FAQ & Contact Information

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You can inquire about FSA's services and support for those starting an asset management business.
We have compiled a list of Frequently Asked Questions below. Please check if your question has already been answered before getting in touch.

Frequently Asked Questions

Financial Instruments and Exchange Act

This section contains frequently asked questions pertaining to the registration of a financial instruments business in Japan. The answers here are intended only as an initial guide and were written to answer questions asked by foreign asset management companies that are entering the Japan market on a small scale targeting Professional Investors, such as its group companies.
Please be aware that answers may differ depending on the actual conditions of the financial instruments business in question, such as the type of business and the nature and methods of work being carried out.

What is the minimum number of personnel required to register as a financial instruments business, and what is the minimum number of those personnel that should be assigned to the Japan office?

Examples of personnel structure of registered businesses are given in the "Guidebook for Registration of Investment Management Business and Other Financial Instruments Businesses.” (See 3.2.2.iv* for examples.)
(*3. Registration Screening Procedure and Registration Requirements,
(2) Requirements for registration by type of Financial Instruments Business,
2) Personnel requirements,
(iv) Actual examples)

Generally speaking, in order to establish an office in Japan, the company must employ at a minimum one full-time director who lives in Japan and has both understanding of the Financial Instruments and Exchange Act and experience as a registered Financial Instruments Business Operator in Japan. (This excludes experience as a Notifier for a Specially Permitted Business for Qualified Institutional Investors, etc.)

Please be aware that answers may differ depending on the actual conditions of the financial instruments business in question, such as the type of business and the nature and methods of work being carried out. For more information, please consult the Financial Market Entry Office.

Does the representative have to reside in Japan?

In principle, the representative of the company must reside in Japan. However, the representative may be permitted to work overseas if the authorities deem them to be carrying out work properly based on the personnel structure, nature of the business, etc. (In such a circumstance, the overseas address from where the representative will work must be provided in the written application for registration.)

Conversely, if the application is being made on the premise that the representative residing overseas will perform the work in Japan, said representative, in principle, must come to Japan by the time the application is submitted.

Please be aware that answers may differ depending on the actual conditions of the financial instruments business in question, such as the type of business and the nature and methods of work being carried out. For more information, please consult the Financial Market Entry Office.

Can the compliance officer of an overseas financial group company be registered as the compliance officer in Japan?

In principle, the compliance officer must reside in Japan and be familiar with the Financial Instruments and Exchange Act. However, the compliance officer of an overseas financial group company may be permitted to register as the compliance officer in Japan while residing overseas if the authorities deem them to be carrying out work properly based on the personnel composition, nature of the business, etc.

Please be aware that answers may differ depending on the actual conditions of the financial instruments business in question, such as the type of business and the nature and methods of work being carried out. For more information, please consult the Financial Market Entry Office.

Is it possible to outsource compliance work instead of hiring an in-house compliance officer at the applying company (registration applicant)?

Operators of Investment Management Businesses for Qualified Investors may be permitted to outsource compliance work without employing an in-house compliance officer at the company (registration applicant) under certain circumstances, such as when there is a system of communication between the authorities, the business operator, and the outsourcer.

However, this only applies to Investment Management Businesses for Qualified Investors; all other business types must have an in-house compliance officer at the company (registration applicant) and establish an appropriate compliance management system to carry out compliance work according to the circumstances and nature of work of the business.
*In regards to investment management companies, a system for the outsourcing of middle and back office operations is planned to be put in place.

Please be aware that answers may differ depending on the actual conditions of the financial instruments business in question, such as the type of business and the nature and methods of work being carried out. For more information, please consult the Financial Market Entry Office.

Can a shared office be used as the domestic business office of the financial instruments business?

Yes, a shared office can be used by a financial instruments business operator. However, there must be a separate room that can only be accessed by employees of the company (registration applicant). This is to ensure that information is appropriately managed, and protected from outside third parties. For this reason, you cannot conduct financial instruments business using only coworking spaces at shared offices. Please also note that there are other obligations, such as posting signs, that must be followed in accordance with the Financial Instruments and Exchange Act. Please be mindful of these things when choosing an office space.

Please be aware that answers may differ depending on the actual conditions of the financial instruments business in question, such as the type of business and the nature and methods of work being carried out. For more information, please consult the Financial Market Entry Office.

