Representative Office vs Branch vs Subsidiary in Japan: The Comparison From the Hiring Side

Head office has decided that Japan needs a presence, and the task of working out what kind has landed on you. Within an hour of searching you have the answer that every guide gives: a representative office is the light option, a branch office is the middle one, a subsidiary is the heavy one, and the differences are cost, setup time, governance, liability, tax treatment, banking access and visa eligibility.

That is a genuinely useful list, and it is every comparison you will find, in the same seven columns. It leaves out the thing you are actually about to do. You are not choosing a form so that the form can exist; you are choosing it so that one or two people can start working in Japan, and none of those seven columns tells you what changes for them.

It changes more than the tables suggest. In JETRO’s guidance on Japan’s social security system, health insurance and employees’ pension insurance apply to “all incorporated companies without exception” — and the same table entry goes on to say that branches and sales offices of overseas companies are treated as incorporated businesses, while representative offices are treated as sole proprietorships. That single classification is what the word “light” is really describing. The lighter form is lighter because the person you hire into it can end up outside the employees’ schemes.

And you cannot keep that quiet even if you wanted to. JETRO’s guidance on recruitment states that companies must indicate in writing, at the point of advertising the job, the matters pertaining to health insurance, employees’ pension, industrial accident compensation insurance and employment insurance. The form you pick shows up in the job advert.

What follows is drawn entirely from JETRO’s English guidance for foreign companies setting up in Japan and from the Japan Pension Service. Registration, tax and labour rules are revised, and how any of it lands depends on facts a general article cannot see. Read this as preparation for the conversation with a Japanese judicial scrivener, tax accountant and certified social insurance and labour consultant (sharoushi) — BLP supports hiring, and is not a law firm or a tax practice.

What this article covers

• What each of the three forms is permitted to do in Japan, and what a representative office specifically cannot do
• Which form can put people to work, and what each one owes the person once they are working
• Why health and pension insurance is compulsory in two of the three forms and, below five employees, in principle optional in the third
• The parts of employment in Japan that the choice of form does not touch at all
• JETRO’s own estimates for how long each form takes to open, what it costs, and what is involved in closing it again
• The situations in which comparing the three forms is the wrong exercise entirely
• Five points the published English guidance does not settle, and who to put each one to

Key facts at a glance

Item	Representative office	Branch office	Subsidiary (KK / GK)
Sales activity in Japan	Not permitted. Market surveys, information gathering, purchasing goods, publicity and advertising only.	Permitted.	Permitted.
Registration	Not required.	Required. A foreign company wishing to engage in continuous transactions in Japan must register, under Article 818 of the Companies Act.	Required, after completing the procedures the Companies Act stipulates.
Separate legal personality	No.	No. Deemed to be encompassed within the corporate status of the foreign company.	Yes. A separate corporation from the foreign company.
Bank account and premises in its own name	Cannot ordinarily hold either. The head office, or the representative in an individual capacity, signs instead.	May open bank accounts and lease real estate in its own name.	Same, as a Japanese corporation.
Japan-resident representative required	Not stated in the published English guidance; Table 1-1 and the Q&A answer only for branches and companies. (A resident card of the representative is listed among the documents generally needed to open a bank account.)	Yes. At least one representative must have an address in and be resident in Japan.	No. The address requirement does not apply to a representative director of a KK or a representative member of a GK, on and after 16 March 2015.
Liability toward creditors	Not addressed by Table 1-1, which compares only branch and subsidiary. The foreign company or the representative personally is the contracting party.	Unlimited. The foreign company is ultimately responsible for the debts and credits of its Japanese branch.	Limited to the amount of equity participation.
Time and cost to open (JETRO estimate)	No registration, and no line in JETRO’s cost estimate, which covers subsidiaries and branches only.	About two months once the particulars to be registered are determined; about ¥700,000 for incorporation and tax notifications.	About two to three months once the particulars are determined; about ¥1,000,000 for the same.

