A Japanese limited company can be registered by a single shareholder, who can be foreign.

Society Constitution
offshore in Japan

Country analysis: legal structures

Everything you need to know to set up an operating company with a bank account.

1. Exchange of banking information

There are no legal penalties for disclosing the customer's bank details to third parties.

Banks are not at all subject to strict customer due diligence regulations (old FATF recommendation 5 / new FATF recommendation 10).

Banks are largely required to maintain sufficient records of their customer and transaction data for law enforcement (old FATF recommendation 10 / new FATF recommendation 11).

Banks and / or other covered entities are required to report large transactions in currency or other monetary instruments to designated authorities.

The national administration has sufficient powers to obtain and provide bank information on request without qualifications.

There are undue notice and appeal rights against the exchange of bank information on demand without qualifications.

2. Legal forms

DOING BUSINESS IN JAPAN WITH A LOCAL ENTITY

The Japanese Limited Liability Company (Godo Kaisha)

A Japanese limited liability can be registered by a single shareholder, who can be foreign. However, our Customers who live outside of Japan are required to appoint a director who ordinarily resides in Japan and generally uses our nomination services to comply with this government rule. The minimum investment to form the company is only US $ 1 (JPY1), the Japanese government requires to increase this share capital to JPY3 million (US $ 39,000) within five years after the incorporation.

Installing a GK Godo Kaisha in Japan can take at least a month, particularly due to the need to find a physical office space and present evidence of it to the Japanese business registrar. Our Clients wishing to relocate to Japan should also expect the Government to take approximately three months to review their work permit application after their company formation in Japan.

One year after its formation, all Japanese entities must prepare and submit their financial statements to the Japanese tax authority. However, Japanese LLCs benefit from an audit exception as long as their issued capital is less than US $ 4,5 million.

Best Uses for a Japanese Limited Liability Company: Thanks to the Requirements of limited configuration, Japanese limited liability can be used to perform most of the types of business activities in Japan. It is the optimal type of business entity for most of our Clients who wish to do business in this country.

The Japanese Free Zone Company

While this has become rare due to rising operating costs in Japan, it is still possible to register an export-oriented manufacturing business in one of Japan's free trade zones, the most famous of which is the Okinawa free zone. . Our Clients interested in this option usually register a limited liability company with a paid-up capital (at least US $ 50.000) high enough to meet the requirements of the free zone authority.

Best Uses for a Japanese Free Zone Company: The Okinawa Free Zone is generally used for logistics companies re-exporting their production to other Asian countries.

The Japanese Stock Company (Kabushiki Kaisha)

Japanese limited companies are essentially the same type of business entity as a limited liability company. They require the same amount of paid-up capital (JPY1) at the time of their incorporation and can also be made up of foreigners, as long as a resident director is appointed.

Unlike most other countries, Japanese corporations are not subject to audit requirements, as long as they meet all of the following conditions i) are not listed on a stock exchange ii) have fewer than three directors (no board of directors) and iii) its issued capital is less than US $ 4,5 million and iv) its mergers and acquisitions explicitly include some restrictions on the power of shareholders to freely transfer shares. These exempt corporations are known locally as Kabushiki Joto Seigen Kaisha, aka a closed JSC.

Best use for a Japanese corporation:
Forming a Japanese corporation is typically done when company owners plan to finance their business by raising capital on the Tokyo Stock Exchange or by issuing shares to third-party investors who may be more comfortable with a company having:

  1. i) a Board that includes independent members
  2. ii) the obligation to go through an audit (activated automatically when there are three directors on the Board)

The Japanese limited liability company

Foreigners can register a limited liability company, with no minimum capital requirement. At least one of the partners must be ordinarily resident in Japan. All partners can benefit from limited liability for business operations.

The partnership is a transparent tax entity, which means that the profits are considered automatically distributed to the partners and must be included in their personal / corporate income tax returns. However, the financial statements must be prepared by the association.

Best Uses for a Japanese Limited Liability Company: The LLP is a good entity for our Clients who already have a partner in Japan.

DOING BUSINESS IN JAPAN WITH A FOREIGN ENTITY

The Japanese branch

Japanese regulations allow foreign companies to establish a Japanese branch of their existing businesses. The scope of the entity's operations often depends on the mergers and acquisitions of the foreign company, which means, in particular, that a branch can only have activities corresponding to those of its "parent" company. Branches must also appoint a Japanese resident representative.

Best uses for a branch:
Registering a branch instead of a separate subsidiary allows our Client to minimize accounting and bookkeeping obligations, as the accounts at the head office and the branch will be the same. It is also a good business entity when our Clients plan to provide products or services subject to a licensing requirement with a large amount of capital required. However, our Clients should be careful when choosing a branch, as their foreign company will assume unlimited liability for the debts and losses of the Japanese branch.

