Taxation on Capital Transferred to an Incorporator’s Bank Account in Japan

September 25, 2019

Question:

If I would cooperate with a foreigner who would like to establish a company in Japan and he/she deposits capital into my bank account, will income tax be levied on the amount transferred?

Answer:

The mere transfer (deposit) of capital is not a taxable transaction in Japan.

Explanation:

Since a foreigner who is a non-resident of Japan who tries to establish their business in Japan on their own would likely encounter difficulties in doing such, it is possible for them to ask resident in Japan to help them. Oftentimes, this would mean you, together with the foreigner, would also be appointed as a joint representative directors of the company.

If such were the case, the Japanese cooperator’s bank account would be the account used for the payment of capital contribution(s). Since the deposit of capital into the cooperator’s bank account is merely having the cooperator “hold on” to the capital for the time being, once the Japanese corporation has been successfully incorporated and its own corporate bank account in Japan has been opened, the capital can be transferred out of the cooperator’s bank account into the corporate account. As a result, since the mere transfer of money, strictly speaking, has no economic benefit, Japan does not impose income tax on that transaction.