What each form is allowed to do in Japan

JETRO’s description of a representative office is narrower than most summaries imply, and the narrowness is deliberate. Representative offices exist as locations for preparatory and supplemental tasks aimed at enabling a foreign company to engage in full-scale business operations later. They may conduct market surveys, collect information, purchase goods and run publicity and advertising. They are not permitted to engage in sales activities. Establishing one requires no registration at all.

The practical consequence that gets least attention is that a representative office cannot ordinarily open a bank account or lease real estate in its own name. Agreements for either have to be signed by the head office of the foreign company, or by the representative of the office in an individual capacity. Where the representative opens the account, JETRO notes that the account name usually contains both the office and the individual, in the form “(name of representative), Japan Representative Office, (name of company)”.

There is one exception to the no-registration position that is easy to miss if you are in financial services. Representative offices established by foreign banks, insurance companies, securities companies and other financial institutions require prior notification to the Financial Services Agency under the Banking Act, the Financial Instruments and Exchange Act and other laws.

A branch office is the shortest route to a registered base. A foreign company that wants to engage in continuous transactions in Japan must register, and Article 818 of the Companies Act is the provision that says so. A branch can begin operating as soon as an office location is secured, the branch representative is determined and the required information is registered. It has no legal corporate status of its own — it is deemed to sit inside the corporate status of the foreign company — so the foreign company is in general ultimately responsible for all debts and credits its Japanese branch generates. In exchange it can hold a bank account and a lease in its own name.

A subsidiary is a separate corporation, established as a Kabushiki-Kaisha, a Godo-Kaisha or a similar entity under the Companies Act. Capital can be as little as 1 JPY, and the foreign company’s exposure is the liability of an equity participant, limited to the amount contributed. Table 1-1 carries the rest of the branch-versus-subsidiary detail, including the fact that a branch has no capital and no equity participation share. The choice between KK and GK turns on governance and disclosure, does not move the hiring position, and is a separate decision on a separate axis.

One boundary is worth naming and then leaving alone. JETRO states that where the activities of a representative office exceed those auxiliary functions, the office becomes subject to taxation as a permanent establishment. Where that line falls, and what it means for a company that has switched from employing people to contracting with them, is a tax question with its own literature and is not the subject here.

Which form can employ people — and what each one owes them

Start with the misreading, because it is common. Several comparison pages are written in a way that leaves the impression that a representative office cannot have staff. That is not how the official material is written. JETRO’s Q&A answers a question posed by a foreign company that exports to Japan through distributors, has hired personnel in Japan to coordinate with those distributors, and does not intend to register anything — and the answer explains which insurances apply to those employees. Section 4.9.6 is titled “Labor and social insurance coverage of representative office” and describes the individual working at the representative office of a foreign corporation. The guidance treats a representative office with employees as an ordinary situation, and sets out what attaches to them.

So the question the comparison tables should be answering is not whether you may hire. It is what the person gets. Here the three forms diverge sharply, and in one direction.

Health insurance and employees’ pension insurance. JETRO’s tables 4-7 and 4-8 use identical wording for both: all incorporated companies without exception, plus a representative office which has five or more regular employees and falls under the prescribed kinds of businesses, are obliged to take part. Branches and sales offices of overseas companies are treated as incorporated businesses. Representative offices are treated as sole proprietorships. The Japan Pension Service puts the same rule from the other end — a company or factory employing five workers or more, or a hojin corporation, is a covered workplace — and adds the point that decides everything downstream: “It is not a contract which employers or workers may opt for or may opt out of the coverage.”