Under which country’s notarial system should the affidavit to be used in place of the extract of the certificate of residence or ID of the overseas officer be drawn up?

As long as legal requirements are met, there are no restrictions as to which country’s notarial system can be used. At the time of notarization, the declaration or affidavit should be made in front of a notary public, and the stamp or certification of the notary public is required. Please refer to FSA’s website for information on the affidavit form.

Please be aware that answers may differ depending on the actual conditions of the financial instruments business in question, such as the type of business and the nature and methods of work being carried out. For more information, please consult the Financial Market Entry Office.

Support with Business Set Up and Life in Japan
To whom should I consult on matters relating to setting up a financial business or getting settled in Japan?

The Financial Start-Up Support Program is a public-private partnership run by FSA and provides one-stop support in English for foreign financial businesses considering entering the Japanese market. Please make full use of this Program to get your business set up smoothly.

Also, qualified professional service providers handle both consultations and execution of various business set-up procedures, including for matters related to living in Japan.
Please refer to this list of professionals who can provide their services in foreign languages on FSA’s dedicated page if you would like to consult with these service providers personally.

  • Administrative scrivener (gyoseishoshi): obtaining or changing status of residence; extending period of stay; and handling the financial license application
  • Tax accountant (zeirishi): tax agency; preparation of tax documents; tax consulting; preparation of financial documents; bookkeeping; and handling of other financial matters
  • Attorney (bengoshi): proxy for procedures related to registration of companies, corporations, etc.; preparation of documents to be submitted to the Legal Affairs Bureau; and handling the financial license application
  • Judicial Scrivener (shihoshoshi): proxy for procedures related to registration of companies, corporations, etc.; and preparation of documents to be submitted to the Legal Affairs Bureau
  • Certified Public Accountant (konin kaikeishi): financial document auditing; assurance; preparation of financial documents; and financial auditing, planning, and consulting
  • Real Estate Agency: real estate brokering
  • Relocation Service: relocation services

Multilingual Professional Services

Please explain the eligibility criteria of the Financial Start-Up Support Program.

In principle, the following businesses are eligible for the Financial Start-Up Support Program (hereinafter “the Program”).

  • Investment Management Businesses
  • Investment Advisory and Agency Businesses
  • Type II Financial Instruments Businesses that register business activities related to investment management affairs
  • Companies (including parent companies, subsidiaries, or affiliates, etc.) that conduct the same type of business as Type I Financial Instruments Businesses in a foreign country in accordance with foreign laws and regulations and that deal only in certain securities of foreign investment with Professional Investors
  • Companies that conduct either of the following businesses subject to notification:
    • 1. Fund Investment Management Businesses whose main clientele consist of Professional Investors from overseas (foreign corporations or individuals residing overseas who possess certain assets)
    • 2. Investment Management Businesses that have received authorization from the authorities and have achieved results managing overseas clients’ assets (management of overseas funds only)

However, FSA would like to provide support to foreign companies that conduct business in Japan. As such, even if your business model is yet to be decided (for example, you have not yet determined the company’s business to be registered), please contact our Financial Market Entry Office.

Per the requirements for registering each business under the Financial Instruments and Exchange Act, an office in Japan is one of the requirements for registering the business of an Investment Management Business, but having an office in Japan is not one of the requirements for Investment Advisory and Agency Businesses.

Venture Capital (VC) may also be eligible for the Program. This depends on the individual business structure, so please get in touch with us to discuss the support available.

I understand that the financial support from the Program lasts until March. If I am unable to obtain a financial license by March, will I be unable to receive financial support from the Program?

It is vital to start preliminary consultation as early as possible, so please contact the Financial Market Entry Office as soon as you can.

Even if your business registration will not be completed by the end of March, you are still eligible for the Program. However, in such cases support will only be provided until the end of March. (The program may be terminated before the deadline depending on the status of budget execution.)

Tax
Please tell me about personal income tax in Japan.
  • 1. Tax residents in Japan

    For Japanese personal income tax purposes, an individual is considered to be a tax resident in Japan if they are domiciled in Japan or have held a temporary residence in Japan for one year or more. Tax residents in Japan are split into two categories: “residents other than non-permanent residents (i.e., permanent residents)” and “non-permanent residents.”

    • (ⅰ) Residents other than non-permanent residents (i.e., permanent residents)

      Individuals in this category must pay tax on all income regardless of whether it is earned overseas or in Japan.

