Representative Office in Japan

Advantage of Representative Office in Japan

The advantage of creating a Representative Office in Japan is to be able to carry marketing survey and information gathering activity in Japan before starting a full scale operation, without having to support the burden of full size company and especially keeping a Japan Yen General Ledger and paying taxes. The Representative Office can employ people in Japan and does not need to be registered with legal authorities like the Legal Affairs Bureau. The only registration needed is with tax office for payment of employees withheld income taxes. A representative office is often used by companies that wish to employ people in Japan for support activity or before starting a full scale activity.

Limitation of Representative Office in Japan

The Representative Office in Japan cannot engage in sales or marketing activity. Basically it cannot be engaged in any “for profit” activity that would give raise to a tax liability in Japan. It is a light first step to establish a company in Japan. Typical activities of representative office are public relations, advertising, market intelligence and research and preparation to set up of a subsidiary.

How to create a Representative Office and have employees in Japan, pay them salaries, without creating a company?

The Representative Office needs to have a Representative resident of Japan.
In order to pay salaries to employees and give them the same benefits of Social Insurance and Pension as enjoyed by other regular company employees the process if relatively strict and a lot of paper work is required by the Social Insurance Office:

The Representative Office needs to prove the reality of its existence by showing:
– a lease for office space in its own name
– a utility bill in the Representative Office name
– a copy of the  contract between the representative and the foreign company

The Representative of the Representative Office also needs to prove its good standing with Social Insurance, Tax and Legal authorities by providing documents such as:
– Registration with the local ward office “Juminhyo”
– Registration with Social Insurance, typically a copy of Pension Book is needed.
– Proof of payment of resident tax and national tax and also individual enterprise tax if she/he was self-employed.

The representative office also needs to register with relevant tax office to report and pay the tax withheld on employees salary.
For further details, on Japanese payroll system click on the link

This is a little bit cumbersome however JMC can help you in this effort and it may be worth it because it allows the company to employ people in Japan without having to create a company in Japan and pay associated taxes.

Representative and Labor Insurance

Please note that the representative of a representative office cannot usually be registered with Labor insurance in Japan just as the representative of a branch or of a joint-stock company cannot be either.

Bank Account

JMC can help the representative office to establish a bank account with a local Japanese bank. We can also set up a dedicated JMC bank account for use of the representative office. JMC provide a full range of cash management services and payment services.

This information is given for information purpose only . Companies should consult with a licensed social insurance consultant and a tax accountant before making any decision.