One Point Advice on Transfer Pricing Taxation

Transfer pricing is a taxation to set appropriate prices for cross-border transactions with foreign related parties based on the “arm’s-length principle” and to require appropriate tax payment in each country. For example, a transaction in which a U.S. subsidiary purchases a product developed and manufactured by a Japanese parent company and sells it in the U.S. market occurs between related parties. Because of this, the price for this transaction can be arbitrarily determined. In this case, if the sales price from the Japanese parent company to the U.S. subsidiary is too low, the income attributable to this transaction will be transferred from the Japanese parent company to the U.S. subsidiary, resulting in an understatement of taxable income reported in Japan and, conversely, an overstatement of taxable income reported in the United States. Since the income reported in Japan will be understated, if this problem is pointed out during a tax audit, the Japanese Tax Authority will reassess the income based on the correct price and impose additional tax payments, resulting in a double taxation.

Are you Prepared for the Mandatory Anti-Harassment Measures?

Power harassment prevention measures will become mandatory for small and medium-sized enterprises starting from April 1, 2022. The Power Harassment Prevention Act (Revised Act on Comprehensive Promotion of Labor Measures) came into effect on June 1, 2020. It will finally become mandatory for small and medium-sized enterprises (SMEs) from April 1, 2022. The recent increase in telework has also had an impact, and issues such as “lack of communication” and “lack of understanding of harassment (managers)” have been cited as some of the challenges faced by employees. Possible countermeasures include revitalization of communication and implementation of training programs for managers.

FY2021 Tax Reforms & Update to the Electronic Preservation System

As part of the 2021 tax reforms, the Japanese National Tax Authority (NTA) has released further updates on December 10, 2021. As was announced initially, amendments to the Act of Electronic Preservation System for Documents related to National Taxes were to take effect on January 1, 2022. However, in the latest release from NTA, the effective date of these amendments has been extended by 2 years.

Information on Amendment to the Act on Electronic Preservation System for Books and Documents Related to National Taxes in Japan

As part of the 2021 tax reforms, the Japanese National Tax Agency has made amendments to the Act on Electronic Preservation System for Books and Documents related to National Taxes, and this will take effect on January 1st, 2022.

These drastic amendments are being made in order to improve productivity by digitization of accounting processes, promote remote work and improve bookkeeping methods through the utilization of cloud-based accounting software.

Introduction to the New Japanese Invoice System Implementation & Qualified Invoice Issuers

What is the new Japanese Invoice System? Japan will implement a qualified invoice storage method (Japanese Invoice System) from October 2023. Under this new Japanese Invoice System, all qualified invoices, where tax credits for Japanese Consumption Tax (JCT) are applicable, will require proper storage as per the stipulated guidelines. Otherwise, deductions through tax credits may not be applicable, and the amount of JCT payments may increase.  

Transfer Pricing in Japan - An Overview Hero Image

Transfer Pricing in Japan – An Overview

Transfer pricing is a fascinating area of international taxation and accounting that is concerned with determining the conditions and price for transactions within a Multinational Enterprise Group (MNE Group), which results in the allocation of profits to related companies across different tax jurisdictions.  Under internationally compliant transfer pricing methods, goods are priced based on the arm’s length principle and valued at the current market price — without manipulation or distortion from either the buyer or the seller.  While the transfer pricing mechanism is a way that companies can legally shift tax liabilities to low-cost tax jurisdictions and allocate earnings among their various subsidiaries and affiliate companies, there are a number of serious issues that organizations need to be aware of when engaging in these activities.  We explore what these are and offer an overview of the rules surrounding transfer pricing in Japan, which can have far-reaching implications for any company doing business here. Transfer pricing rules exist to prevent entities from distorting taxable income in a way that would not happen between completely independent entities. BEPS and Tackling International Tax Avoidance The Organization for Economic Cooperation and Development (OECD) has developed transfer pricing guidelines for multinationals, with the aim of

HLS Global Group and HWS GmbH & Co. KG Form International Strategic Joint Venture

July 30, 2020 Shunsuke Saito Hotta Liesenberg Saito LLP   HLS Global Group and HWS GmbH & Co. KG Form International Strategic Joint Venture Creating New Opportunities for Japanese Companies in Europe through a Partnership Founded on Trust Los Angeles, CA, U.S. / Stuttgart, Germany: Today, Hotta Liesenberg Saito LLP, a leading international accounting, taxation, and business advisory firm, announced a new joint venture with HWS GmbH & Co. KG, a German full-service accounting, taxation, and business advisory firm with a rich history spanning nearly a century. This partnership will empower existing and new clients by creating new business opportunities for Japanese companies in Germany and for German companies globally.

International Tax Accountants – How they can support your Market Expansion in Japan

If your business is operating across borders, competing in the Japanese market as well as in your home jurisdiction, complying with local tax laws, meeting the necessary reporting requirements, and generally staying on top of your tax activities can be challenging. And it is often more than what the internal finance department is equipped for. As well as needing a whole new knowledge base when navigating Japan’s increasingly complex tax landscape, many companies simply require additional resources to handle intensified accounting and tax activities in multiple countries. As you will know already if you have been involved in medium-sized or large corporate entities, one of the keys to success is operational alignment. Without the right approach and skills to completely align your accounting and tax activities to minimize your global tax accountability, you will not be giving your corporate strategy and Japan market entry activities the best chance of success. In this article, we explore the various benefits for your business by hiring the right international tax accountant in Japan.

Why Comprehensive Tax Advisory Might be Essential for Your Business

Over the last decade, Japan has introduced various measures to combat perceived tax avoidance by multinational enterprises. Putting the activities of global corporations under increased scrutiny, it has become imperative for businesses operating in Japan to apply a sufficient amount of precaution and due diligence to all things tax-related. As well as this, the global tax landscape continues to evolve, with each nation updating its own policies to be aligned with current trade and foreign policies. Should entities fail to navigate both the obligations of their home countries and Japan’s complex tax requirements, the consequences can be severe. All this is to say that having a comprehensive tax advisory to support your expansion or Japan market entry activities is essential. We explore this topic and how to find your own tax advisory.

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