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CCC
Prepared by Core Capital Consulting KK
2013 June
A Distinguished Global business solution partner connecting you through Asia
CCC 2
3
Other
wholesale
18.3%
Finance
8.6%
Consulting
3.3%
Non-
manufacturing
15.9%
Chemical
4.2%
Electronic
equipment
3.5%
General
machinery
3.5%
Other
manufacturing
11.4%
Transportation
3.1%
Information
system
and software
10.9%
Machinery
wholesale
6.1%
Electronic
equipment
wholesale
6.4%
Precision
instruments
wholesale
4.7%
1.1 Statistical Data In 2009
Source: Gaishikei Kigyo Soran 2008, Published by Toyo Keizai
67.0%
13.8%
6.2%
12.9%
100%
50% ~ 100%
50%
~ 50%
Non-manufacturing
77.4%
Manufacturing
22.6%
U.S.A
43.2%
Canada, 1.2%
Germany
11.7%
UK, 7.2% France,6.7%
Swiss, 4.4%
Netherlands,
2.5%
Italy, 1.9%
Other
European, 6.4%
South Korea,
4.8%
China (&HK),
3.5%
Other Asian,
4.8% Australia, 0.9% Other, 0.8%
North America
44.4% Europe
40.7%
Asia 13.2%
Others 1.7%
Investigation targets: 3311 foreign affiliate (NOT all the foreign affiliate) in Japan
Remarkable Changes
- Number of Asian parent companies has made 0.8 point raise up since last year, now occupying 13.2%. ( Namely China, Hong Kong, North Korea, Singapore, India)
Distribution of Foreign Affiliates by Industry
Foreign Capital Ratio
Nationalities of Parent Company
BO
Parent Company wants minimal bureaucracy
Less burden in establishing (disbursement,
timeframe, required docs, etc) + running (as do
not require share holder decision making
processes from the compliance formality
perspective)
Lower Credibility in Japan upon doing
business
Liability transferred to HQ
Tax can be inflated. Branch and the foreign
company from which it extends are treated as
the same entity for Japanese tax purposes and
therefore, in general, a branch cannot
recognize internal profits and losses from
transactions with its head office or other
branches of the same head office
1.2 Comparison of Branch Office and Kabushikaisya
KK
Independent Legal Entity
High credibility,
Can get tax reduction better than BO
(Blue Return System – Loss carry forward)
Higher possibility to fund raising from banks or
other 3rd party investors under the higher
credibility
Limited liability up to the paid-in-capital
Cost of disbursement for establishment
Overall high running cost comparatively
Statutorily more complicated than BO
Identity
Pros
Cons
CCC
1.3 Requirements to Incorporate Branch office or Local corporation
Branch Office Local corporation (KK, GK, etc)
Restrictions on equity participation Notification must be filed with the Bank of
Japan Notification must be filed with the Bank of Japan
Capitalization No capital More than 1 Japanese yen
Number of investors N/A At least one shareholder
Liability of equity
participants/parent company toward
creditors
Unlimited Limited to amount of equity participation
# of executives required
Representative in Japan: Can have 1 or
more
*At least one representative MUST have
an address in and be resident in Japan.
Under New Corporation Law: Can have 1 or more
*At least one representative MUST have an
address in and be resident in Japan
Legally stipulated term of office for
registration No legally stipulated term
Freely determined up to 10 years for directors
Up to 4years (until the end of fiscal year) for
auditors
General meeting of shareholders Not required Must be held at least once a year
Fiscal Year End (FYE) FYE must be in alignment with the HQ FYE can be set at any date as desired(less than
12months)
Corporate Income taxation As per the amount of taxable income
As per the amount of taxable income and
reduced tax rate applicable for small companies
depending on the shared capital amount
Local Business taxation
As per the Head office company’s capital
amount, some part of the Business tax
amount is determined.
Allocated according to equity participation ratio
after the taxation
CCC
CCC 6
Preliminary investigating matters related to incorporation
Preliminary investigating matters related to incorporation
7
BO KK
Notification of BO establishment to the Bank of Japan
Opening of bank account under BO name
Acquisition of certificate on registered information
Application to Legal Affairs Bureau for registration
Certification of affidavit by embassy/consulate in Japan
Preparation of affidavit
Establishment of BO ( date of BO establishment is at the BO’s discretion)
Examination at the Legal Affairs Bureau of similar corporate names
Determination of branch office information to be registered
Embassy/Consulat
e
Legal Affairs Bureau
Bank
The Bank of Japan
Notification of KK to the Bank of Japan
Opening of bank account under company name
Acquisition of certificate on registered information and company seal registration
certificate
Application to the Legal Affairs Bureau for registration of KK
Examination by directors and auditors of legality of establishment procedures
Appointment of directors and other officers, i.e. Rep directors and auditors
Remittance of KK capital to special bank account
Application to bank for capital custody and issue of capital custody certificate
Notarization of KK’s AOI by Japanese notary public
Acquisition of registration certificates, etc.
Preparation of KK’s articles of incorporation
Examination at the Legal Affairs Bureau of similar corporate names
Determination of profile of KK
Internal
Notary Public
Legal Affairs Bureau
Bank
The Bank of Japan
Source: JETRO & “Commercial Registration Forms” published by Nippon Hourei KK
Internal 60D
61D
64D
62D
68D
30D
33D
34D
70D
Complete
Complete 36D
2.1 Flowchart to Incorporate BO/KK
8
2.2 Taxes in Japan
BO
- HQ is responsible for debts & revenue.
- BO is subject to tax on all Japanese source income or domestic source income attributable to Permanent Establishment (PE) based on a tax treaty and must file a tax return.
- Tax may be calculated upon PARENT COMPANY’S CAPITALIZATION. Branch and the foreign company from which it extends are treated as the same entity for Japanese tax purposes and therefore, in general, a branch cannot recognize internal profits and losses from transactions with its head office or other branches of the same head office.
KK
- KK is responsible for debts & revenue.
Types of Taxes in Japan
- Corporate Tax, Enterprise Tax, Corporate Inhabitant Tax (Per Capita Rate and Corporation Tax Rate) and Consumption Tax
Japan (Tokyo) USA(CA) France Germany China Korea (Seoul) UK Singapore
Provincial 12% 9% 0% 14% 0% 2% 0% 0%
National 24% 32% 33% 16% 25% 22% 24% 17%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Rat
e
Corporate Income Tax Comparison (as of 2012 April)
2.3 Tax rates comparison
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