The representative office of Japan

Representative offices can only carry out i) market studies and ii) promote the business of the parent company. The representative office will not be able to open a bank account in Japan, so most of our Clients request our Firm to provide their representative in Japan with a personal bank account.

Best uses for a representative office:
Our clients are advised to establish a representative office in Japan, usually for the Japanese market, before registering a branch or subsidiary.

REMEMBER

Nor a Japanese resident director is required. HOLDING COMPANIES are available in Japan.

OFFICES

Foster Swiss helps our Clients secure offices or we provide an office address. Most emerging markets require our Clients to have a 12-month office lease before company registration is approved.

We help our Clients overcome this challenge in the following ways:

Virtual office service

DDepending on the country and city, the rates range from US $ 900 to US $ 2000 and the annual active virtual office services range from US $ 1500 to US $ 4000).

Shared office space

LThe one-time fee is US $ 850. Thereafter, our Client pays the monthly rent directly to the owner).

Permanent office space

D Depending on the country and the city, the rates range from US $ 5.000 to US $ 8.000).

TAXES

Japan's corporate tax for companies with paid-in capital over JPY 100 million is 23,4%, applicable for tax years beginning on or after April 1, 2016.

In addition, the business must pay two types of local taxes, which vary depending on the size and location of the business. The resident tax varies from 12,9% to 16,3%; and corporate tax, which has three components: a progressive taxable profit rate capped at 3.6%, a 1.2% tax on value added and 0.5% on capital stock and excess capital.

The effective tax rate for companies in Japan is around 30%.

In the country, the standard rate of value added tax (VAT) is 8%.

The country has signed agreements to avoid double taxation (DTAA) with 54 countries.

The country has signed the Trans-Pacific Partnership that allows free trade with 12 countries.

In Japan, most companies require an annual statutory audit.

National companies that are wholly owned by other national companies can file consolidated tax returns with their parent company.

Monthly and quarterly financial statements must be submitted to local authorities. Returns must include total global income and will be taxed on your earnings

Legal and compliance

De According to the Japanese Corporation Law, the minimum share capital of a Japanese GK company is one Japanese yen. However, to hire a foreigner and expedite the incorporation process, it is recommended to have a minimum capital of US $ 50.000.

As of March 16, 2015, Japanese public limited companies do not require the appointment of ordinarily residents of Japan as local resident directors.

All companies in Japan must register with the Ministry of Justice of Japan, and all non-Japanese foreign nationals living in Japan must register with the Government of Japan.

The Japanese government emphasizes that leases cannot be terminated prematurely without a reason. Therefore, it is difficult to relocate after signing a lease.

All business activities conducted in Japan receive government approvals, permits, and licenses. There is an obligation to register specific products with the government, including food, pharmaceuticals, medical devices, and drugs.

The withdrawal of resident Japanese companies will take a minimum of 6 months.

In Japan, an employer must contribute i) 5% of the employee's annual salary for their health insurance, ii) 9% for the employee's pension fund, and iii) 1% for unemployment contribution.

The Japanese government promotes a lifetime employment policy. Therefore, it can be difficult to recruit Japanese staff if you do not adopt this policy.

Companies can set their fiscal year when they begin their operations in Japan and must submit their accounting reports within two months of the end of their fiscal year. Monthly and quarterly financial statements must be submitted to local authorities.

There are two types of tax return forms, blue and white. The blue tax return form requires approval from the tax office and provides businesses with several tax benefits. To be eligible for the blue form, a company must request an approval before the start of the taxable year.

It is important to note that when a corporation is created, an internal auditor must be appointed.

Cash remittances of more than US $ 30.000 must be reported to the Ministry of Finance by multinational companies.

Country problems

Ehe country has a closed economy, so consumers prefer to buy only local products.

All business documents are also written in Japanese. In addition, local business legislation can be relatively complex, putting foreign companies at a disadvantage.

Government bureaucracy can be frustrating in Japan because i) it is slow and involves a lot of administrative overhead; and ii) it favors the Japanese over the foreigners.

Renting and registering your office in Japan is expensive, the average rent for an office per month is about $ 200 per square meter.

After the establishment of the company, the monthly financial statements must be submitted to the local authorities. Only 15% of the Japanese population speak English fluently.

It is difficult to fire unproductive employees in the country, as Japanese labor law encourages employment for life.

The country's labor costs are among the highest in the world. The average monthly salary per skilled worker is US $ 3.700 not including the bonus.

The country is located near a tectonic plate boundary. As a result of this, there are an average of 1.500 earthquakes each year. This can disrupt daily business and business operations from time to time.

