A Chinese company or a Japanese perm. address

[Socratesabroad]

Apologies for the subject line; I'm not exactly sure where J-bus-related stuff should go.

I'm currently a university student in China working for Japanese companies as a freelance translator. Several clients have asked, for tax purposes, if I could set myself up as a small company in China. I'm looking into this now, so I can't say if it's feasible or not. But I'd appreciate any advice or suggestions.

Should the company idea prove way too expensive, I was looking into other options, like trying to secure a 'permanent' address in Japan. I had considered something like Taro's 3Yen advice of Pakmail for a mailing/accomodation address.

FWIW, I'll be in Tokyo in mid-Oct (for a friend's wedding) and my J work visa and entry permits are good till 2006.

I'd appreciate any tips or suggestions fellow FGs might have to offer.

[Mulboyne]

I would consider which country has the higher corporation taxes. Outside of that, I'm afraid I can't be much help. Japan has the 1 yen yugen gaisha procedure now but I'm not sure how that could work for a non-resident.

[DrP]

first off ---

1) where are you doing business? japan or china? are you chinese?
2) why are your 'clients' asking you to set up a business? do they just need official receipts?
3) how are your clients paying you? in china? japan? bank transfer? cash?

setting up a kk or yk in japan is basically worthless unless you plan to do business with companies in japan. instead just register your company in hongkong . lower (no) tax and easy to pay to/from.

or just satisfy the japanese corporate lust for paper and issue an 'official receipt' with some sort of 100y store hanko stamp on it. the national tax office wont care either - as long as they some ink on it, its fine. think about the 'official receipts' given at hostess clubs and you'll know what i mean..... doh!

[Socratesabroad]

First off, thanks for the tip, Mulboyne. I think the costs and tax would be considerably cheaper in China.

And DrP, here are answers to your questions and some additional details.

1) where are you doing business? japan or china? are you chinese?
I'm an American who used to live and work in Japan. I built up a decent rapport with several Japanese translation companies and then moved to China to attend university a little over a year ago. Now, I do work for these companies to pay for school and living expenses here in China.

2) why are your 'clients' asking you to set up a business? do they just need official receipts?
J-tax inspectors noted that the companies were not withholding tax on payments to translators abroad (10% for individuals in Japan but 20% for those abroad). Now, the companies must withhold or pay stiff tax penalties. As the companies noted, because I am abroad I'll have a devil of a time recouping the tax assessed against me in Japan. The end result: J trans. companies need to send payments abroad to a company (hopefully a small one I set up) instead of an individual.

3) how are your clients paying you? in china? japan? bank transfer? cash?
Clients pay through transfer to my account at a Japanese bank.

setting up a kk or yk in japan is basically worthless unless you plan to do business with companies in japan. instead just register your company in hongkong . lower (no) tax and easy to pay to/from.

Setting up a kk or yk in Japan will not help me since I reside in China. I'm not sure about the HK approach since, as I said, I live on the mainland and corporate matters differ substantially.

or just satisfy the japanese corporate lust for paper and issue an 'official receipt' with some sort of 100y store hanko stamp on it. the national tax office wont care either - as long as they some ink on it, its fine. think about the 'official receipts' given at hostess clubs and you'll know what i mean.....

This approach sounds good at first, but should the Tax Office in Japan request Articles of Incorporation or the like, I'd prefer to be on solid legal ground. Additionally, I wouldn't want to open the Japanese companies up to tax liabilities or penalties - on the moral side, I have a good relationship with them and don't care to tarnish it, and on the practical side, the money they're paying me is helping to finance my education.