Read those two together and the asymmetry is stark. For a branch or a subsidiary, enrolment is not a decision. For a representative office below five employees, section 4.9.6 says voluntary coverage is available in principle, and the Q&A describes it as something that can be determined by agreement between the company and the employees, for the office as a whole. The lightest form is light in exactly one way that matters to the person you hire: whether they are enrolled through their job is, in principle, something you get to decide. That is not the same as the person going uncovered. The same tables carry the other side: everybody in Japan has an obligation to take out one of the public health insurance schemes, and every resident aged between 20 and 59 without employees’ pension insurance must be part of the national pension system. What changes is which scheme they land in and how it is funded — premiums for the employees’ schemes are shared equally between the insured party and the employer, while the national pension contribution is a fixed monthly amount and national health insurance premiums are determined by each local government.

Labour insurance does not follow the same rule. Workers’ accident compensation insurance is, as a rule, compulsorily applicable to all workers, and 4.9.6 states that where the individual working at a representative office falls under the definition of “workers” under the Labor Standards Act, that person is eligible. The Q&A is blunter: for an unregistered office, labour insurance coverage is mandatory for employees other than the Representative in Japan. Employment insurance carries its own thresholds, stated without reference to the form — prescribed working hours of at least 20 hours per week and an expectation of employment for at least 31 days — and employees dispatched to Japan from an overseas head office who are enrolled in an equivalent scheme abroad are exempt from it.

The person you send is the one least covered. This is the part that tends to surprise the head office, because it is the reverse of the intuition. At a representative office, the representative in principle does not become an insured person for health and pension purposes, on the reasoning that a representative is the employer of a sole proprietorship. An exception exists where documents certifying that person’s status as an employee of the overseas head office are submitted, and JETRO states plainly that the ultimate decision on the exception lies with each local competent authority. At a branch or a subsidiary the position inverts: the representative director of a KK, the representative member of a GK and the Representative in Japan of a branch are, if they receive remuneration in Japan, in principle mandatorily covered by health insurance and employees’ pension insurance, while as a general rule they are not eligible for labour insurance.

The employer’s share is about 15% of total annual wages. That is JETRO’s own figure in the Q&A, covering workers’ accident compensation insurance, employment insurance, health and nursing care insurance, employees’ pension insurance and the child and child-rearing contribution together. It is the number to put in a budget line. The individual rates behind it, and what happens to them when an engagement that was set up as outsourcing gets recharacterised as employment, are the subject of our article on disguised employment in Japan — including the retroactive exposure, which is where the 15% stops being a budget line and becomes a bill.

And the choice is disclosed at the point of hiring. Section 4.2.3 requires companies to indicate working conditions in writing when recruiting through newspapers, magazines, the internet, Hello Work or a private employment agency. The listed items include job description, workplace, hours, wages — and matters pertaining to an employee’s health insurance, employee’s pension, industrial accident compensation insurance and employment insurance. If the working conditions in the eventual contract differ from what was advertised, the employer must show the difference in a document the jobseeker can compare, or by highlighting the changes. A decision made in a head office planning meeting therefore reaches the candidate’s screen before the first interview.

