking solutions iv) visa options and staff recruitment strategies and v) workspace rental solutions.
Compare different Japan entities | LLC | Fast solution LLC | Free Zone Company | Branch office | Representative office |
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Best use of company? | All purposes | Close client deal now | Global Trading | Specific projects and assignments | Marketing & research |
How soon to invoice Clients? | 1 month | 1 month | 2 months | 2 months | 2 months |
How soon can you hire staff? | 1 month | 1 month | 2 months | 2 months | 2 months |
How soon can you sign a lease agreement? | Immediately | Immediately | Immediately | Immediately | Immediately |
How long to supply corporate bank a/c? | 3 months | 2 months | 3 months | 3 months | 3 months |
How long to supply co. reg / tax numbers? | 2 months | 1 month | 2 months | 2 months | 2 months |
Corporate tax rate on annual net profits? | 23.9% | 23.9% | Up to 23.9% | 23.9% | 0.0% |
Limited liability entity? | Yes | Yes | Yes | No | No |
Government grants available? | Yes | Yes | Yes | Yes | No |
Govt approval required for foreign owners? | No | No | No | No | No |
Res. director/partner/ legal rep. required? | No | No | No | Yes | Yes |
minimum paid up share capital? | US$1 | US$1 | US$1 | None | None |
Can bid for Government contracts? | Yes | Yes | Yes | Yes | No |
Corporate bank account location? | Standard Chartered Bank | Standard Chartered Bank | Standard Chartered Bank | Standard Chartered Bank | Citibank |
Can secure trade finance? | Yes | Yes | Yes | Yes | No |
VAT payable on sales to local customers? | 8% | 8% | 8% | 8% | No sales allowed |
Average total business set up costs? | US$20,325 | US$38,500 | US$13,325 | US$17,050 | US$14,750 |
Average total engagement period? | 3 months | 6 months | 3 months | 3 months | 3 months |
Accounting and tax considerations | LLC | Fast solution LLC | Free Zone Company | Branch office | Representative office |
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Statutory corporate tax payable? | 23.9% | 23.9% | Up to 23.9% | 23.9% | 0.0% |
Legally tax exempt if properly structured? | No | No | Yes | No | Yes |
Group HQ tax incentives? | Yes | Yes | Yes | No | No |
Must file an annual tax return? | Yes | Yes | Yes | Yes | No |
Must file annual financial statements? | Yes | Yes | Yes | Yes | No |
Must appoint an auditor? | No | No | No | No | No |
Access to double taxation treaties? | Yes | Yes | Yes | Yes | No |
WH tax on payments to foreign s/holders? | 20% | 20% | 20% | 0% | 0% |
Company Registration | LLC | Fast solution LLC | Free Zone Company | Branch office | Representative office |
Res. director/partner/ legal rep. required? | No | No | No | Yes | Yes |
Min. number of shareholders/partners? | 1 | 1 | 1 | Parent company | Parent company |
Maximum shareholding for foreigners? | 100% | 100% | 100% | 100% | 100% |
Min. statutory paid up share capital? | US$1 | US$1 | US$1 | None | None |
Security deposit kept with government? | No | No | No | No | No |
Shelf companies available? | Yes | N/A | No | No | No |
Time to incorporate a new entity? | 2 months | 1 month | 2 months | 2 months | 2 months |
Can easily convert to a PLC? | Yes | Yes | Yes | No | No |
Public register of s/holders and directors? | Yes | Yes | Yes | Yes | Yes |
Can have preference shareholders / partners? | Yes | Yes | Yes | No | No |
Business Considerations | LLC | Fast solution LLC | Free Zone Company | Branch office | Representative office |
Good entity for trademark registration? | Yes | Yes | Yes | Yes | No |
Can secure an import and export license? | Yes | Yes | Yes | Yes | No |
Sponsorship by a local citizen required? | No |
Our Client must travel to Japan? | No |
Temp. physical office solutions available? | Yes |
You need local resident as bank signatory? | No |
Can be wholly foreign owned? | Yes |
The entity will likely be regulated by? | METI |
Minimum number of directors/managers? | 1 |
Monthly VAT reporting to the Government? | No |
Sign office lease during incorporation? | Yes |
S/holder/director docs attested/translated? | Yes |
Foreign director needs personal tax no.? | No |
Foreign non resident director needs a work permit? | No |
Maximum number of staff allowed? | No maximum number for any entity |
Expatriate to local staff ratio? | None |
