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Company Formation in Japan
Investors from all over the world are interested in opening a company in Japan, due to many business advantages. The Japanese legislation doesn’t require a minimum share capital for the registration of a limited liability company.
Japan is famous for its pro-business atmosphere, proficient in attracting wide-ranging overseas funds and important foreign businesses. Japan promotes research and development and has a good percentage of its GDP dedicated to research and development activities. The country has one of the largest and most complex economies in the world and is also considered a competitive country to do business in.
There are several types of companies available for incorporation that present different advantages to investors. Our experts in company registration in Japan are specialized in forming all types of companies in this country.
If you want to open a company in Japan, we invite you to watch the following video about the company incorporation procedure in this country:
Company formation steps in Japan
The main types of companies in Japan are the corporations and the partnerships. Joint stock companies and limited liability companies are preferred corporate forms while those investors who share similar business goals prefer the general partnership. The limited liability partnership is a convenient business form for those investors who require the limited liability protection as in the case of a company but still wish to operate under a partnership.
Foreign investments are encouraged in Japan and there are few formal restrictions on investment in selected economic sectors. Investors need to give special notifications when they plan on making an investment in business fields like broadcasting and telecommunication, aerospace, aviation, maritime transport or nuclear energy. The Government may restrict investments in these special areas if it believes that such actions would threaten the national security or the public order. The Foreign Exchange and Foreign Trade Law offers details on investments for special categories of foreign direct investment.
Company formation in Japan requires a few formalities. The steps we present here apply for incorporating a limited liability company in Japan. This is the most common business type found in this country.
The “godo gaisha”, is the Japanese equivalent of the limited liability company in which the members are only liable to the extent of their contributions to the company’s capital. The New Companies Act is the main legal resource that regulates this type of business, as well as the other types of companies that are available for incorporation in Japan.
Investors who want to open such a company in Japan, must know that the “godo gaisha” does not have a minimum share capital requirement when it is registered, however, the member’s contributions can only be made in cash or non-cash assets and not in services. The steps for opening a limited liability company are the following:
1) A manager chosen by the company members acts in the name of the company and their interests. The chosen manager can be a natural person or a corporate body. If the latter applies, a functional manager must also be appointed to act on behalf of the company.
2) The first step for company formation in Japan is making the company seal. The company’s representative is also required to register for a personal seal. A certificate of registration is issued when the process is complete.
3) The company’s Articles of Association are registered with the Japan Legal Affairs Bureau, via a standard application. The Articles are the company’s founding documents and contain its unique name, the motive for incorporation, the founder’s identification details, the authorized share capital and information about the type of shares. A list of members who have made cash or non-cash contribution is also needed during this step.
4) If all the documents are in order and the application is approved, the certificate of seal registration is then delivered to the Legal Affairs Bureau. After this comes the final registration of the formed company.
5) The next steps concern tax matters and begin with submitting a notification to the District Tax Office: the notification of the company registration (which must be submitted no longer than two months after the incorporation date). A special notification for opening a payroll office is also submitted (no longer than a month from opening it) together with a request for the approval of blue tax returns (no longer than three months from registration).
6) When the new company starts to hire employees in Japan, it must register at the Labour Standards Inspection Office for the labor insurance. In order to be registered for health insurance and public welfare pension, the company sends a notification to the Social Insurance Office, so the company is registered for health insurance and public welfare pension.
7) The last step consists of submitting an application to the Public Employment Security Office no longer than 10 days after hiring the first employees.
The registration of a company in Japan takes less approximately ten days when all the documents are in order. Subsequent special permits and licenses may be needed.
- A limited liability company in Japan is a type of company suited for small and medium businesses.
- The members are liable only to the extent of their contribution to the company’s capital.
- Unlike the joint stock company, all the members of the company may represent it, until a manager is appointed. Their contribution can be made in cash but also in non-cash assets.
- It’s mandatory that all the company’s members must be in favor of a certain decision to make it applicable.
- A “godo gaisha” may be reorganized as a joint stock company if all the company’s members agree with the decision.
- All companies in Japan are subject to observing the accounting, filing and auditing requirements. The Japanese accounting standards apply to all companies (GAAP) and company owners must prepare and submit the financial statements on an annual basis. Companies that have more than 500 million JPY capital are required to appoint an external auditor. The tax year is generally the same as the calendar year but it may be another twelve-month period, as the company chooses upon its incorporation. Branches are generally required to have the same fiscal year as the head office abroad.
In case you are considering starting a company of this type in Japan, our experts can help you.
Services provided for registering a company in Japan
- drafting the Articles of Association (necessary for the company incorporation in Japan); If the investor cannot be present in the country, the Articles of Association for the Japanese company can be signed through a Power of Attorney.
- drafting all other documents required for the incorporation of the Japan company; these documents include specimen signatures, special forms provided by the Company Registration Office in Japan, passport copies, etc.
- a registered office in Japan for your company, which is mandatory for all companies registered in the country (the registered office is the chosen address where the Japanese company has its headquarters).
- setting up a bank account for your Japanese company.
Key facts about Japan
- The Japanese taxation system is quite elaborate so it is advisable to consult with a tax expert before opening a company and for any accounting and tax filing proceedings;
- Foreign residents are only taxed on the income earned in Japan.
- The taxation of individuals is done according to progressive tax rates, up to 45%. Individuals may be considered permanent residents or nonpermanent residents.
- For individuals, the tax year is the same as the calendar year.
- The equivalent of worldwide VAT in Japan is the Consumption Tax at a rate of 8%. CT registration is mandatory only under certain conditions and for companies that exceed a certain taxable sales amount.
- The corporate tax in Japan is 23,4 %. Along with the corporate tax, the company must pay two types of local taxes: inhabitant tax and enterprise tax.
- Withholding taxes apply to dividends, interest, and royalties, in different percentages starting from 20% to 15%, plus a surtax.
- Companies must file a corporate income tax return, an inhabitants tax return and an enterprise tax return. The filing and payment deadline is no later than two months after the closure of the fiscal year.
- There are two types of tax returns in Japan: the so-called white ones and the blue ones. The blue tax return has several benefits, among which privileges for accelerated depreciation and a tax loss carryforward. Our agents who specialize in company registration in Japan can help you understand the differences and apply the use of a blue return, if possible in the company’s particular case.
- The tax authority in Japan is the National Tax Agency (NTA). Sources for tax law include the Corporation Tax Law, the Special Taxation Measures Law and the Consumption Tax Law.
- The workforce from Japan consists of well trained, educated and loyal employees.
- The Labor Standards Law includes the provisions for the working hours, the wages and benefits and the employee rights.
- The government offers certain incentives to the companies: for investments related to productivity improvements or for the promotion of income growth. A tax credit for job creation is applicable.
- The industry is very developed, especially in the electronics, machine tools, ships, chemical substances and motor vehicles.
- Japan’s main export partners are the United States, China, Taiwan, Korea and Hong Kong. Import partners include the United States, China, Australia, Saudi Arabia, Korea or Malaysia.
- Many financial services companies are located in Japan.
- Japan is a member of the World Trade Organization and has an extensive double tax treaty network wish allows for double taxation relief for corporations that derive income both from Japan and from another jurisdiction with which a treaty is signed.
For more details on company registration in Japan and investment particularities, please do not hesitate to talk to one of our experts.
Bridgewest provides company formation services in Japan. Please contact us for more information and prices.
Meet us in Tokyo
Call us now at (+81) 3-4580-1516to set up an appointment with our company formation agents in Tokyo, Japan. Alternatively you can incorporate your company without traveling to Japan.
As a BridgeWest client, you will benefit from the joint expertize of local and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Japan.