Japan Nominee Director Services

Business Set-Up & Support

Japan Visa can provide qualified nominee directors to facilitate initial incorporation and to meet the ongoing need of strengthening internal controls.

A Japanese resident individual must be appointed to act as the representative when establishing an entity in Japan. As a result, we offer the following as part of our Japan Nominee Director Services:

  1. Japan Nominee Representative Directors for Kabushiki Kaisha (“KK”).
  2. Japan Nominee Executive Managers for Godo Kaisha (“GK”).
  3. Japan Nominee Branch Managers for the Japan Branches of Foreign Companies.
  4. Japan Nominee Representatives for Japan Representative Offices / Liaison Offices.

The following article provides additional information about each of the above entity types: Choosing a Japan Entity: KK, GK, Japan Branch and Representative Office.

Why Use Our Japan Nominee Director Service?

Benefits associated with using a Nominee Director, Nominee Executive Manager, or Nominee Branch Manager include:

1. Practical Issues

A foreign company that wishes to establish an entity in Japan may not have anyone in Japan available to fill the director position. In such cases, our Japan Nominee Director Service can provide a suitably qualified individual to act on a temporary basis until a Japanese national is hired or a foreign national has obtained an appropriate visa (usually a Japan Investor Visa / Investor Manager Visa).

The Japan nominee director can facilitate the incorporation and, once that is complete, assist in obtaining visas for foreign expatriate staff who will be transferred to Japan.

2. Internal Control Issues

The representative director of a Japanese company is considered to have full authority to represent the company. Unfortunately, it can be difficult for even large well organized foreign companies to maintain good internal control in Japan. This issue is often compounded since the Japan operation is relatively small and most source documentation is written in Japanese.

Many foreign companies are reluctant to hire a Japan based employee in the representative director role because of this combination of factors. Japan Visa offers qualified nominee directors who can respond to both these challenges so the parent company can maintain effective internal control.

3. Corporate Tax Issues

Structuring director compensation is a significant problem for Japanese companies. In part, this is because bonuses (defined very broadly for Japanese tax purposes) paid to a director are generally NOT deductible for Japanese corporate tax purposes. Non-deductible compensation includes most performance based payments which are typically an important feature of compensation packages in multinational companies.

For more information, this article discusses Issues in Structuring Compensation for Directors of Japanese Companies.

The possible adverse effect of this non-deductibility is illustrated by the following basic sample calculation:

Recipient is Normal Employee Recipient is a Director
Japan Company’s Income 100 100
Bonus Paid 25 25
Deduction Allowed for Japanese Corporate Tax Purposes 25 0
(i.e. Non-Deductible Expense)
KK’s Taxable Profit 75 100
CORPORATE TAX PAID (42%) 31.5 42

While eliminating this corporate deductibility problem is not possible, the risk may be substantially reduced by utilizing a nominee director who receives no bonus payment.

4. Individual Tax Issues

Expatriate foreign employees may reduce their Japanese taxes based upon days spent outside Japan on business, often referred to as the Days-In-Days-Out Benefit. However, such a reduction may not be available to individuals with director status.

In addition, company provided housing (a key component of Japan side tax planning for many expatriates) is significantly less beneficial for directors.

Using a nominee director may avoid this issue. This article discusses Japan Tax Planning for Foreigners Working in Japan, including a discussion of company provided housing, and the Days-In-Days-Out Benefit available to non-director employees.

5. Issues Regarding Japanese Statutory Benefits

A regular employee in Japan is entitled to a range of statutory benefits. An important component of these statutory entitlements is Japanese Labor Insurance. This program provides workers accident compensation and unemployment insurance protection.

Individuals with director status in a Japanese company are typically not eligible for enrollment in the Labor Insurance Program in the same manner as regular employees.

Key Features of the Japan Nominee Director Service

  1. Given the responsibility involved in undertaking a nominee director position, we carry out thorough Know Your Client (“KYC”) procedures. We clarify the Japan entity's beneficial owners, identify professional advisors (i.e., lawyers and accountants), and confirm banking relationships. In some cases a bank reference letter may be required.
  2. A written agreement is put in place with both the foreign parent and the local entity as parties. The agreement includes a clause indemnifying the individual acting as the Japan nominee director.
  3. An individual from the parent company is generally required to act as director even if a nominee director is in place. This individual is needed to approve important decisions in the Japan entity, such as hiring employees, and entering into leases and other agreements. This individual can become either a regular director or a representative director of the Japan entity. In either case, there is no requirement that the additional director be a resident of Japan.
  4. Our fees for acting in this capacity are based on a number of factors including the nature of the proposed structure and the degree of responsibility borne by the nominee director.

The above is provided for general information purposes only and does not constitute advice to undertake or refrain from undertaking any action. Only qualified Japanese professionals are able to advise on Japan immigration, legal, and tax matters.