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New release of the Transfer Pricing Administrative Guidelines by the National Tax Agency

Japan Inbound Tax & Legal Newsletter March 2018, No. 27

Japan’s National Tax Agency (the “NTA”) recently released a revised version of the Commissioner’s Directive on the Operation of Transfer Pricing (the “Administrative Guidelines”).

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Japan’s National Tax Agency (the “NTA”) recently released a revised version of the Commissioner’s Directive on the Operation of Transfer Pricing (the “Administrative Guidelines”). The Administrative Guidelines do not have the force of law in Japan and are not binding on Japanese taxpayers. They are intended to encourage a consistent application of Japan’s transfer pricing rules at the various levels of the tax authorities. Therefore, the Administrative Guidelines are an important source of guidance for how the Japanese authorities are likely to interpret transfer pricing rules in Japan. A discussion draft of the amended Administrative Guidelines was released on November 10, 2017 with comments submitted to the NTA until December 10, 2017 and the final Administrative Guidelines subsequently released on February 23, 2018.

The key changes for foreign multinationals operating in Japan can be grouped into: 1. Changes to the Advance Pricing Arrangement (“APA”) landscape in Japan; and 2. Revisions concerning intra-group service provision. This article summarizes the most important aspects of each group, as well as possible challenges for taxpayers resulting from the changes.

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