Priority in Japanese transfer pricing methodologies

February 28, 2011  |  Transfer Pricing  |  No Comments

Flowchart showing priority among Japan's transfer pricing methodologies pre 2011 tax reform.

Japan’s 2011 tax reform proposals include the abolition of priority among the different approaches allowed under the transfer pricing regulations to price controlled transactions (‘TP Methodologies’). The proposals are intended to be effective from 1 October 2011 if passed by the Japanese Diet in early 2011.

This article introduces a flow chart outlining the priority in which different TP Methodologies should be applied. Read More

Transfer pricing and Japanese 2011 tax reform

February 28, 2011  |  Transfer Pricing  |  No Comments

An artfully composed photograph of recently planted rice fields in rural Japan.

The outline of 2011 Japanese tax reform proposals (link in Japanese) issued on the 16th of December 2010 include a number of technical changes to the Japanese transfer pricing regulations that have important practical implications for transfer pricing practice in Japan. This article summarizes those proposed changes.

The transfer pricing section of the 2011 tax reform proposals starts by noting that proposed changes to the transfer pricing regulations Read More

A mini case-study in residual profit split transfer pricing

November 3, 2010  |  Transfer Pricing  |  No Comments

A beautifully taken picture of an unpainted JAL cargo plane taking off from a US airport.

A Tax Tribunal appeal case (the ‘Appeal’) reported on 28 June 2010 provides a useful ‘mini case study’ in the application of a residual profit split transfer pricing methodology.  The Appeal reviewed the identification of key intangible assets, issues in the choice of an appropriate third party comparable and the use of an appropriate allocation factor in the method concerned.  This article reports the facts and findings in the case concerned. Read More

Donations to foreign related parties

August 15, 2010  |  Domestic, Transfer Pricing  |  No Comments

Shishi odoshi, often seen in Japanese temples or traditional gardens

This article examines an issue that often arises during the course of a corporate tax audit of the Japanese subsidiary of a foreign multinational.  During such an audit the auditors may assert that a Japanese company’s transaction with its Foreign Related Party (‘FRP’) is a “Donation” for Japanese tax purposes (as defined below) Read More

Related parties for transfer pricing purposes

August 13, 2010  |  Group Taxation, Transfer Pricing  |  No Comments

Foreign related parties - capital relationship

This article outlines the definition of Special Relationship and Foreign Related Party (‘FRP’) for Japanese transfer pricing purposes and includes diagrams giving examples of the application of the definition.  Transactions with an FRP with whom a Japanese company has a Special Relationship are subject to Japanese transfer pricing regulations and must be carried out at arms’ length to avoid tax adjustment. Read More

Tax Controversy – disallowance of related company recharges

News, information

The Asahi Newspaper reported on 11 August 2010 that Hewlett Packard’s Japanese subsidiary (‘Japan HP’) had received an assessment in respect of JPY47Bn (USD550m) unreported income. Read More