A fast-growing U.S.-based e-commerce company was expanding into the Japanese market via a newly established KK (Kabushiki Kaisha).
While excited about the market opportunity, the client had concerns about taxation, profit repatriation, and foreign exchange control issues.
Epic was engaged to advise on tax-efficient structuring from day one.
The Challenge
The client planned to operate warehousing, sales, and customer support functions in Japan, with revenues generated in JPY.
They were unfamiliar with how profits could be transferred to the U.S. parent company without incurring excessive tax or regulatory friction.
Key issues included dividend withholding tax, intercompany service fees, transfer pricing, and thin capitalization rules.
They also had to navigate the timing and mechanics of cash remittance, as well as documentation needed for banking and tax authorities.
The U.S. HQ needed financial visibility in real-time, but local books were maintained in Japanese and under J-GAAP.
Japan’s unique quarterly consumption tax filings and deductible expense classifications added complexity to their internal planning.
The client wanted to avoid surprises at year-end, including unanticipated corporate tax liabilities or intercompany audit issues.
Their finance team was lean, and they required both technical advice and hands-on execution support.
What did epic do
Epic helped establish the Japan entity and registered it for all required tax and social insurance purposes.
We advised on appropriate capitalization to avoid thin capitalization issues and ensure interest deductibility.
Our team designed a tax-compliant transfer pricing structure, using service fees and royalty payments to support regular repatriation.
We provided quarterly tax projections and guided the U.S. HQ on withholding tax and foreign exchange requirements.
Epic created a bilingual reporting framework to bridge US-GAAP and J-GAAP, enabling seamless consolidation.
We also helped implement accounting procedures for consumption tax credits and deductible expense tracking.
The client received banking and documentation support for dividend declarations and service fee transfers.
Post-launch, we continued to assist with monthly bookkeeping, tax filings, and international coordination.
The Results
- Compliant and cost-effective repatriation structure implemented
- Transfer pricing policy and contracts established to support intercompany flows
- No issues with withholding tax or FX documentation
- U.S. HQ gained timely visibility into Japan financials
- Consumption tax and deductible expense issues proactively managed