    • (ⅱ) Non-permanent residents

      Individuals in this category do not hold Japanese nationality and have been domiciled or have held a temporary residence in Japan for a total of 5 years or fewer, during the past 10 years.

      Non-permanent residents are taxed on income other than foreign-source income (i.e., domestic-source income) as well as any foreign-source income remunerated in Japan or remitted to Japan from abroad.

      Tax rates in Japan are generally as follows, based on the nature of income:

      • Employment income: 5% to 45% personal income tax; an additional 10% resident tax
      • Investment income:
        • Interest on deposits: withholding tax 20% (personal income tax 15%, resident tax 5%)
        • Public and corporate bond interest: withholding tax 20% (personal income tax 15%, resident tax 5%)
        • Listed stock dividends: withholding tax 20% (personal income tax 15%, resident tax 5%) or comprehensive income taxation (personal income tax 5% to 45%, resident tax 10%)
        • Capital gains: 20% (personal income tax 15%, resident tax 5%)
        • Income from certain futures trading: 20% (personal income tax 15%, resident tax 5%)
        • Foreign exchange margin profit, crypto-assets trading profit: usually categorized as “miscellaneous income” and falls under comprehensive income taxation (personal income tax 5% to 45%, resident tax 10%)
  • 2. Non-tax residents in Japan

    The tax rate may differ if a non-tax resident holds a permanent establishment in Japan or not. The following information holds true for a non-tax resident who has no permanent establishment in Japan. (* Tax rates will differ from those listed below if withholding tax is reduced or exempted under an applicable tax treaty.)

    • Interest on bonds and deposits; and listed stock dividends: withholding tax 15% (personal income tax 15%, no resident tax)
    • Capital gains* and derivatives trading: non-taxable (taxed at the jurisdiction of residence instead)

      *Certain capital gains are counted as taxable.

  • * Special reconstruction personal income tax (2.1% of base income tax) was imposed on income tax until 2019 (Reiwa 1). Special reconstruction income tax (1,000 yen per year) is imposed on resident tax as an addition on a per capita basis until FY 2023-2024 (Reiwa 5).
Please tell me about what constitutes a permanent establishment in Japan when investing in a fund.

When a foreign investor (Limited Partner, LP) invests in a partnership fund (investment limited partnership, etc.) in which a General Partner (GP) is located in Japan, the business office of the GP in Japan is in principle deemed to be a Permanent Establishment (PE) of the LP, and the LP is subject to Japanese taxation on the income attributable to that PE. However, if the LP meets certain requirements, such as each LP's ownership interest in the fund being below 25%, the LP can receive a tax exemption on the income attributable to its PE by submitting a “Written Application for Special Provisions” to the GP (the person handling dividends from the investment partnership), which in turn submits the form to the tax office. The 2021 tax reforms allow such tax return forms to be submitted to the tax office electronically. Please note that tax returns must be submitted if there are any changes to the contents of a previously submitted return or if 5 years have elapsed since the day after it was submitted.

If a foreign partnership fund GP that is not located in Japan enters into a discretionary investment agreement with a Japanese investment management company, if that company is deemed to be an independent agent, it will not be a PE of the partners of the foreign fund.

A "Reference Cases" PDF file concerning the "Independent Agent Exemption" of fund managers is provided here.

Please tell me about taxation when a non-tax resident or a foreign corporation transfers shares of a domestic corporation through a foreign fund whose GP is not located in Japan.

If a non-tax resident or a foreign corporation transfers shares with a domestic corporation, the profits of the transfer are taxable under the following conditions.

  • (ⅰ) A specially-related shareholder, etc., of the domestic corporation owned shares or capital contributions in a number or amount equivalent to 25% or greater of the total number or total amount of issued shares or capital contributions of the domestic corporation at any point during the three years preceding the transfer of shares.
  • (ⅱ) During the year of the transfer, a specially-related shareholder, etc., of the domestic corporation transferred shares or capital contributions in a number or amount equivalent to 5% or greater of the total number or total amount of issued shares or capital contributions of the domestic corporation immediately before the first transfer of shares or capital contributions of the domestic corporation.

