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FAQ update: What are the advantages of opening a subsidy? What are the advantages of opening a branch?

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Today updated our FAQ with a new question:

Q20. What are the advantages of opening a subsidy? What are the advantages of opening a branch?

A20. When expanding your business to Japan, you must decide whether you will create a subsidy or establish a branch of your already existing company. However we cannot say that one is always better than the other. With a branch you have the advantage of starting the business backed by the trust the company has already created with customers. Also, with a branch the obligation to pay taxes lies with the headquarters of the company. On the other hand, if the company’s capital exceeds 100 million yen, there are cases where the subsidy may have to pay taxes even if there is no profit. (Taxes that apply after the company exceeds 100 million yen in capital are called “dual corporate taxes”, or “size-based corporate taxes”.)

For a subsidy, even if the parent company has more than 100 million yen and the subsidy has no profit, taxes are not imposed like they would be for a branch. Also subsidies can receive preferential tax treatment for being a small-medium business in Japan, even if the parent company is a large company, as long as the subsidy passes certain prerequisites.

Branches and subsidies both have their advantages, but it’s really case-by-case to determine which is best. Our staff of financial and legal professionals are ready to answer your questions, so please feel free to consult with us before making the decision on which type of business you will expand with.

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