Most local banks can offer online banking services in English, but will charge an additional fee for doing so.

Japanese banks are required to meet at their branch with at least one Japanese-speaking director before releasing corporate bank account numbers.

Japanese banks and some companies still prefer the use of bank books and company stamps

MORE CONFIGURATION SERVICES SOLUTIONS

  • Shareholders and Agents
  • Office permits
  • Protection of trademarks and copyrights. - Market study.
  • Legal support
  • Proportion of details of temporary unions or associations
  • Fusions and acquisitions.
  • Internal control.
  • Group restructuring.
  • Financial management consulting.
  • Buy a business.
  • Valuation of companies.
  • Credit recovery
  • Job solutions
  • Due diligence search on existing companies and individuals

3. Commercial register

The national business registry does NOT include the identity information of the legal owner.

Information on legal owners is not always available online (up to 10 EUR / GBP / USD).

4. Transparency of society

Available companies where only some legal owners are registered.

5. Shareholders publications

Companies available without registered information on beneficial owners.

6. Publication of the company account

There is an obligation to maintain accounting data.

There is an obligation to present annual accounts for all types of companies.

Business accounts are not always online (up to € 10 / US $).

7. Country-by-country financial reports

No country-by-country public reporting at all.

8. Corporate tax return

The secondary mechanism is subject to the restrictions imposed by the OECD model legislation; or no secondary mechanism (only the ultimate national parent entity has to present the CbCR.

Unilateral cross-border tax rulings (eg advance tax rulings, advance tax rulings) are available in laws or regulations, or administrative practice.

9. Identifier of legal entities

The use of a Legal Entity Identifier (LEI) updated annually, developed under the guidance of the
Financial Stability Board, FSB, is not required.

The use of an annually updated Legal Entity Identifier (LEI), developed under the guidance of the Financial Stability Board, FSB, for some operators of financial markets and / or asset classes is not mandatory.

The use of an annually updated LEI for the identification of reporting financial institutions (in accordance with the Common Reporting Standard (CRS) is not mandatory.

10. Measures to avoid tax evasion

Dividend payments: Unilateral relief for double taxation through a tax credit system for a payment scenario (if the recipient is an independent or related legal person, or a natural person).

Interest payments: Unilateral relief for double taxation through a tax credit system for both payment scenarios (recipients always receive a unilateral tax credit, regardless of whether it is a legal person or a natural person).

11. Tax matters judicial secrecy

None or restricted access to both criminal and civil tax procedures.

None or restricted access to both criminal and civil tax judgments / verdicts.

12. Opaque structures

The jurisdiction does NOT issue or accept the circulation of large notes / cash notes of its own currency (of value greater than 200 EUR / GBP / USD).

Unregistered bearer shares are available / outstanding or registered by a private custodian.

Series LLC / Shielded Cell Companies are not available.

Trusts with escape clauses are not prohibited.

13. Anti-money laundering legislation

Japan is not on the FATF List of countries that have been identified with strategic AML deficiencies.

The last Mutual Evaluation Report related to the implementation of the rules against money laundering and terrorist financing in Japan was carried out by the Financial Action Task Force (FATF) in 2008. According to that Evaluation, Japan was considered to be in compliance with 4 and largely complies with 19 of the 40 + 9 FATF Recommendations. Partially or non-compliant with 2 of the 6 main recommendations.

Overall Non-Compliance Score of FATF Standards in Percentage: 54,9%.
(100% = all indicators rated as not met / low level of effectiveness; 0% = all indicators rated as completed or highly effective).

14. Automatic exchange of information

Japan signed the MCAA and committed to exchanging information on or before 2019.

The number of significant activated AEOI relationships (according to the MCAA) published by the OECD as of October 2019 is 95.

What type of private banking exists in Japan?

International Banking
Local banking

Central bank security ⭐⭐⭐

The international and digital banks They're available.

CRS: SI.

Real bank operations: 90%.

Type of visa: YEN, US $, €.

Joint accounts: SI.

Remote management account: To consult.

Asset management Depending on the rating of the company.

Rates: It depends on the type of account.

Credit / debit cards in local currency.

Crypto friendly banks: It depends on the correspondent bank.

Portfolio availability: It does not depend on the correspondent bank.

Ability to issue letters of credit: SI.

Why with Foster Swiss?

Foster Swiss is an international company registered in Switzerland aimed at providing financial and compliance advice on a variety of topics related to company formation
and commercial banking internationally. We are specialized in the implementation of businesses in different jurisdictions, which means that we offer value-added services helping our clients in their expansion abroad.

Some of these services include:
Advice and consultancy,
visas, offices, nominated director / shareholder / secretary,
accommodation if necessary… to name a few.
Check with your assigned consultant for more information.