The hiring view	Representative office	Branch office	Subsidiary (KK / GK)
Workers’ accident compensation insurance	Applies where the individual falls under the definition of “workers” under the Labor Standards Act. Whether the office’s representative does is determined on the actual situation of the work.	Applies as a rule to all workers.	Applies as a rule to all workers.
Employment insurance	Mandatory for employees other than the Representative in Japan, subject to the same thresholds.	Applies to workers with prescribed hours of 20 or more per week and an expected term of 31 days or more.	Same thresholds.
Health and employees’ pension insurance	Treated as a sole proprietorship. Below five employees, voluntary coverage in principle; at five or more regular employees in the prescribed kinds of businesses, mandatory as a general rule.	Treated as an incorporated business. Compulsory.	All incorporated companies without exception. Compulsory.
The Japan representative’s own coverage	In principle not an insured person, as the employer of a sole proprietorship. An exception on submitted documents is decided by each local competent authority.	Mandatorily covered by social insurance in principle where remuneration is received in Japan; as a rule not eligible for labour insurance, though enrolment may be permitted where the status is strongly employee-like.	Mandatorily covered by social insurance in principle where remuneration is received in Japan; as a rule not eligible for labour insurance.
What the job advert must state	Stated for recruiting companies generally, without reference to the form: health insurance, employees’ pension, industrial accident compensation insurance and employment insurance must be indicated in writing.
Employer’s share of premiums	Arises to the extent the office is covered.	About 15% of total annual wages.	About 15% of total annual wages.
Labour and social insurance filings at setup	No line in JETRO’s cost estimate.	About 942 USD through a proxy.	About 942 USD through a proxy.
Rules of Employment	Stated by headcount, not by form: employers with 10 or more regular employees must draw up work rules and submit them to the local Labor Standards Inspection Office. No exemption by form of presence is stated.
Dismissal protection for the person you hire	Stated without reference to the form of presence: objectively reasonable grounds, appropriateness in light of socially accepted ideas, and the burden of proof on the employer.
Winding it down	No closure registration, because nothing was registered. Ending the employment is a separate matter.	Creditors must be given no less than one month to submit objections; affidavit attested by an embassy consul; certificate about two weeks after the registration application.	Creditors must be given no less than two months to submit claims; special liquidation under court direction if net assets are negative.

What choosing a form does not change

A surprising amount of what makes Japan feel difficult is not indexed to the form at all.

Start with the labour statutes themselves. Section 4.1 names three of them — the Labor Standards Act, the Industrial Safety and Health Act and the Minimum Wage Act — and states that they apply in principle to enterprises in Japan, whatever the employer’s nationality and whether the company is a Japanese or a foreign-registered corporation. Nationality and place of incorporation are the variables that sentence uses. It is a statement about those three Acts, and not about the insurance rules further down Section 4, which do divide by form — that division is the subject above.

Dismissal is where this matters most. Section 4.8 states that an employer is only allowed to dismiss where there are objectively reasonable grounds and the dismissal is deemed appropriate in light of socially accepted ideas, that all possible grounds must be clearly stated in the work rules if a dismissal is to be valid, and that the burden of proof is on the employer. Redundancy runs through four criteria drawn from case law — necessity, serious effort to avoid redundancy, reasonable selection, and sufficient consultation. JETRO adds that terminating a labour contract by paying a certain sum is not recognised as a matter of course by Japanese law, except by amicable settlement between the parties, and recommends that employers first obtain the advice of a specialist in labour law, since the validity of a dismissal is exceedingly difficult to judge in concrete cases. None of those requirements is stated by reference to the size or the registration status of the employer. What an invalid dismissal actually costs, and why almost all of the defence has to exist before the hire rather than after it, is the subject of what the law really says about firing employees in Japan.

Nor is the exemption question indexed to the form. The exemptions in the social insurance rules are written around where a person came from: employees dispatched from head offices in a list of countries with medical insurance coverage at home are exempt from enrolling in Japanese health insurance, and Japan’s social security agreements exempt people sent temporarily from an agreement country and insured under that country’s pension system. Both are written by reference to the individual and the sending country; neither uses the form of presence as a variable.

Finally, between a branch and a subsidiary, tax is not a lever. The heading JETRO puts on section 3.1.1 is “Neutrality of tax system with respect to form of business presence (branch or subsidiary)”, and the text explains that steps have been taken to ensure the tax system does not impose unfair burdens on the basis of the form of business presence. Since business years beginning on or after 1 April 2016, a Japanese branch and its head office are each deemed an independent corporation for determining taxable income. That neutrality is stated for those two forms only: a representative office sits on a different footing, outside corporation tax while its activities remain auxiliary and taxable as a permanent establishment once they exceed it. Individual outcomes depend on facts and belong with a tax accountant.

