For real estate funds, renewable energy projects, battery energy storage systems and other investment structures in Japan, the stable operation of a special purpose company, or SPC, requires more than accounting and tax compliance.
In addition to bookkeeping and tax filings, day-to-day operations may include payment administration, cash management, document execution, contract management, investor reporting and coordination among multiple stakeholders.
When selecting an accounting firm or tax adviser for a Japanese SPC, it is therefore important to consider not only whether the service provider can prepare accounts and tax returns, but also whether it understands the overall transaction structure, contractual terms, cash flows, distribution mechanics and reporting schedules, and whether it can coordinate effectively with the SPC administrator and other operational parties.
Capabilities Required of Accounting Firms and Tax Advisers Supporting SPCs
SPCs involve accounting and tax matters that differ from those of ordinary operating companies.
Under a GK-TK structure, for example, the accounting and tax compliance of the Godo Kaisha must be coordinated with the calculation and allocation of Tokumei Kumiai profits and losses, distributions to investors and investor reporting.
A Tokutei Mokuteki Kaisha, or TMK, also requires integrated management of accounting and tax matters, distributable profit, tax pass-through requirements, corporate governance, specified bonds and preferred equity.
Accordingly, when appointing an accounting firm or tax adviser for an SPC, it is important to confirm whether the provider understands not only the relevant SPC structure, but also the transaction as a whole and its operational requirements.
SPC Operations Extend Beyond Accounting and Tax Compliance
Preparing accounting records and tax returns alone is not sufficient to operate an SPC smoothly.
Routine operational matters may include reviewing invoices and contracts, arranging and approving payments, administering bank accounts, managing document execution, monitoring deadlines and preparing reports for investors and lenders.
In addition, events such as asset acquisitions, refinancing, additional capital contributions, distributions, disposals and liquidations require coordination across accounting, tax, legal, treasury and reporting functions.
Stable SPC administration therefore depends on managing accounting, tax compliance and fund operations as an integrated process, with clear responsibilities and deadlines for all parties involved.
Coordination with Overseas Investors and Fund Administrators
When overseas investors and international funds invest in Japanese real estate, hotels, logistics facilities, data centres, renewable energy projects or battery energy storage systems, they often require practical explanations of Japan-specific SPC structures, accounting and tax requirements, banking procedures and document execution practices.
In some cases, an overseas fund administrator manages the overall fund while outsourcing Japanese SPC accounting, tax compliance and local administration to service providers in Japan.
For these cross-border transactions, the local service provider must coordinate with Japanese asset managers, financial institutions, law firms, accounting firms and tax advisers, while also explaining and reporting the relevant matters accurately in English to overseas stakeholders.
Sakura Kyodo Financial Advisory’s Support
Sakura Kyodo Financial Advisory K.K. provides integrated support for SPC administration, accounting, tax compliance and fund operations, primarily for real estate and infrastructure investments, in cooperation with the tax corporation and other entities within the Sakura Kyodo Group.
We support GK-TK structures, TMKs and other Japanese SPCs throughout the transaction lifecycle, including initial setup, day-to-day administration, financial closing, tax compliance, distributions, disposals and liquidation.
We also communicate in English with overseas investors, international funds, fund administrators and other global stakeholders.
We welcome enquiries regarding the appointment of an SPC administrator, accounting or tax service provider for a new transaction, the review of an existing operating model, the transfer of services from another SPC administrator or accounting firm, and standalone accounting or tax compliance engagements.
For enquiries regarding Japanese SPC administration, SPC accounting and tax compliance, GK-TK structures, TMKs, fund operations or support for overseas investors, please contact us through our enquiry form.