Residence visa for business owner? | Yes |
Other useful information | |
What will be included in my customer sales invoice? | Click link |
Japan has signed free trade agreements? | Yes |
This country is a member of WIPO/TRIPS? | Yes |
This country is a member of the ICSID? | Yes |
Average custom duties suffered? | 1.80% |
Govt foreign investment approval required? | No |
Average monthly office rental? (US$/sq m) | US$360 |
Minimum statutory monthly salary? | US$1,148 |
Average US$ salary for local skilled staff? | US$2,126 |
US$ deposit interest rate? (1 year average) | 0.10% |
Overseas remittance currency controls? | None |
Banking considerations | |
Multi-currency bank accounts available? | Yes |
Corporate visa debit cards available? | Yes |
Quality of e-banking platform? | Good |
Crowd funding available in this country? | Yes |
Japan business setup summary
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Benefits and disadvantages
Benefits of registering Japanese companies
- It is easy for our Clients to open a company in Japan because:
- Healy Consultants Group can setup our Client’s Japanese LLC with only 1 shareholder and 1 director and minimal requirement of initial capital;
- Since March 16, 2015, Japanese companies no longer require appointment of a resident director. As a result, both directors and shareholders can be non-resident foreigners;
- Lastly, Healy Consultants Group incorporation team will ensure there is no requirement for our Clients to travel to Japan to complete the company setup engagement.
- A Japan company is likely to benefit from the following advantages including:
- Japan is one of the most politically stable countries in Asia, boasting a reputable regulatory environment. Consequently, a Japanese company is an excellent solution for i) signing regional contracts with customers and suppliers; and ii) registering intellectual property;
- Japan is the 2nd largest country in Asia (by GDP) and 3rd largest in the world. Furthermore, with its population of 126 million, our Clients will have access to a large potential consumer base if they setup a Japanese company;
- Japan is a major international financial centre. The Global Financial Centre Index ranks the country as the 6th best financial centre in the world. Furthermore, the Tokyo Stock Exchange is the largest exchange in Asia and the 3rd largest exchange in the world;
- Japan is a major global trading hub. The Narita International Airport is ranked as the 8th largest airport (by cargo traffic), while Keihin Port is ranked as the 20th largest seaport in the world (by cargo volume);
- Our Clients will also benefit from availability of excellent infrastructure in Japan (ranked 5th best in the world) and highly sophisticated business environment (ranked 17th best in the world);
- Japan boasts 3 free zones offering companies no custom duties, and flexible labour laws. The three free zones are Nagasaki, Niigata, Okinawa, and Tokyo;
- Japan has currently signed double taxation treaties with 96 countries allowing local companies to minimize withholding tax when remitting funds to other countries.
- Lastly, as a result of the above, Japan was ranked as the 6th most competitive economy in the world by the World Economic Forum in their annual rankings for the year 2019;
- Japan has one of the largest markets for telecommunications services in the world. The country is world-renowned for its innovation in technology and excellent capabilities of product development. It proves to be an excellent location for Telecom industry since i) it has no restrictions on foreign investments in this sector; ii) it has at least 30% more fibre to the home (FTTH) subscribers than the whole of EU; and iii) numerous mobile technologies were first developed in Japan.
- Due to its geographical positioning, the Japanese market is an ideal jurisdiction for foreigners looking to enter other Asian markets. Being the third largest economy after China and USA, businesses have access to a market of about 127 million people, making Japan an ideal jurisdiction to set up a business.
- A limited liability company (Godo Kaisha) is not required to publicly release its financial statements every year, a requirement that is mandatory for each joint stock corporation (Kabushiki Kaisha).