What each form costs you to open, and to close

JETRO’s estimates are specific enough to plan against, and they come with their premises attached. Incorporation and tax notifications run to about ¥1,000,000 for a subsidiary and about ¥700,000 for a branch, covering both actual expenses and the fees of professional proxies, against timelines of about two to three months and about two months respectively. The setup guide adds that the procedures typically take about three months to complete. There is no equivalent estimate for a representative office, because there is nothing to register — it simply has no line in the table.

Two entries in the detailed cost estimate matter for hiring, and both are the same number for a branch and a subsidiary. Labour and social insurance filings through a proxy are estimated at 942 USD in each case. The fee paid to a recruiting agency for hiring a manager is estimated at 14,605 USD, described as equivalent to 35% of the expected first-year salary for a manager-class role in the non-manufacturing sector. The model case is Tokyo, with an initial staff of two — one person from the foreign firm and one Japanese manager-level hire — converted at 1 USD = 159.19 JPY. The full estimate also carries paid-in capital, office, housing and visa costs, which are a different question from the one here. JETRO’s guide separately advises allowing at least a month to find managerial staff, so the search runs alongside the registration rather than after it.

Capital deserves one line. A company can be registered with capital of as little as 1 JPY under the Companies Act, while having capital of 30 million JPY or more is one of the requirements for obtaining the “Business Manager” status of residence — two facts that sit in the same paragraph of JETRO’s Q&A and are routinely collapsed into one. Residence status is a separate subject, treated separately.

Closing is where the asymmetry between the forms reappears, and almost nobody writes about it. A branch office is closed in practice by registering the resignation of all representatives in Japan — the register will not close until they have all resigned, because business could otherwise continue. Creditors must be given a period of no less than one month before the closure to submit objections, on an individual basis and through a notice in the official gazette. An affidavit has to be prepared and attested by an embassy consul or similar official, and the certificate on registered closure information arrives about two weeks after the registration application. A subsidiary is dissolved and liquidated: creditors get no less than two months to submit claims, and if the company has negative net assets it cannot complete liquidation independently and must follow special liquidation procedures under the direction of a court.

Which brings up the plan that sounds sensible in a planning meeting — start light, convert later. A branch cannot be directly reorganised into a KK or a GK, so the closure and the establishment procedures have to run simultaneously, though the branch’s assets may be passed on through contribution in kind. Starting light does not avoid the cost of the heavier form. It defers it, and adds a creditor notice period to the middle of the transition — at the same moment you are managing what the change means for the people already employed.

Where this comparison is the wrong question

Some situations settle themselves, and a three-week comparison matrix is time taken from the decision that matters.

• You intend to sell in Japan. Sales activity puts the representative office out of scope on the first line of JETRO’s description. There is no version of the comparison in which it survives this.
• You need a bank account or an office lease in the company’s name. A representative office cannot ordinarily hold either, and the alternative is that your head office or one individual is personally on the contract. That is a governance problem, not an administrative one.
• You expect ten or more regular employees in Japan. JETRO states that employers with 10 or more regular employees must draw up work rules and submit them to the local Labor Standards Inspection Office. Note the tension underneath that threshold: section 4.8.1 also states that all possible grounds for dismissal must be clearly stated in the work rules if a dismissal is to be valid, and that requirement is not written as starting at ten. Put it to a sharoushi rather than settling it from an article.
• You want a team working under your direction. Then contracting is not the instrument, whatever the entity position. Direction over hours, attendance and method is what puts an arrangement labelled as outsourcing at risk of being read as employment instead — and this is the honest limit of what BLP does, not a caveat we can design around. What a contract engagement can legitimately look like from the client side is set out in our article on hiring freelancers in Japan under a gyomu itaku contract.

It is worth being clear about who answers which part. JETRO’s reference section lists attorneys-at-law, judicial scriveners and administrative scriveners as the specialists to consult on establishing branch offices and companies, and notes that filing commercial registration applications with the Legal Affairs Bureau as attorney-in-fact is the exclusive province of judicial scriveners and attorneys-at-law. BLP is a hiring support company, not the right party for registration, tax filings or the drafting of work rules. This article is written to make that meeting shorter, not to replace it.

