Dear Sir/Madam,

 

Hope you are doing good and staying safe!

 

Japan is currently the 3rd largest economy in the world with a GDP of US$ 5.1 trillion next only to the US and China. Japan is one of the important trading partners of India and both countries are strategic partners having substantial cross border investments. As a result, for most Indian companies having international operations (exports/subsidiaries/joint ventures), it is necessary to have a deep understanding of the Japanese regulations regarding foreign investment and tax framework. This is particularly true for IT, pharma, automobile and auto components, engineering, infra, gems and jewellery and textiles industry. The number of Indian companies operating in Japan is also increasing, with the number now over 100. Some of the largest Indian companies operating in Japan include TCS, Tata Motors, L&T, HCL, M&M, Infosys, etc.

 

In the enclosed publication “Doing Business in Japan 2021”, our RSM colleagues in Japan have endeavoured to cover various tax and regulatory aspects, which would be handy reference for businesses either having their operations in Japan or proposing to set up entity in Japan for their business expansion.

 

As regards inbound investment, significant and long term investments by big Japanese companies in India (automobile / auto ancillary / pharma & healthcare / manufacturing / engineering, etc) present major opportunities for joint ventures and technical collaborations. From 2000 until September 2020, the Japanese investments in India cumulatively stands at around US$ 34.15 billion (Japan ranks 5th amongst the largest source of investment). The number of Japanese companies registered in India stands at more than 1460. Some of the largest Japanese companies operating in India include Toyota, Canon, Hitachi, Yamaha, Honda, Sony, Mitsubishi, etc.

 

Key Tax and Regulatory Aspects:

 

§  To facilitate investment in Japan, the government offers appealing incentives, as well as operating single contact points in relevant ministries and agencies for inquires/support regarding doing business in Japan.

§  Local governments also offer various incentives and support exclusively for foreign-affiliated companies and foreign companies that are planning to open an office in their region.

§  There are four principal forms of doing business in Japan for foreign entities – Subsidiary Company / Limited Partnership / Branch Office / Representative Office

§  Each are subject to registration (except representative offices) and other procedures stipulated by the general provisions of the Companies Act and specific rules of the Commercial Registration Law (also under the jurisdictions of the Ministry of Justice).

§  We understand there are no foreign currency exchange controls in Japan.

§  Most of the Japanese companies have March year end. However, a branch should use the year end which is taken by its head office of the foreign entity.

§  The effective tax rates in Japan is in the range of ~ 30% to 35% (Corporate Tax + Local Taxes)

§  Transfer pricing provisions shall be applicable w.r.t. international transactions with group entities

 

Hope you find the publication useful. Please feel free to connect for any further clarifications or to explore further on the Japan Business Opportunity.

 

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