The branch office has no legal corporate status under Japanese law. Accordingly, it may be hard to enter into a lease agreement for an office lease because an owner of a building, especially in a popular area, may not like to rent out an office to the foreign branch of a foreign company?

The branch office is allowed to be used for opening bank accounts. However procedures to do so take time and will be complicated.

All rights and obligations belong to the head foreign company, even if the foreign company office has conducted relevant business. This could be a demerit.

In relation to the taxation, under Japanese law, branch offices are liable for corporate and consumption tax. Withholding tax may be applicable depending on the method used to pay employees' salaries and certain other factors. However, the profit of the branch office as a result of its business operations in Japan must be transferred into the annual accounting of the head foreign company. These could be a demerit or merit depending on the situation of a foreign company.

To set up a branch office in Japan, it is only necessary to locate an office, appoint a representative residing in Japan (regardless of his/her nationality) and register required information at a registry office. As no capital is required to invest in the branch office, it is easier to set up than a Japanese subsidiary company, which is a clear merit.

As a branch office is a registered legal entity, unlike a representative office, it can have a Japanese bank account to deal with Japanese clients and conclude a lease contract for a rental office under its company name as explained above. Therefore, if all the decisions come from the foreign company and the business partners would not care about entering into the contracts with the foreign company, the establishment of a foreign branch for your business in Japan can be the best option after the tax implication is considered by the tax advisers who can analyze the entire situation.