The larger question underneath all of this — whether the work needs a registered presence at all, or whether it can be done by people you contract with while the decision waits — is a different article and a different analysis. It is worth asking before the comparison matrix, not after it.

What the official guidance does not settle

Five points came up repeatedly while working through the sources above, and in each case the published English material stops short of an answer. Each one has a specific person to put it to.

1. Whether a representative office’s representative can be enrolled at all. Two JETRO pages describe the same situation and do not line up. Section 4.9.6 says that in the case of a representative office with fewer than five employees, voluntary coverage is available in principle “with the representative of the office as the employer”, and then states in brackets that the representative does not become the person insured. The Q&A, answering the same scenario, says there are two possible approaches: excluding the representative by treating that person as the business owner, or enrolling the representative as an employee together with the other staff. Section 4.9.6 also says the ultimate decision on the documentary exception lies with each local competent authority — which means there may be no single nationwide answer to reconcile. Put both passages, in the original, to a sharoushi and to the pension office with jurisdiction over your address, and get the position confirmed for your office rather than in general.

2. How an unregistered office registers as a withholding agent. JETRO’s reference section states that representative offices need give no notification to tax offices, since they do not engage in business operations in Japan and are not subject to corporate tax. Section 3.4.2 states that payments of salary, wages, bonuses and similar compensation made in Japan to residents are subject to withholding at source, and 3.4.1 sets out the payment deadline of the 10th day of the following month, with a special measure for businesses with fewer than 10 persons on the payroll allowing payment in two six-month instalments. The English guidance does not join those two statements together for an office that has filed nothing. Take the actual payment route you plan to use — who pays, from which account, in which country — to a Japanese tax accountant before the first payroll run, and ask specifically what has to be filed, by whom, and by when.

3. Labour insurance for a Representative in Japan, in theory and in practice. The Q&A is unusually candid here. Whether labour insurance applies to a Representative is, in theory, determined by whether that person is deemed to have employee status — but it adds that in practice it is currently difficult for administrative procedures to accommodate such treatment. Section 4.9.6 offers a partial route in the other direction: under certain conditions there is a scheme allowing a representative to be insured under workers’ accident compensation insurance as a special enrolment, at their own cost. If the person you are sending to Japan is the one carrying the operational risk, ask specifically about that special enrolment and what it does and does not cover.

4. Who signs the employment contract at a representative office. Section 1.1.1 is explicit in one context and silent in the neighbouring one: for bank accounts and real estate it states that agreements must instead be signed by the head office of the foreign company, or by the representative at the representative office in an individual capacity. There is no equivalent sentence for an employment contract. This is a separate question from the social insurance one above, which the guidance does answer — for health and pension purposes the representative is treated as the employer of a sole proprietorship. Put the contracting question to a Japanese employment lawyer before an offer goes out.

5. What the voluntary-coverage choice does to you in the recruitment market. No public dataset answers this. What can be stated is the mechanism. Section 4.2.3 requires the four insurance items to be indicated in writing when the job is advertised, and requires any divergence between the advert and the eventual contract to be shown to the jobseeker for comparison. So the choice is not an internal administrative matter that stays internal — it is a term of the offer, visible at the top of the funnel, competing against employers for whom the answer was never optional. Whether that costs you the candidate you want is a question for whoever is running the search, and it is worth asking before the form is filed rather than after the offer is declined.

