JTAX | Guide to Setting Up A Japan Representative Office | 1

JTAX JAPAN TAX GROUP

JTAX I GUIDE TO SETTING UP A JAPAN REPRESENTATIVE OFFICE

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Disclaimer

Transmission and I or receipt of this guide [the "Guide"] does not constitute advice of any kind, does not establish a client relationship, and does not create any duty to any reader.

This Guide is a public resource provided for general information purposes only and does not constitute advice to undertake or refrain from undertaking any action. The reader should not act or refrain from acting based on any information contained in any of the materials in this Guide without first obtaining independent professional advice. We expressly disclaim any and all liability with regard to actions taken or not taken based upon the content of this Guide. The contents are not promised or guaranteed, to be complete, accurate, and up-to­date. Only appropriately qualified professionals are able to advise on matters such as payroll, immigration, legal, and tax matters and readers should always seek the advice of competent counsel prior to taking or refraining from taking any action.

Not Advertising

This Guide is not intended to be advertising.

In particular, JT AX does not desire to assist anyone seeking assistance if such desire for assistance is based upon the reader viewing this Guide in a jurisdiction where this Guide fails to comply with all laws and ethical rules of that jurisdiction.

Copyright Notice

Copyright © 2017 by Accounting Asia Holdings

All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, scanning, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed "Attention: Permissions Coordinator," at the following email address:

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ABOUT JTAX JT AX is a member of the Accounting Asia Group, a leader in Asia focused professional services.

Tracing its roots to 2001, JT AX's team of Japanese and foreign professionals has assisted hundreds of foreign clients to establish and run their businesses in Japan. Our management is drawn from the Big 4 and has extensive experience responding to the requirements of clients ranging in size from listed multinationals to start-ups.

JT AX recognizes the practical difficulties associated with operating a business in Japan and our aim is to provide clients with one-stop assistance. Our team therefore provides a comprehensive range of services including tax advisory, tax compliance, incorporation, accounting, cash management I expense payment, payroll I HR, Japan resident nominee directors, and work visas. In addition to the convenience of dealing with a single service provider, JT AX ensures that its services are handled in a coordinated manner. For example, Japan work visas may be dependent on having a properly incorporated company and an appropriate tax structure, etc.

In addition to working directly with clients, JTAX is also able to assist foreign law firms and accounting firms whose clients require assistance in Japan.

Please Contact Us tor more information about any of our services.

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JTAX MANAGEMENT Dean Page - Administrative Partner

Dean Page is JTAX's administrative partner. He is a leading expert on Japanese and international tax and on doing business in Japan.

Dean worked for seven years in the Big 4, most recently as a partner at Ernst & Young [E&Y). At E&Y he served as the inbound account leader in which role he had responsibility for overseeing the delivery of services to E&Y Japan's foreign clients.

At PricewaterhouseCoopers ["PwC") Dean headed the Pathfinder Group, a team that specializes in assisting foreign clients to establish operations in Japan.

Since 2001, Dean has co-headed the International Tax Education Program [ITEP) and acted as an Adjunct Professor at the Beasley School of Law, Temple University, Japan Campus. He is the author of numerous articles related to Japanese and international tax.

Dean is admitted as both an attorney [England I Wales) and as a CPA [USA, California).

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However, it may be possible for JT AX to open in account under the name of one of our professionals with an annotation that funds are being held for the Japan Representative Office. For example, the account title may be "Taro Aoki on behalf of the Japan Representative Office of XYZ Limited".

Once established, the bank account can be used for Japan payroll purposes [including payments to the Japanese authorities for employee social insurance and labor insurance] and also to pay expenses related to the Japan Representative Office.

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1. Overview of Steps To Establish A Japan Representative Office

The following graphic provides a simplified overview of the practical steps involved in establishing a Representative Office in Japan.

REPRESENTATIVE OFFICE TIMELINE

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Confirm Scope of Proposed Activities is Consistent With Japan Representative Office (tnctud~ng Whether Double Tax Treaty ("DTA 1 1s App11cable )

Enter Lease for Japan Office

Establish J11panese Bank Account (for Payment of Payroll and Expenses)

Establish Payroll and Accounting Systems

Decide Basic Issues

- Identify Fore1gn Head Office - Identify lndMdual to Act as

Japan RepresentatiVe - Address for Japan

RepresentatiVe Office

Individual Tax I Compensation Planning for lndMdual Who W1ll Act as Japan Representative

--._ Japan Work Visa Applications for non­Japanese Employees

Registrations for P11yroll and Japanese Withholding Tax Purposes

--~

r-ln-d-iv- id_u_a_I_T_a_x-----, _/ ~ Ongoing (at least annual) Review of Japan RepresentatiVe Office ActMtles to Ensure Permanent Establishment ("PE1 R1sk is M1t1gated

Compll11nce for Japan Representative

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2. Time To Establish A Japan Representative Office

Given its unregistered status, a Japan Representative Office can technically be established upon the appointment of an individual to act as the Japan Representative.

However, if the filings discussed below are required (i.e., for Japan payroll purposes] the procedures may take up to one month to complete.

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3. Filings With The Japanese Social Insurance Office

Social insurance is an important statutory benefit received by employees in Japan. Incorrect handling of social insurance can be a major source of friction between foreign management and Japan Representative Office employees.

Name of Filing Due Date

Application for Enrollment in Social Insurance As soon as possible but not later than five days after an employee is hired.

Annual Social Insurance Report 10 August of each year

Change Reports [e.g., regarding new employees As soon as possible but not later joining the Representative Office, retiring from the than five days after a relevant Representative Office, significant change in salary, event occurs. etc.]

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4. Filings With The Japanese Labor Insurance Office

Labor insurance is another important statutory benefit received by employees in Japan. It is important that filings are made in a timely manner.

Name of Filing Due Date

Application for Enrollment in Labor and As soon as possible (within 10 Employment Insurance days when an employee is hired)

Report on Computation of Estimated Labor As soon as possible Insurance Premium

Annual Labor Insurance Report May 15 of each year

Change Reports [eg, regarding new employees As soon as possible but not later joining the Representative Office, retiring from the than ten days after a relevant Representative Office, significant change in salary, event occurs. etc.)

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