The simplest form for a foreign company to establish a base for business operations in Japan is to set up a branch office.

The branch office can begin business operations as soon as an office location is secured, the branch office representative determined, and the necessary information registered with the Legal Affairs Office. 


A branch office does not have its own legal corporate status, but instead is deemed to be an extended arm of the foreign company. In general, therefore, a branch office creates potential Japanese corporate income tax exposure on all of its foreign parent's Japanese business income, i.e. the foreign company is ultimately responsible for all debts and credits generated by the activities of its Japanese branch office. 


In a more detail:

  • a branch office:
‚Äč  o must be registered with the Japanese Ministry of Justice,
 o must have a registered representative who is resident in Japan,
 o must have a registered office in Japan (can be the representative's home address),
  • a branch office can open and operate a bank account, can rent office space, can lease equipment and can do most other  things a domestic company can do
  • a branch office can employ any number of employees but must adhere to all requirements of the Labor Standards Law 
  • a branch office is governed by Japan's Commercial Code and is liable under Japanese law for its debts etc.
  • a branch office is a subject to annual tax declaration derived from its Japanese operations, including all revenue derived in Japan by its foreign parent.
  • a branch office is not required to deduct any withholding taxes when transferring revenue back to the foreign parent
  • the head-office is allowed to assign some part of its G&A costs to the branch-office to offset against Japanese corporate tax
  • a branch-office can 'roll-up' any year's losses and carry them forward for a maximum of 9 years to offset against profits when calculating corporate taxes
  • a branch-office cannot be directly converted to a Japanese company so the corporate tax benefit of rolled-up losses will be lost if for any reason a switch is made to a kabushiki kaisha or godo kaisha prior to the rolled-up losses being offset