International companies increasingly see Japan as a prime location for expansion. But entering the Japanese market needs careful planning, especially when deciding the best legal structure for your business.
For many foreign companies, setting up a branch office in Japan is a strategic and cost-effective way to establish a presence without forming a completely new legal entity.
A Japan branch office allows businesses to conduct commercial activities and maintain a direct link to the parent company. This setup is particularly beneficial if you’re looking to enhance customer service, expand your reach, or test the market before committing to a full-scale subsidiary.
Contents:
- Understanding the Japan Branch Office
- Step-by-Step Process to Setting Up a Foreign Branch in Japan
- Timeline and Costs for Opening Japanese Branch Offices
- Taxation and Compliance
- Things Foreign Companies Need to Consider
- FAQs About Company Branch Set-Up in Japan
- Your Gateway to Doing Business in Japan
Need Some Guidance on Setting Up a Branch in Japan?
Understanding the Japan Branch Office
What is a Japan Branch Office?
A Japan branch office is an extension of a foreign company rather than a separate legal entity. With a subsidiary (Kabushiki Kaisha or Godo Kaisha), the entity operates independently under Japanese corporate law. A branch office, on the other hand, remains directly tied to its parent company.
This means that while a branch office can engage in business activities, all profits, liabilities, and legal responsibilities fall under the parent company’s jurisdiction.
Key Characteristics of a Japan Branch Office
Ability to Conduct Business Operations:
A branch office in Japan can engage in sales, contracts, and revenue-generating activities just like a local company. But its operational scope has to align with the business objectives of the parent company.
Parent Company Bears Full Liability:
Since a branch office is not an independent entity, all financial debts, legal disputes, or business risks it faces are the direct responsibility of the foreign parent company.
Requires a Resident Representative in Japan:
It’s a requirement under Japanese law for every branch office to appoint at least one representative who is a resident of Japan. This individual doesn’t have to be a Japanese citizen but they must have a valid visa and residence status that allows them to oversee the branch’s operations.
Operational Scope
Operational aspects that a branch office can conduct include:
- Business Transactions: A branch office can buy and sell goods, provide services, and conduct other commercial activities on behalf of the parent company.
- Local Representation: It can serve as the official presence of the parent company in Japan, engaging with clients, partners, and regulatory bodies.
- Employment & Staffing: The branch office can hire local employees, but employment contracts are generally signed under the foreign parent company’s authority.
- Banking & Financial Operations: A branch office can open and manage bank accounts in Japan, but financial oversight remains with the parent company.
Branch Office vs. Subsidiary: Making the Right Choice
When expanding into Japan, businesses generally choose between a branch office and a subsidiary. The main difference comes down to legal status and liability.
A branch office is not a separate legal entity, meaning the foreign parent company is directly responsible for its debts and obligations. Subsidiaries operate as independent entities, shielding the parent company from financial and legal risks.
Branch offices can be easier and faster to set up, and there are fewer regulatory steps in comparison to a subsidiary. However, it has limited autonomy because all major decisions and financial commitments must align with the parent company. Subsidiaries, on the other hand, have full control over their operations, which typically makes them a better choice for businesses planning long-term growth in Japan.
From a taxation perspective, a branch office is only taxed on income earned within Japan, whereas a subsidiary is subject to Japanese corporate taxes on its worldwide income.
For businesses testing the Japanese market or maintaining a cost-effective presence, a branch office is often a practical, low-risk option. However, if your company plans to establish long-term, independent operations, a subsidiary may be the better choice.
Step-by-Step Process to Setting Up a Foreign Branch in Japan
1. Appoint a Resident Representative
Every branch office in Japan must have at least one resident representative. This individual doesn’t need to be a Japanese national, but they have to legally reside in Japan with the appropriate visa status. The representative will act on behalf of the branch office, handling administrative and legal matters.
2. Secure a Physical Office Address
A branch office must have a registered address in Japan for official correspondence and tax registration. This can be a commercial office, coworking space, or virtual office, depending on your business needs. However, some banks and authorities may require a dedicated physical space rather than a virtual office.
3. Prepare the Necessary Documentation
Documents which must be prepared and submitted (in Japanese) include:
- An notarized affidavit to certify the establishment of the branch.