Questions to ask before you commit

Worth putting to a judicial scrivener, a tax accountant and a sharoushi — ideally in that order, and before the form is filed:

• Given what our people in Japan will actually be doing day to day, does any of it read as sales activity?
• If we go with a representative office and stay below five employees, what exactly would we be offering a candidate on health and pension insurance, and how would that read in the advert next to a competing offer?
• For our specific office and our specific representative, can that person be an insured party — and which authority makes that call?
• Who is the withholding agent for the salary we intend to pay, and what has to be filed before the first payment date?
• If we outgrow the form we choose, what does the transition cost in time, in creditor notice periods, and in continuity for the people already employed?
• At what headcount do work rules become an obligation for us, and what should they say about grounds for dismissal from day one?
• Does the person we intend to send fall under a social security agreement or a health insurance exemption, and what documentation does that require?

Frequently asked questions

Can a representative office in Japan hire employees?

The official guidance is written on the basis that it happens: JETRO devotes section 4.9.6 to labour and social insurance coverage of representative offices, and its Q&A works through a foreign company that hired staff in Japan for liaison work without registering anything. What differs is not permission but consequence — the office counts as a sole proprietorship for health and pension insurance, so below five employees enrolment is in principle voluntary. The real constraint is on the work itself, since sales activity is not permitted.

Does a representative office have to enrol staff in Japanese social insurance?

For health and employees’ pension insurance, JETRO puts an office with fewer than five employees in the voluntary coverage case in principle, and makes it mandatory as a general rule at five or more regular employees in the prescribed kinds of businesses. Labour insurance runs on a different track: workers’ accident compensation applies where the person meets the definition of a worker, and the Q&A calls labour insurance mandatory for employees other than the Representative in Japan. Confirm the position with a sharoushi and the office with jurisdiction over your address.

Is the person who runs our representative office covered?

In principle that person does not become an insured party, because JETRO treats the representative as the employer of a sole proprietorship. An exception exists where documents certifying that person’s status as an employee of the overseas head office are submitted, and the ultimate decision on it lies with each local competent authority. The Q&A separately describes a second approach in which the representative is enrolled together with the other staff. The two passages read differently and neither page reconciles them, so settle this for your own case rather than assuming it.

Is a branch or a subsidiary better if our plan is to hire people?

On the hiring axis the two are close to indistinguishable. Both count as incorporated businesses for health and employees’ pension insurance, so coverage is compulsory either way, and JETRO’s estimate puts the labour and social insurance filings at the same 942 USD for each. They separate elsewhere: liability toward creditors, the requirement for a Japan-resident representative, and the closure procedures. “Better” depends on which of those you are optimising for.

Does choosing a lighter form make it easier to end an employment in Japan?

Nothing in the published guidance suggests it does. Section 4.8 states the dismissal rules by reference to employers generally — objectively reasonable grounds, appropriateness in light of socially accepted ideas, grounds stated in the work rules, burden of proof on the employer — with no exemption for smaller or unregistered operations. Redundancy is assessed against four criteria from case law whatever the entity behind the employer.

How long does it take and how much does it cost to set up a branch or a subsidiary?

JETRO estimates about two months for a branch after the information to be registered is determined, and about two to three months for a subsidiary. For incorporation and tax notifications it gives about ¥700,000 and about ¥1,000,000 respectively, covering actual expenses and professional proxy fees. These are model-case estimates, not quotations, and the setup guide puts the procedures at around three months in total.

Can we start as a branch and convert to a subsidiary later?

Not directly. JETRO states that a branch cannot be reorganised into a KK or a GK, so the branch closure procedures and the subsidiary establishment procedures must run simultaneously; the branch’s assets may be passed on through contribution in kind. Budget for the creditor objection period of no less than one month on the branch side, and for a subsidiary being built from scratch in parallel.

Can a representative office open a bank account in Japan?

Not in its own name. JETRO states that the head office of the foreign company, or an individual such as the office’s representative, opens the account in its place, and that the account name then usually takes the form “(name of representative), Japan Representative Office, (name of company)”. A passport, a resident card, a company brochure, the leasing agreement and a bank seal are listed as the documents generally needed.

