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Subsidiary vs Branch

Subsidiary vs Branch

(Note) The appropriate structure will be decided according to your Japanese business itself!

<Which is preferable Subsidiary or Branch.>


  Subsidiary (Kabushiki-Kaisha) Japanese Branch
1. Capital No minimal capital figure.
At least JPY 1
2. Dividends / Profit Remittance Subject to withholding tax at 20% (or reduced rates under tax treaties) Not imposed
3. Loan
1) Intra-company (Loan form the head office)
2) Inter-company (Loan form affiliated companies)
1) N/A
2) Interest is deductible
Note: 'Thin Capitalization' rules.
1) Interest is not deductible
2) Same as left
4. Annual administration Annual shareholders meeting. No annual procedure. Registration is required when registered items of the head office is changed.
5. Tax Return Submit by the subsidiary. No requirement to the parent company. Submit by the branch with the accounting reports prepared by the head office for worldwide bases.
6. Director Necessary at least one representative director who is a resident of Japan Necessary at least one representative who is a resident of Japan
7. Local tax (capital per levy) Depending on capital amount etc Disadvantage? (If the capital amount of the head office is huge.)
8. Loss of starting up Cannot setoff by the parent company Can setoff by the head office

Local corporation tax (Per capita levy on corporate inhabitant tax) - Tokyo Metropolitan
Category of corporation main office is located
within the 23 wards
Other than left area
Capital Amount Number of staff Metropolitan tax Metropolitan City
Over JPY 5,000,000,000 Over 50 JPY 3,800,000 JPY 800,000 JPY 3,000,000
Or under 50 JPY 1,210,000 JPY 410,000
Over JPY 1,000,000,000
Or under JPY 5,000,000,000
Over 50 JPY 2,290,000 JPY 540,000 JPY 1,750,000
Or under 50 JPY 950,000 JPY 410,000
Over JPY 100,000,000
Or under JPY 1,000,000,000
Over 50 JPY 530,000 JPY 130,000 JPY 400,000
Or under 50 JPY 290,000 JPY 160,000
Over JPY 10,000,000
Or under JPY 100,000,000
Over 50 JPY 200,000 JPY 50,000 JPY 150,000
Or under 50 JPY 180,000 JPY 130,000
Or under JPY 10,000,000 Over 50 JPY 140,000 JPY 20,000 JPY 120,000
Or under 50 JPY 70,000 JPY 50,000
Other than above JPY 70,000 JPY 20,000 JPY 50,000

Representative Office vs Branch

PE (Permanent Establishment) issue should be investigated with a tax specialist before setting up a Japan office.