Looking to explore the Japanese market without committing to a full legal entity? A representative office in Japan offers the simplest way to establish a local presence. It’s ideal for early-stage activities like market research, promotional work, and managing relationships with local partners, but it comes with strict limitations: no sales, no contracts, and no invoicing.
In this guide, we’ll walk through what a representative office is, what you can (and can’t) do with it, how to set one up, and when it makes sense to upgrade to a branch or subsidiary. If you’re just getting started in Japan, this is the place to begin.
Contents:
- What Is a Representative Office in Japan?
- Why Foreign Companies Use Representative Offices
- Permitted and Restricted Activities
- Step-by-Step: Setting Up a Representative Office in Japan
- Legal and Tax Considerations
- Pros and Cons of Representative Offices
- Representative Office vs Branch vs Subsidiary
- When to Consider Upgrading to a Branch or Subsidiary
- How weConnect Can Help
Need Some Guidance on Setting Up a Representative Office in Japan?
What Is a Representative Office in Japan?
A representative office in Japan is a non-commercial base used for support functions like market research, promotional activity, and communication with local partners. It allows foreign companies to establish an initial presence without registering a formal legal entity.
Importantly, a representative office cannot engage in profit-generating activities. That means no selling products or services, signing contracts, or holding inventory.
Unlike a branch or subsidiary, a representative office has no legal status in Japan. It’s not registered with the Legal Affairs Bureau and doesn’t pay corporate income tax. However, it can still serve as a useful first step for companies exploring the market.
Why Foreign Companies Use Representative Offices
For many companies, a representative office is the most practical entry point into Japan. It offers flexibility without the cost and complexity of full Japanese entity incorporation.
Key reasons to choose a representative office include:
- Low setup burden: No registration with the Legal Affairs Bureau is required.
- Minimal compliance: No corporate tax filings or financial audits, unless staff are hired.
- Ideal for early-stage presence: Suitable for testing the market, conducting research, or preparing for future expansion.
- Local credibility: Allows you to build relationships with Japanese partners under your brand name.
If your primary goal is to learn the market or lay the groundwork for future growth, a representative office keeps things lean and simple.
Permitted and Restricted Activities
A representative office offers flexibility in some areas, but the restrictions are important—and non-negotiable under Japanese law. Understanding what you can and cannot do is essential to staying compliant.
Permitted Activities
A representative office can engage in non-commercial operations that support the business goals of the parent company, such as:
- Market research: Gathering information on competitors, customer behavior, regulations, or pricing.
- Promotional efforts: Participating in trade shows, conducting brand awareness campaigns, or managing public relations.
- Liaison work: Coordinating with local partners, vendors, or service providers on behalf of the parent company.
- Administrative preparation: Laying the groundwork for future expansion, including scouting locations or evaluating partners.
These activities are allowed because they do not involve generating revenue or directly conducting business in Japan.
Restricted Activities
A representative office cannot perform any tasks that are considered commercial operations. Specifically, it may not:
- Sell goods or services to Japanese clients or consumers.
- Enter into contracts with local businesses, customers, or government entities.
- Invoice or receive payments for any commercial transactions.
- Store or deliver inventory, even if the sale occurs outside Japan.
Violating these restrictions can lead to penalties and may put your future business expansion in Japan at risk. If your plans involve generating income or signing clients, a branch or subsidiary is the better route.
Step-by-Step: Setting Up a Representative Office in Japan
Setting up a representative office in Japan is relatively straightforward—but there are still key decisions to make and steps to follow to ensure your presence is legitimate and operational.
1. Choose Office Location and Local Manager
Decide where your office will be based. Options include:
- Leasing a physical office: Best for companies planning face-to-face partner meetings or hiring staff.
- Using a virtual or serviced office: A cost-effective option for low-activity operations or early-stage market entry.
You’ll also need to appoint a local representative to manage the office. This can be a Japanese national or a foreign employee based in Japan (visa required).
2. Notify the Japanese Tax Office (Optional but Recommended)
Although not legally required, submitting a notification of the representative office to the relevant tax office is strongly advised. This improves transparency and helps with:
- Visa applications for foreign staff
- Opening a local bank account
- Establishing credibility with Japanese partners
The process involves submitting a basic notification form, along with a letter from the parent company outlining the office’s non-commercial purpose.
3. Open a Local Bank Account (Optional)
Opening a bank account without legal incorporation can be difficult. Some banks may reject applications from unregistered entities. Workarounds include:
- Using the personal account of the representative (not ideal)
- Partnering with a local service provider that can help facilitate account setup
- Operating in JPY via the parent company’s international banking setup
For many rep offices, a local account is useful—but not essential, especially if transactions are minimal.
4. Hire Local Staff (if needed)
If you plan to employ staff in Japan, even under a representative office, labor laws apply. That includes:
- Drafting compliant employment contracts
- Enrolling employees in social and labor insurance systems
- Paying into required pension and health schemes
If the manager is a non-Japanese national, you’ll also need to secure an appropriate visa, such as the Business Manager Visa. This process may require additional documentation and proof of operational intent.
While there’s no incorporation process per se, these setup steps must be handled carefully. Japan values clarity and documentation—so even a basic structure like a representative office should be set up with attention to detail.