- Officially translated versions of the parent company’s articles of incorporation in Japanese.
- A power of attorney (if applicable), authorizing the resident representative to handle registration and operations.
- A lease agreement for the office address.
4. Register with the Legal Affairs Bureau
Once the documents are ready, the next step is to officially register the branch office with the Legal Affairs Bureau. The registration fee is around ¥90,000, and the process typically takes 2-3 weeks. Once that’s approved, your branch is legally recognized and can start operations.
5. Confirm Seal Requirements (Hanko/Inkan)
In Japan, the use of seals (referred to as hanko or inkan) is the traditional method for authorizing documents. For a branch office, the requirements can differ:
- Personal Seal of the Representative: The resident representative’s personal seal, registered at their local municipal office, is often sufficient for many official purposes, including signing contracts and opening bank accounts. This personal seal serves as the representative’s official signature in Japan.
- Branch Office Seal: In some cases, especially when dealing with certain banks or governmental procedures, you might need a specific branch office seal. This seal would bear the name of the branch and needs to be registered with the Legal Affairs Bureau.
6. Open a Corporate Bank Account
With the registration certificate and company seal in hand, you can now open a corporate bank account in Japan. This step is where many foreign companies can run into challenges since Japanese banks require extensive documentation and in-person meetings. Some businesses choose international banks with a presence in Japan for a smoother process, but you can also reach out to an expert team like the one here at weConnect to handle the process on your behalf.
7. Register for Taxes and Social Insurance
Finally, you must register the branch office with Japan’s tax authorities. If you’re hiring employees, you also have to enroll in social insurance programs. This includes:
- Corporate tax registration with the National Tax Agency.
- Consumption tax (VAT) registration if applicable.
- Social and labor insurance enrollment if you’re hiring local staff.
Timeline and Costs for Opening Japanese Branch Offices
How Long Does It Take to Set Up a Branch Office in Japan?
In general, the set-up process for a Japanese branch office takes 4 to 7 weeks, but the actual timeframe depends on things like document preparation, government approvals, and banking procedures. Here’s a step-by-step breakdown of the timeline:
| Step | Estimated Timeframe | Key Notes |
| Step 1: Preparing Documentation | 1–2 weeks | Gather and translate necessary documents (e.g., parent company’s incorporation certificate, notarized affidavit, and Japanese translations). Any delays in document notarization can extend this step. |
| Step 2: Appointing a Resident Representative | Concurrent with Step 1 | The representative must be a Japan resident. If selecting a nominee service, this step can be completed quickly. |
| Step 3: Securing a Registered Office Address | Concurrent with Step 1 | A branch office must have a registered business address in Japan. Virtual offices may be accepted but can complicate banking procedures. |
| Step 4: Registering with the Legal Affairs Bureau | 2–3 weeks | Filing the branch office registration with the Legal Affairs Bureau. Approval time varies based on workload and completeness of submitted documents. |
| Step 5: Obtaining a Company Seal (Inkan) | 1–3 days | Required for official documentation, transactions, and banking. Can be expedited if ordered in advance. |
| Step 6: Opening a Corporate Bank Account | 2–4 weeks | Some banks require in-person meetings and additional scrutiny for foreign companies, causing delays. International banks may offer faster processing. |
| Step 7: Tax Registration and Social Insurance Enrollment | 1–2 weeks | Must register for corporate tax, VAT (if applicable), and social insurance if hiring employees. Delays can occur if additional documentation is needed. |
What Can Cause Delays in the Branch Office Setup Process?
Although the official registration process can take as little as 4 to 7 weeks, delays often come from challenges outside of the legal filing itself.
For example, one common issue is securing office space. Many landlords in Japan require a Japanese guarantor, long-term lease commitments, and key money (a non-refundable fee), which can make the process difficult for foreign companies. If finding an office takes longer than expected, it can delay business registration and tax filings, as a registered address is required for both.
Opening corporate bank accounts is another frequent bottleneck. Japanese banks have strict due diligence requirements, and many require in-person meetings, extensive documentation, and proof of local business operations before approval. Some foreign companies struggle to meet these requirements, and it’s not uncommon to receive multiple rejections or extended processing times. If the appointed resident representative is not a Japanese national, some banks also require extra documentation or verification steps.
