Setting up a liaison office in Japan
So once you've researched your market and met potential distributors or customers, how are you going to enter the Japanese market? You can have a presence in the Japanese market either through a liaison office, trading companies, a licensing arrangement, a joint venture, a branch office or a wholly owned subsidiary. Each of these options has different consequences with respect to taxation, business risk and potential profitability so you should research each option thoroughly.
In this section I wanted to look at each of these options individually, but you should realize that your firm may operate in Japan through two or more entities. For example, assume that you recently set up a wholly owned subsidiary. Even with the new subsidiary, you may want to continue to use existing relationships with a trading company that can generate sales while your subsidiary gets its feet on the ground.
To do market research as a prelude to either selecting a trading company or to establishing a branch or subsidiary, you may want to establish a liaison office in Japan.
Such a liaison office may be set up without any sort of notification or registration with the Japanese authorities. Such an office is also free from any Japanese taxes, and funds necessary for the office may flow freely to it.
To gain these privileges, the liaison office may not be a permanent establishment, and it is not allowed to conclude contracts, take orders nor invoice nor collect money.