Legal and Tax Considerations
One of the key appeals of a representative office is its minimal legal and tax burden. That said, there are still important compliance points to keep in mind—especially if you hire staff or interact regularly with local authorities.
Legal Requirements
- No legal registration: Representative offices are not incorporated entities. You don’t need to register with the Legal Affairs Bureau, and there are no requirements for Articles of Incorporation or corporate governance structures.
- Employer compliance (if hiring): If you hire staff, you must register for:
- Labor insurance
- Health and pension insurance
- Employment insurance
- Labor insurance
Even without legal entity status, hiring triggers obligations under Japan’s labor laws.
Tax Obligations
- No corporate income tax: Since a representative office cannot generate revenue, it is not subject to Japanese corporate taxes.
- Consumption tax (VAT): In rare cases, a rep office may become liable for consumption tax if certain thresholds are unintentionally crossed (e.g., providing reportable services from Japan).
- No permanent establishment: Because it’s not engaged in business activities, a rep office generally does not qualify as a taxable presence under Japanese tax law.
While the legal and tax environment is light, it’s not nonexistent. If your activities or staffing expand, consult a specialist to ensure you remain within the bounds of what’s permitted.
Pros and Cons of Representative Offices
Representative offices offer a low-risk way to explore Japan—but they’re not the right fit for every company. Understanding the benefits and limitations can help you decide whether this structure matches your goals.
Pros
- Simple setup: No need to register with the Legal Affairs Bureau or file Articles of Incorporation.
- Cost-effective entry: Avoids incorporation costs, tax filings, and many regulatory obligations.
- Quick presence: Start operations faster, especially useful for research or early-stage outreach.
- Brand visibility: Allows you to establish a local presence under your company name.
Cons
- No legal status: The office itself has no separate legal standing in Japan.
- Limited functionality: You can’t generate revenue, sign contracts, or hold inventory.
- Difficult to scale: If business opportunities grow, you’ll need to upgrade to a branch or subsidiary.
- Banking and hiring challenges: Without incorporation, some banks may refuse to open accounts, and hiring may require visa support or employer registration.
A representative office works best when the priority is exploration over execution. For companies looking to learn, prepare, or build early-stage relationships, it’s a lean and practical choice. But if your goals include sales, hiring at scale, or long-term operations, a more robust structure may be necessary.
Representative Office vs Branch vs Subsidiary
Choosing the right structure depends on your goals, timeline, and willingness to take on regulatory responsibility. Here’s how a representative office compares to other entry options:
| Feature | Representative Office | Branch Office | Subsidiary (KK) | |
| Legal Status | No legal entity | Extension of parent company | Separate legal entity | |
| Can Sign Contracts? | ❌ No | ✅ Yes | ✅ Yes | |
| Can Generate Revenue? | ❌ No | ✅ Yes | ✅ Yes | |
| Taxed in Japan? | ❌ No (unless thresholds are met) | ✅ Yes | ✅ Yes | |
| Setup Complexity | Low | Moderate | High | |
| Best For | Market research, early entry | Operational testing, faster market access | Full-scale market entry, long-term growth |
Which Option Is Right for You?
- Choose a representative office if you’re testing the waters or building relationships.
- Opt for a branch office if you want to begin operations but keep things lean.
- Go with a subsidiary if you’re ready to invest in long-term presence and local credibility.
Need more detail? Read our full Branch Office and Subsidiary guides.
When to Consider Upgrading to a Branch or Subsidiary
A representative office is often just the first step. As your business evolves, you may outgrow its limitations—and upgrading becomes not only logical, but necessary.
Signs It’s Time to Upgrade
- You want to sign contracts or invoice clients in Japan.
- You plan to hire a team and manage operations locally.
- You’re pursuing revenue-generating activities, such as sales, service delivery, or product distribution.
- Japanese partners request a local legal entity for compliance or credibility.
At this point, transitioning to a branch office or subsidiary unlocks new capabilities—but it also changes your tax position, HR obligations, and regulatory responsibilities.
Many Companies Start Small, Then Scale
It’s common for foreign businesses to enter Japan via a representative office, then upgrade once the business case is clear. This phased approach allows for learning, relationship-building, and risk management before committing to full-scale operations.
Planning ahead is essential. If you’re seeing traction in Japan, it’s worth considering the next step before growth is held back by structural limitations.
How WeConnect Can Help
Navigating Japan’s market entry options can be complex—but you don’t have to do it alone. Whether you’re opening a simple representative office or planning a long-term expansion, weConnect helps foreign companies build the right foundation.
We support every stage of the journey:
- Market entry strategy: Clarify your goals and choose the best structure for your needs.
- Back-office support: Handle tax filings, labor compliance, and reporting—if and when required.
- HR and visa guidance: Hire local staff, manage payroll, and support visa applications for foreign managers.
- Entity upgrades: Seamlessly transition from a representative office to a branch or subsidiary when the time is right.
With deep experience supporting global companies in Japan, weConnect provides practical, end-to-end support to reduce risk and accelerate your growth.
Let’s talk about setting up your Japan presence the right way. Contact us!