A foreign company that wants to do ongoing business in Japan has three main options: a subsidiary (usually a kabushiki kaisha or godo kaisha), a branch, or a representative office. A representative office needs no registration, but it can only do market research, liaison and similar preparatory work. Once the company trades continuously in Japan, it must appoint a representative in Japan, at least one of whom is resident, and register as a foreign company within three weeks. Trading before registration makes the people who did it jointly liable with the company.
A branch is not a separate company. Its contracts are the foreign company's contracts, its debts are the head office's debts, and its staff are employees of the foreign company. It is taxed in Japan on the profits attributable to the branch. Banks, insurers and some trading businesses use branches for regulatory or capital reasons; many other groups start with a branch and later move the business into a subsidiary.
The rules for people do not change with the form. Anyone working in Japan for a branch is covered by Japanese labour law and must be enrolled in Japanese social insurance and labour insurance, and the branch needs its own work rules once it reaches ten employees.
What it means for a foreign employer
- The Japan representative carries the registration. The resident representative is named in the public register and is the legal face of the company in Japan. Treat that appointment as seriously as a directorship.
- Candidates may see a branch as provisional. A branch suggests a market entry rather than a commitment. Senior Japanese candidates often ask whether a subsidiary is planned, and why not.
- Dismissal rules still apply. Closing a branch or cutting staff is subject to the same tests as any Japanese employer; the head office cannot dismiss on overseas terms.
- Transfers are simpler. A branch can bring in staff from the head office under the intra-company transferee visa, just as a subsidiary can.
Sources
- Companies Act, Articles 817, 818 and 933.
- Registration and Licence Tax Act, Schedule 1 (foreign company branch registration).
- Ministry of Justice, sample application for registration of a foreign company's first office in Japan (registration tax 90,000 yen per office).
- Ministry of Justice, guidance on registration of foreign companies.