Summary

• All three forms appear in the official guidance as places where people work. What separates them is what attaches to those people, not whether hiring is possible.
• The decisive line is a classification: branches and sales offices of overseas companies are treated as incorporated businesses for health and employees’ pension insurance, and representative offices are treated as sole proprietorships. Below five employees, that turns a compulsory enrolment into a voluntary one, and moves the person to the national schemes rather than the employees’ ones.
• Labour insurance does not follow that split, and the representative you send is the person least likely to be covered by anything.
• Whatever you decide has to be stated in the job advert, so the choice is visible to candidates before you meet them.
• The three labour statutes named in section 4.1, the dismissal rules and the work rules obligation are not framed by reference to the form you choose, and the tax framework is explicitly described as neutral between a branch and a subsidiary.
• Starting light does not avoid the cost of converting later. A branch cannot be reorganised into a company directly, and closing one carries a creditor objection period of at least a month.

The useful reframing is that these three forms are not three sizes of the same thing. They are three different answers to the question of what your company is, administratively, on Japanese soil — and the person you hire inherits that answer whether or not anyone discussed it with them.

If you do not yet know how big Japan will be, the comparison is being asked to carry a decision it cannot make. What can be settled now is narrower: what specific work needs doing in the next six months, who could do it, and whether that requires an entity to exist first. Registration stays answerable in two to three months, and it stays answerable while the work is already moving.

Everything above is a reading of published guidance, and none of it survives contact with your own facts without help. Take the five open points to a Japanese judicial scrivener, tax accountant and sharoushi before anything is filed. BLP is a Japanese company that helps overseas businesses get work done in Japan by breaking it into defined tasks and placing it with contractors — one way to keep moving while the entity question is still open, and not a substitute for advice on the entity question itself.

Related reading

Three articles that pick up once the form has been chosen and the relationship with the person actually begins:

• Firing employees in Japan: what the law actually says about your first hire — the rules that do not change whichever form you register, and why the first hire is the decision that carries the risk.
• Paying contractors in Japan: withholding tax, consumption tax and the invoice system — the payment mechanics if the people doing the work are engaged rather than employed.
• Japan’s Freelance Act: what overseas companies owe a Japanese freelancer — obligations that follow from being the party placing the order, which is a separate question from what you registered in Japan.

Sources

• JETRO, "1.1 Types of operation in Japan", Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section1/page1.html
• JETRO, "1.2 Comparison of types of business operation" (Table 1-1), Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section1/page2.html
• JETRO, "1.7 Closure of branch offices or subsidiary companies", Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section1/page7.html
• JETRO, "Section 1 Reference" (specialists, bank accounts, representative offices), Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section1/reference.html
• JETRO, "3.1 Overview of Japanese corporate tax system for investment in Japan", Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section3/page1.html
• JETRO, "3.4 Overview of withholding income tax", Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section3/page4.html
• JETRO, "4.1 Application of laws", Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section4/page1.html
• JETRO, "4.2 Recruitment" (4.2.3 Indication of working condition), Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section4/page2.html
• JETRO, "4.6 Rules of Employment", Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section4/page6.html
• JETRO, "4.8 Resignation and dismissal", Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section4/page8.html
• JETRO, "4.9 Japan’s social security system" (4.9.2 to 4.9.6), Setting Up Business in Japan — https://www.jetro.go.jp/en/invest/setting_up/section4/page9.html
• JETRO, "Investing in Japan Q&A" — https://www.jetro.go.jp/en/invest/setting_up/qa.html
• JETRO, "Cost Estimation" (model case, Tokyo) — https://www.jetro.go.jp/en/invest/setting_up/modelcase/
• JETRO, "How to Set Up Business in Japan" — https://www.jetro.go.jp/en/invest/setting_up/guide.html
• Japan Pension Service, "Enrollment in Employees’ Pension Insurance and Employees’ Health Insurance" — https://www.nenkin.go.jp/international/english/japanese-system/employeespension/epi_procedure.html