If investing in the domestic corporation’s shares via the partnership fund, the fund in question becomes a “specially-related shareholder, etc.,” and a determination of 25% or 5% will be made at the fund level. However, if the fund meets certain requirements, such as the LP's capital contribution ratio in the domestic corporation in which the fund invests being less than 25%, a determination can be made at the LP level by submitting a "notification related to the application of special provisions to the taxable income of foreign partners of a partnership fund" to the tax office by the deadline for filing a tax return for the fiscal year of the date of transfer (which is by March 15 of the following year for individuals). The 2021 tax reforms allow such tax returns to be submitted to the tax office electronically.

Please tell me about taxation on carried interest.

Regarding “carried interest,” which is the distribution of the profits of the fund received in excess of the capital contributions ratio from the partnership business managed by a fund manager (an individual acting as a partner), if the distribution of such profits has economic rationality, it is subject to pass-through taxation. (If the distribution of partnership profits is based on profits from the transfer of shares, the personal income tax is calculated by the separate taxation method, which has a tax rate of 20%.) For more information, see the “Partial revision of the notice regarding the tax treatment of Carried Interest” page.

Specific examples are provided in the “The Notice Regarding the Tax Treatment of Carried Interest.” However, these are only examples, and the specific settings such as for contribution ratios in these examples are not necessarily requirements for Carried Interest taxation. Please note that reference should be made to the requirements noted in "II. Basic Concepts of 'Economic Rationality,' etc." to determine economic rationality.

Status of Residence

How long can I stay in Japan with the “Highly Skilled Professional” status of residence?

With the “Highly Skilled Professional (i)” status of residence, the longest period of stay granted under law is five years. Before the end of this period, you can apply for an extension of period of stay to continue residing and working in Japan under the same status of residence.

As a foreigner who holds a “Highly Skilled Professional” status of residence, how easy is it to obtain permanent residence?

To obtain permanent residence, applicants typically need to have resided in Japan for at least ten years. However, this requirement is relaxed for highly skilled professionals. Individuals in category A below must have resided for at least three years, and those in category B must have resided for at least one year.

  • A. A highly skilled foreign professional who has at least 70 points at the time of application for permanent residence and meets either one of the following criteria:
    • Is a highly skilled foreign professional with at least 70 points and has resided continuously in Japan for at least three consecutive years
    • Has resided continuously in Japan for at least three consecutive years, and it is deemed that three years prior to the time of application for permanent residence they would have had at least 70 points
  • B. A highly skilled foreign professional who has at least 80 points at the time of application for permanent residence and meets either one of the following criteria:
    • Is a highly skilled foreign professional with at least 80 points and has resided continuously in Japan for at least one year
    • Has resided continuously in Japan for at least one year, and it is deemed that one year prior to the time of application for permanent residence they would have had at least 80 points
How much time is necessary for applying for a “Highly Skilled Professional” status of residence or an extension of period of stay?

When the application is to acquire a “Highly Skilled Professional” status of residence to enter Japan, the Immigration Services Agency endeavors to process applications within ten days of receipt; when the applicant is in Japan already and applying either for an extension of period of stay or a change of status of residence to “Highly Skilled Professional,” the Immigration Service tries to process applications within five days of their receipt.

(Note) These time frames do not apply should there be any missing documents or doubts about the contents of the application. Furthermore, the Minister of Justice will judge the contents of the application relating to “Research Achievements” points upon hearing the opinions of the heads of relevant government agencies and judge the application appropriately. Hence, the application may not be subject to priority processing.

If I entered Japan to prepare to register an Investment Management Business, is it possible to apply to change my status of residence to a “Highly Skilled Professional” status once the registration has been completed?

If you registered as an Investment Management Business operator while staying in Japan on a “Temporary Visitor” status of residence, you can apply to change your status of residence from “Temporary Visitor” to “Highly Skilled Professional” or “Business Manager” without having to leave Japan.

Contact Information

If you could not find the answer to your question in the FAQ section, please contact the Financial Market Entry Office or use the contact form below.

Inquiries to the Financial Market Entry Office

Inquiries to the Financial Market Entry Office

Reception hours:
Weekdays 9:30 to 18:15 (JST)
Email:
marketentry@fsa.go.jp
Phone number:
+81-(0)3-6667-0551 (direct line)
Address:
FinGATE TERRACE 7F, 8-1 Nihonbashi Kabutocho, Chuo-ku, Tokyo 103-0026

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