Doing Business In Asia: Japan: Taxes

Japan: Revisions To Transfer Pricing Regulations Shed Light On Documentation Requirements

An International Tax Alert Report, published by Ernst and Young, regarding the tax changes to transfer pricing in Japan, adopted in April, 2010.

To hear a Summary of the article, as presented by the editor of Doing Business In..., The Global Business Professor, please click on the image below.

Overview


Following the 22 December 2009 outline of the 2010 tax reform proposal,
Japan’s Ministry of Finance released a revision to the Special Taxation
Measures Law Enforcement Regulation on 31 March 2010. This revision to
the regulation is effective 1 April 2010 and provides the legal framework
for the documentation items that taxpayers are expected to provide to the
tax authorities in a transfer pricing examination.

The document, for the first time, clarifies what types of documents must
be submitted in a timely manner, under audit to avoid the potential
application of “presumptive taxation.” Presumptive taxation refers to a
case where the tax examiners are authorized (due to the taxpayer’s failure
to submit requested data without delay) to conduct their own transfer
pricing analysis, possibly based on secret comparables, and to use this
analysis in computing a tax assessment. Secret comparables are are non-
public transactional data on prices and profit margins of unrelated parties
for use in calculating potential transfer pricing assessments.

Entire Report: Doing Business In Asia: Japan: Revisions To Transfer Pricing Regulations Shed Light On Documentation Requirements