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Transfer Pricing Documentation-Japan

Transfer Pricing has been one of the key focuses of the Japanese Tax Authorities for many years. We recommend that clients have robust documentation in place setting out their transfer pricing policy for all intragroup transactions involving Japan.

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Transfer Pricing Documentation

The Japanese Transfer Pricing rules follow the OECD Guidelines in determining taxable income. There is no contemporaneous documentation rule as there is in some other countries. However, the Tax Authorities can request Transfer Pricing Documentation upon audit and any documents requested must be submitted “without delay”, which usually means just a week or two. Given the limited deadline for submitting any documents requested once an audit commences, preparation of Transfer Pricing documentation is essential to give the taxpayer a good opportunity to defend their pricing and policy. If documentation is not provided in a timely manner, the taxpayer runs the risk of being assessed through “secret comparables” or by estimation. Having transfer pricing documentation readily available should also mitigate the risk of penalties. Transfer Pricing assessments are subject to the same penalties that apply to general corporate tax assessments. Please contact Deloitte Japan for more details.