Disadvantages of Japan company registration
- Foreign nationals establishing a company in Japan are likely to face certain operational challenges including:
- The country has a closed economy, consequently consumers prefer to purchase local products only. Furthermore, there has been minimal trade between Japan and China since the 2nd World War;
- All business documents are also written in Japanese. Also, the local business law can be relatively complex, which puts foreign companies at a disadvantage. Consequently, our Clients are advised to engage services of a local law firm once their companies are operational;
- Government bureaucracy can be frustrating in Japan because i) it is slow and involves a lot of administrative overhead; and ii) it favours Japanese nationals over foreigners;
- Renting and registering your office in Japan is expensive. The Average office rental per month is around US$200 per sq. ft;
- Following company establishment, monthly financial statements must be submitted to the local authorities.
- Japanese companies may also face issues with local employees because:
- Only 15% of the Japanese population speak English fluently, making it difficult for foreigners to converse with their local employees;
- It is difficult to terminate unproductive employees in the country, as Japanese employment law encourages “life time employment”;
- The country’s labour costs are amongst the highest in the world. The average monthly salary per skilled worker is US$3,700 excluding bonus.
- Japanese is the official language for conducting business in Japan and English is spoken only by a minority there. As a result, foreign entrepreneurs who do not have a good command over Japanese language must source local partners for conducting business in this country;
- Lastly, the country is located near a tectonic plate boundary. As a result of this, there are on average 1,500 earthquakes every year. This may disrupt daily business and trade operations from time to time.
- English is not widely spoken in Japan. Most local banks can supply online banking services in English, but will charge an extra fee to do so.
- Japanese banks require to meet at their branch at least one director who is Japanese speaking, before releasing corporate bank account numbers. To avoid having to travel to Japan, most of our Clients require Healy Consultants Group to supply them with a professional passive resident director, who will visit the bank branch to secure corporate bank account numbers.
- Japanese banks and some businesses still prefer the use of bank passbooks and company seals. Healy Consultants Group will assist our Client to secure these items. Some of our Clients who do not plan to have staff in Japan also require our Firm to provide a local legal representative to assist with providing these items to their suppliers and banks (when required).
- Doing business in Japan is difficult for Clients who do not speak/read/write Japanese, or do not appoint a Japanese speaking director/representative.
- Bank account opening in Japan can be painfully long. Bank officers and their compliance departments take time to review each application regardless of the size/turnover of the company.
- Setting up a company in Japan can be challenging due to the bureaucracy levels when dealing with government authorities. Before being operational in the country, you will need to liaise with at least seven different government departments for approvals.
- The Japanese tax system is complicated and can be difficult to understand for new entrepreneurs in the country. According to World Bank and IFC, it takes an average of 330 hours per year in management time to prepare tax returns with at least 14 payments required annually.
- Although not legally required when setting up, most banks in Japan will require a company to have a resident director before they can approve a corporate bank account. Moreover, banks seldom assign relationship managers to new clients and the preferred business language is Japanese.
- It is easy for our Clients to open a company in Japan because:
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Best uses for a Japanese company
- Japan is an excellent jurisdiction for companies investing in innovation and R&D activities because:
- Japanese governments allows several tax credits for R&D companies (focusing on scientific and technological research). The values of these tax credits may vary between 5% and 30% of the corporate tax before credit;
- Incentives are also available for companies which are willing to invest in order to innovate and improve their production facilities. Such companies can claim i) up to 100% depreciation on their assets or ii) tax credits of up to 20%;
- The World Economic Forum ranks Japan as the 3rd best jurisdiction in the world for “availability of scientists and engineers” metric and the 13th best for “quality of scientific research institutions”. As a result, Japan is ranked the highest in the world for “PCT patents applications/million population” metric;
- Consequently, the corporate advisory firm, Solidiance ranks Tokyo and Osaka as the 6th and 8th most innovative cities in the world. Such high rankings are generally due to the country’s talented labour force and excellent infrastructure;
- A Japan company is also recommended to take advantage of the highly lucrative market of the world’s 3rd richest economy. Furthermore, due to the distinct culture, business practices and island location of the country, a resident company (with local employees) can help foreigners understand the market better, especially since English is not widely spoken among locals.
- Japan is an excellent jurisdiction for companies investing in innovation and R&D activities because:
Frequently asked questions
Useful links for Japan
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