Q13: Between a Japanese corporation and a Japanese branch, which is more advantageous from a tax perspective?
ringo tax corporation
Japanese Certified Public Accountant ・Tax Accountant Hiroya Aihara
Ringo Tax Corporation
A: The answer to that question depends on several factors, but generally, the following three cases are compared
Q: Specifically, what factors are involved?
First, if there is a continuous loss at the Japanese base, a Japanese branch is advantageous. This is because it is possible to offset losses with the foreign corporate headquarters. The deficit of the Japanese branch can be deducted from the profits of the foreign corporation, reducing the taxable income of the foreign corporation and thus lowering the corporate tax.
Q: I see, that's a case where the Japanese branch is advantageous. What about the other cases?
If the foreign corporation's capital exceeds 100 million yen, a Japanese corporation becomes advantageous. Having a large amount of capital makes it ineligible for the preferential measures for small and medium-sized corporations, resulting in fewer tax benefits for the Japanese corporation.
Q:And what about the last case?
The last case involves situations where the deduction of losses is restricted in a foreign country. If losses in the foreign country are subject to restriction, a Japanese branch would be affected, whereas a Japanese corporation would not be, allowing it to enjoy domestic tax preferential measures. When there are restrictions abroad, a Japanese corporation is more likely to reduce the tax burden.
Q:I see. Having specific figures or simulations would make it easier to compare.
Yes, that's correct. By conducting simulations for each case, a more specific comparison can be made. It is advisable to consult with a tax advisor and conduct specific simulations for each case.
