While a Japanese company has limited use as an international trading vehicle (due to high corporate taxes), Japan incorporation is attractive for businessmen who want to conduct business in Japan. Under certain circumstances, a Japanese company may be favoured over a foreign company during tendering for local contracts etc. Important points to note about Japan incorporation and its implications for foreign investors include:

As a well respected international financial centre, Japan presents a strong image in international business circles. Consequently, a Japanese company is likely to create a positive impression on clients, suppliers, investors and even venture capitalists.

Unfortunately, the Japanese government agencies offer few concrete incentives to stimulate foreign investment. That said, the Japan External Trade Organisation (JETRO), the government body responsible for coordinating and promoting inward investment, is a useful source of information for entrepreneurs both prior to and after Japan incorporation.

Most foreign investors choose a limited liability company as their preferred form of Japan incorporation. A Japanese limited liability company has similar characteristics to limited companies in other jurisdictions. However, government incorporation costs are high at US$5,570.

A Japanese limited liability company must prepare annual financial statements complying with Japanese Financial Accounting Standards. The financial statements accompany a tax return which is submitted every year to the National Tax Agency. Because of the complexity of Japanese tax law, most foreign business people hire a professional services Firm to handle tax and accounting functions.

A Kabushiki Kaisha is liable to corporate tax of 22% on income up to 8 million yen, and 30% on income over 8 million yen. In addition, companies need to be aware of the complex structure of corporate tax burdens in Japan. The special local corporate taxes and corporate inhabitant taxes vary with the different prefectures in Japan. As such, the total tax burden that a firm has to pay may range from 30.80%-44.79%. For more information, visit our Tax Planning in Japan page.

Japan enjoys high standards of corporate governance. For example, companies listed on the Tokyo Stock Exchange are required to disclose information on their financial status and business performance to their local Finance Bureau.