International Society of Primerus Law Firms

Incentive to Establish Asian Business Center in Japan

Written By: 

Shinji Itoh, Esq.
Nao Tsuchiya, Esq.
Chie Tabata, Esq.

Hayabusa Asuka
Tokyo, Japan

The Act for Promotion of Japan as an Asian Business Center (the “Act”) came into force on November 1, 2012. The Act was passed in July 2012 with the aim of encouraging global enterprises to establish their R&D centers and Asian headquarters in Japan. Below is an outline of the support measures which the Act provides for certain types of business activities.

Targeted Business Activities

When a specified multinational enterprise as defined in the Act intends to establish a Japanese affiliated company for the purpose of (i) conducting R&D business for the first time in Japan, or (ii) managing its business for the first time in Japan, the Japanese affiliated company can apply to obtain certification from the competent minister regarding its R&D plan or business management plan.

Under the Act, various types of support measures are given to Japanese affiliated companies which are established during the implementation of certified plans, and/or to specified multinational enterprises.

Tax Benefit

[Corporate Tax Incentive-tax deduction]
A Japanese affiliated company which meets the requirements under the Act is entitled to apply for an income deduction when it files its blue-tax return. The deduction is 20% of eligible income and will be applicable for 5 years. Consequently, it realizes an effective corporate tax reduction of approximately 7% for 5 years (from approximately 38% to 31%).

[Individual Tax Incentive-tax deferral]
When directors, executive officers, and employees of a Japanese affiliated company exercise stock options granted by the parent foreign enterprises which established the Japanese affiliated company in accordance with a certified plan, any profit earned upon the exercise of such tax option will not be taxable. Instead, it will be taxed as income tax when transferring the stock.

This is similar to the tax treatment when Japanese enterprises are granted stock options by foreign parent companies.

Patent Benefit

[Patent Fee Reduction]
Patent fees for small and medium sized enterprises (“SME”) are reduced 50% when the patents are invented in accordance with an R&D business plan which is certified by the competent minister.

[Acceleration of Patent Examination]
Patent examination is accelerated for patent applications relating to technology invented as a result of R&D activities accredited by the Act. According to the performance records for 2011, the average examination waiting period was 22.2 months for regular cases while 1.9 months for accelerated cases.

Shortening of Investment Procedures

Under the Foreign Exchange and Foreign Trade Act, a foreign enterprise wishing to invest in Japanese companies in regulated industries must wait for 30 days after submitting a prior notification for inward direct investment. The Act grants a shortened waiting period of 2 weeks for a foreign enterprise investing in an accredited plan under the Act.

Funding Support

SME are entitled to receive funding support from Small and Medium Business Investment & Consultation Co., Ltd.

*Please note that the Act provides more detailed conditions and requirements for each of the support measures.

For further details, please feel free to contact Hayabusa Asuka at or the International Society of Primerus Law Firms.

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