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Overview
As of April 1, 2017, the amended Payment Services Act came into effect and as of that moment operators of Virtual Currency exchange business are required to be registered with the Japanese Financial Services Agency.
Timeframe:
- ▪Company formation – within 8 weeks
- ▪License application – within 6 months
Minimum capital requirement: 10 000 000 JPY (approx. EUR 75 000) + Registration tax minimum of 150 000 JPY (0.7% of capital)
It is important to note, that not all, currently available cryptocurrencies, fall under the definition of Virtual Currency of the Payment Services Act. There are two types of Virtual Currency that are described and regulated by the mentioned Act. In short, they are:
- ▪A currency that has financial value and can be used to pay for goods and services (for example: Bitcoin, Litecoin, Ether etc.);
- ▪A currency that can be exchanged with the virtual currency that falls under the first description.
That said, a coin/token that can’t be used as payment for goods or services and can be exchanged only with a currency described in the second definition – will not be viewed as a Virtual Currency described by the Payment Services Act. Also, instruments that are pegged to fiat currency are not regarded as Virtual Currency, as both definitions exclude these types of instruments. Therefore – every applicant is to submit a list and description of virtual currencies that the company plans to deal in.
The following are some examples of businesses that do not fall under the Virtual Currency Exchange Business, as described by the Act:
- ▪Natural or legal entity that engages in Virtual Currency trade only for its own investment purpose;
- ▪Companies engaging in Cryptocurrency Mining;
- ▪Software developers;
- ▪Wallet service providers that do not engage in sale or purchase of Virtual Currency.
Benefits of Japan Virtual Currency Exchange provider’s license:
- ▪Japan Company portrays a good image to your Clients;
- ▪Great reputation worldwide;
- ▪One of the few jurisdictions providing licensing for virtual currency exchanges;
- ▪Japan is major international financial center;
- ▪96 double taxation avoidance treaties;
- ▪Not blacklisted.
Comprehensive Guide to Company Incorporation
General information
Company structure
- ▪At least 1 shareholder (natural person or legal entity, no nationality restrictions)
- ▪At least 1 resident director (representative of the local office)
- ▪A minimum of 1 local compliance officer (local compliance officer and an internal controller stationed at the company’s local office)
Taxation
- ▪37.05% Corporate income tax rate (including Corporate Inhabitant Tax)
- ▪Withholding tax rates: 15% on Dividends, 20% on Interest, 20% on Royalties
- ▪8% Consumption tax (~VAT)
Accounting and audit – An annual audit of company’s financial statements is required
Secretary – Required
Registered office – Required
Registered Agent – Not required
Company name
- ▪The provider must not use a trade name or company name that is identical to one used by any others
- ▪The name of the company is to be accompanied with the words “Kabushiki-Kaisha” (in Japanese characters)
- ▪It is restricted for a Company name to include any word which make it likely that the Company may be mistaken for a different form of Company
- ▪Restricted connections for company name: names of state and local government bodies and agencies
- ▪A company’s name shall not be contrary to good morals, as well as shall not be misleading with regard to the legal form, area of activity or scope of activity of the undertaking
- ▪Registrar may reject any name which it considers undesirable or contrary to the public interest
In order to obtain a license, the following steps will be carried out:
- ▪Application for reservation of company name
- ▪Preparation and submission of the application and incorporation documents to the Registry
- ▪Incorporation of the company
- ▪Filing the report with Bank of Japan under the Foreign Exchange Act of Japan
- ▪Filing the notifications with tax authorities
- ▪Opening of a Bank Account
- ▪Registration with the FSA/Local Financial Bureau
In order to obtain license, Offshorelicense will fill all necessary application forms and also acquire apostilled corporate documents.
For that reason, please provide us with the following documents.
For the company officers:
- ▪A notarized copy of valid passport (of each Director or Shareholder)
- ▪A notarized copy of proof of residential address (ex. utility bill of each Director)
- ▪Certified Bank Reference (of each Director)
- ▪2 professional character references (of each Director and Shareholder)
- ▪Detailed CV dated and signed by applicant (of each Director and Shareholder)
- ▪Notarized copies of Diplomas of higher education
- ▪Notarized criminal record
In case the shareholder is a company, it is required to provide:
- ▪Certified true copy certificate of registration
- ▪List of shareholders
- ▪Copy of the last annual/financial return
- ▪Apostilled Certificate of Good Standing
For the company/business:
- ▪Detailed business plan, that will include a prospect of profit and loss for three fiscal years from the startup
- ▪Manuals: Internal control rules; Internal procedure rules; System of protective measures for service users; System of segregated management of money, Virtual currency deposited by users; Information technology system risk management
- ▪List and description of virtual currencies offered
- ▪Contract forms for execution of virtual currency exchange business
Additional Due diligence may be prescribed by Financial Services Commission:
- ▪Original documents that prove source of capital
N.B.
- ▪If documents are not in English language, then they must be accompanied by a notarized translation.
- ▪Service agent is required by law to meet face-to-face with the client, when it is not possible – a letter will be sent to the address on the IDs via registered mail.
- ▪Additional documents may be requested by the FSA/Local Financial Bureau or local Bank at any point to certify specific information.