These pitfalls are one of the reasons that working with local experts or corporate service providers who can assist with steps like leasing negotiations, visas and banking set-up can be a huge time and cost saver. Need guidance? Feel free to reach out to us here at weConnect for a free consultation.
Taxation and Compliance
Setting up a Japan branch office comes with specific tax obligations and compliance requirements. Unlike a subsidiary, a branch office is not a separate legal entity, so its tax liability is limited to income generated within Japan. Here’s what you need to know:
Corporate Tax
A Japan branch office is taxed only on the income it generates in Japan, unlike a subsidiary, which is subject to corporate tax on global earnings. The corporate tax rate in Japan ranges from 23.2% to 30%, depending on the company’s size and revenue. Businesses also have to file annual tax returns and comply with Japanese accounting standards.
Consumption Tax (VAT)
If the branch office generates more than ¥10 million in revenue over two fiscal years, it must register for Consumption Tax (Japanese VAT). The standard rate is 10%, with a reduced rate of 8% for certain goods like food and beverages.
Withholding Tax
When a Japan branch office makes certain payments to non-residents or foreign entities, such as dividends, royalties, or service fees, withholding tax may apply. The rate depends on Japan’s tax treaties with the recipient’s country, but it generally ranges from 10% to 20%.
Annual Filings
Japan has strict financial reporting requirements, and branch offices must:
- File annual corporate tax returns with the National Tax Agency.
- Submit financial statements in accordance with Japanese GAAP or international accounting standards.
- Register for social insurance and labor insurance if employing staff in Japan.
Things Foreign Companies Need to Consider
Expanding into Japan offers great opportunities, but foreign companies often come across unexpected challenges that can slow down or complicate the process. Here are three major factors to keep in mind:
1. Language Barrier
Japanese is the primary language used in business, legal, and regulatory documents. While some multinational firms operate in English, most official paperwork, tax filings, and contracts must be submitted in Japanese. Miscommunication or mistranslations can lead to delays, compliance issues, or costly mistakes. To avoid this, it’s highly recommended to work with professional translation services or hire bilingual legal and business consultants.
2. Japan’s Complex Bureaucracy
Japan has strict business regulations, and procedures for setting up a branch office can feel bureaucratic and time-consuming, especially for foreign firms unfamiliar with the system. Local authorities often require multiple approvals, in-person meetings, and precise documentation. Even minor errors can result in rejected applications.
3. Banking Procedures
Opening a corporate bank account in Japan isn’t always straightforward, especially for foreign companies. Many banks have strict due diligence policies, and some even require a track record of business operations in Japan. Some banks also prefer working with companies that have a Japanese director or representative, which can be an obstacle for fully foreign-managed businesses.
FAQs About Company Branch Set-Up in Japan
Can a foreign company own 100% of a branch office in Japan?
Yes, a Japan branch office is entirely an extension of the foreign parent company, meaning it can be 100% foreign-owned. However, the parent company is legally responsible for the branch’s debts and obligations in Japan.
Is a physical office required for a branch office?
Yes, a registered physical address in Japan is mandatory for branch office registration. This can be a traditional office, serviced office, or in some cases, a virtual office, depending on the bank and local regulations.
What are the visa requirements for foreign staff?
Foreign employees working at the Japan branch office must have an appropriate work visa, such as a Business Manager Visa. The visa application should be initiated well in advance where possible, as processing times can vary.
Can a branch office engage in all types of business activities?
Generally, yes, a branch office can engage in most commercial activities permitted in Japan. However, regulated industries such as finance, pharmaceuticals, and legal services may require additional permits or licenses from the relevant authorities.
Your Gateway to Doing Business in Japan
Setting up a branch office in Japan is one of the best ways for foreign companies to enter the market without the complexity of establishing a subsidiary. It’s a cost-effective and practical option, but like anything in Japan, it comes with its fair share of rules, paperwork, and procedures—from securing office space and opening a bank account to navigating tax and compliance requirements. With the right preparation and local support, you can avoid common pitfalls and get your branch office up and running without unnecessary delays.
At WeConnect, we make the process simpler, faster, and stress-free by taking care of registration, compliance, and administrative hurdles for you. If you’re looking to expand into Japan the right way, reach out to us today!