How to Legally Set Up a Foreign Branch in Japan

When a foreign company plans to expand into Japan, it can choose to establish either a subsidiary or a branch.

For information on establishing a subsidiary, please refer to my article, How Foreigners, Foreign Companies Establish Japanese Subsidiaries.

This article covers the regulatory procedures required for setting up a branch in Japan.

Registration Obligation for Foreign Companies

A foreign company is defined as a corporation or other entity established under foreign laws and regulations, similar to or resembling a company (Companies Act, Article 2, Item 2). If a foreign company intends to conduct business in Japan continuously, it must appoint a representative in Japan (Companies Act, Article 817, Paragraph 1) and register the foreign company. A foreign company can only continue to conduct business in Japan once it has completed its registration (Companies Act, Article 818, Paragraph 1).

At least one of the representatives in Japan must reside in Japan (Companies Act, Article 817, Paragraph 1). The foreign company must apply for registration within three weeks of appointing a representative in Japan (Companies Act, Article 933, Paragraph 1).

Penalties for Non-Compliance with Registration Obligations

In cases of violation, the representative or manager of the foreign company in Japan may be subject to a fine of up to 1 million yen (Companies Act, Article 976, Item 1). They may also be subject to a fine equivalent to the amount of the registration license tax for the company's establishment (Companies Act, Article 979, Paragraph 2, Paragraph 1).

Required Registration Items (Companies Act, Article 933)

The registration items are the same as those required for establishing the most similar type of company in Japan (Kabushiki Kaisha, general partnership, limited partnership, or limited liability company), such as:

• Company name, business purpose, head office, and branch locations
• Amount of capital
• Laws governing the establishment of the foreign company
• Names and addresses of the representatives in Japan
• Method of public notice, website address, etc.
• Others

Documents Required for Registration

According to the Commercial Registration Act (Article 129), the following documents are required when registering a foreign company's branch in Japan: -

• Application Form (Application for the Registration of the Establishment of a Foreign Company's Office)
  The application form must be signed and stamped by the applicant or agent. If stamped, the seal submitted to the registry must be used. If the representative in Japan is a foreign national, signing the document in place of a stamp is sufficient, but a certificate from the home country's government (commonly known as a signature certificate) is required to prove the signature's authenticity.
• Document proving the existence of the head office
• Document proving the qualifications of the representative in Japan
• Articles of incorporation or other documents identifying the nature of the foreign company
• Others

These documents must be authenticated by the competent authorities of the foreign company's home country, a consulate, or other authorized officials in Japan.

Registration License Tax

A registration license tax of 90,000 yen is required when establishing a branch in Japan.

Foreign Exchange and Foreign Trade Act Requirements

Guide to the Prior Notification System for Foreign Investors

Tax Matters

Foreign companies must submit notifications to the tax office and tax service office, such as the "Notification of Becoming a Foreign Ordinary Corporation" and the "Notification of Establishment of a Salary Payment Office." Other necessary filings may include blue return applications and special provisions for withholding income tax deadlines.

HR Compliance

When hiring employees, it's important to remember that you must submit the necessary notifications to the Labor Standards Inspection Office, the Public Employment Security Office, and the Social Insurance Office.

Conclusion

Establishing a branch in Japan as a foreign company involves complying with various legal, tax, and labor requirements. From registering the company, appointing a local representative to fulfill tax obligations, and submitting labor-related notifications, these procedures ensure the company's operations align with Japanese laws. Properly navigating these steps is essential for a successful and compliant business presence in Japan.