Latest trends in tax controversy in Japan : Rationality of the arm’s length price in transfer pricing taxation
Tax Controversy Newsletter for Inbound : May 2018, No. 1
Under the principles of transfer pricing taxation, a Japanese company engaging in the sale or purchase of assets, service provision, or any other kind of transaction (foreign related party transaction) with one of its related parties, such as a foreign subsidiary (foreign related party), is subject to corporate tax as if the transaction was conducted at an arm’s length price. “Arm’s length price” refers to the price that would be appropriate for the transaction were it conducted under the same conditions between independent companies (uncontrolled parties).
This newsletter explains the following topics;
- Practical countermeasures for unexpected taxation risk
- Methods for calculating the arm’s length price
- Judicial precedents and determinations regarding the CUP method
- Judicial precedents and determinations regarding the RP method
- Judicial precedents and determinations regarding the CP method
- Judicial precedents and determinations regarding the PS method
- Judicial precedents and determinations regarding TNMM
- Conclusion: The risks of presumptive taxation
* This Article is based on the relevant Japanese or specific country’s tax law and other authorities in effect on the date of this Article. This Article would not be guaranteed updating if there are any changes in Japanese tax law, any other law, or interpretations by the courts or tax authorities thereof after the date of this Article.