A foreign-owned hospitality group planned to expand its Japan operations ahead of a major inbound tourism rebound. Their activities included luxury hotel operations, event services, and local entity staffing.
Epic was engaged to help structure their entry in a tax-efficient, low-risk manner.
The Challenge
The client planned to open multiple hotel and tourism-related facilities in Japan, while coordinating investment from overseas holding companies.
They needed to decide between a Japanese branch or a KK (subsidiary), each with different tax and legal implications.
Hotel operations involved pre-opening expenses, imported furnishings, and complex booking platforms with cross-border payments.
They also had a global loyalty rewards program, and needed to understand how point liabilities and redemptions would be taxed in Japan.
Transfer pricing policies between HQ (which handled brand licensing and marketing) and the Japanese entity had not yet been defined.
Additionally, employment of non-Japanese staff, housing allowances, and withholding obligations needed clarification.
The company wanted to ensure that tax planning did not trigger permanent establishment (PE) risks before entity incorporation.
With operations in multiple languages and tight timelines for launch, bilingual support and project coordination were essential.
Japanese consumption tax and local accommodation tax rules added complexity to pricing and revenue recognition.
The internal finance team was unfamiliar with Japanese tax documentation, filing schedules, or accounting practices.
What did epic do?
Epic advised on entity selection, comparing branch vs. subsidiary structures from tax, legal, and HR perspectives.
We provided a pre-entry PE risk assessment and outlined conditions to avoid unintended tax exposure.
Our team coordinated with customs agents to structure the import of hotel furnishings in a compliant, duty-efficient manner.
We created a model for revenue recognition across OTA (online travel agency) platforms and booking aggregators.
Epic designed a transfer pricing policy covering brand royalties, shared marketing costs, and booking platform services.
We also reviewed the loyalty program’s tax treatment and determined whether point liabilities could be deferred.
Housing allowance structures and expatriate payroll were evaluated for proper withholding and fringe benefit tax treatment.
All internal finance materials were translated and localized for Japan GAAP and compliance readiness.
The Results
- Entity structure optimized for tax and regulatory compliance
- No PE risk triggered during pre-opening operations
- Transfer pricing model implemented across jurisdictions
- Import and pricing structure aligned with customs and tax laws
- Clear consumption/accommodation tax rules applied to room rates
