Q20: For a foreign company with a large capital of 200 million yen, which is better from a tax perspective, a Japanese branch or a Japanese corporation?
ringo tax corporation
Japanese Certified Public Accountant ・Tax Accountant Hiroya Aihara
Ringo Tax Corporation
A: From a tax perspective, a Japanese corporation can offer greater tax-saving benefits.
1: Capital of a Japanese Corporation vs. a Japanese Branch
A Japanese corporation has its own corporate personality, independent from the foreign company, and sets its own capital. In contrast, a Japanese branch is considered part of the foreign company, and its capital is based on that of the foreign company.
2: The Impact of Capital on Taxes
The amount of capital influences the calculation of corporate tax and consumption tax, among others. Notably, corporations with capital of less than 10 million yen or under 100 million yen enjoy tax benefits.
When a Foreign Company with 200 Million Yen in Capital Enters Japan
If a foreign company with 200 million yen in capital establishes a Japanese corporation, setting the capital at less than 10 million yen can yield tax benefits. On the other hand, for a Japanese branch, the tax assessment is based on the foreign company's capital, resulting in higher taxes. Generally, for foreign companies with significant capital entering Japan, establishing a Japanese corporation is financially advantageous. However, if the Japanese operation consistently operates at a loss, a Japanese branch could be more beneficial in some cases. Attention should also be paid to the tax treatment of fund transfers.
