If I set up a branch office of a Japanese company in the US will the Japan office pay US tax on revenue? -

The company in Japan is owned by US Citizens and the question is how will the IRS look at income generated from the Japan side?

Yes, the US income is fully taxable in the US. And since the company is owned by US citizens, any money that THEY earn (salaries and dividends, for example) must be claimed on their personal tax returns as well. Caution: If the corporate entity isn t properly structured, the US may claim the right to tax the purely Japanese income within the corp that normally would not be subject to US taxes. And Japan may be able to tax the US income that could otherwise be exempt from Japanese taxes. Hopefully you ran this past experts in international law and taxation before you created the US subsidiary.