移転価格課税リスクを管理するにあたって、独立企業間価格の算定方法にTNMMを選定し、海外子会社の利益率が移転価格税制上妥当な水準であるかを気にかけている企業は多いことと思います。昨今の円安ドル高が続く状況では、特に対米取引について、米国子会社の利益率管理に苦慮している企業様も多いのではないでしょうか。この記事では、為替変動が移転価格に及ぼす影響を解説していきます。
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昨今、経済安全保障問題について活発に報道されるようになり、「輸出規制」という言葉が身近に聞かれるようになりました。輸出規則というと、日系企業にとっては、日本から海外に製品を輸出する際に、日本（自国）の輸出規則の対象となり、あくまでも自国だけの規制と思わている方も多いのではないかと思います。しかし、米国の輸出規則には、「再輸出規則」と呼ばれる制度があり、たとえ日本で製造した製品でも、米国産の製品・部品、ソフトウェア、技術が一定以上含まれている場合や、米国産の技術を使用して製造した製品である場合は、他国へ輸出する際に米国政府の許可が必要になることがあります。このような場合、無許可で製品を輸出してしまい、米国の輸出規則に違反してしまうと、禁固刑や米国製品、技術についての取引が禁止になるといった厳しい罰則があります。日本で製造活動を行っている企業でも、米国産の製品、技術、ソフトウェアを取扱っており、中国、ロシアを含む、米国が規制している国々と取引を行っている場合は、米国の輸出規制に注意する必要があります。
(more…)In June 2022, the National Tax Administration Agency (NTA) announced amendments to the Transfer Pricing Administration Guidelines. The amendments are thought to reflect the January 2022 update to the OECD Transfer Pricing Guidelines on financial transactions, and they revise Japan’s legislation on the treatment of financial transactions and cost contribution agreements (CCA). It should be noted that this may affect Japanese companies operating outside of Japan, including those operating in the United States.
(more…)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.
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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.
The Organization for Economic Cooperation and Development (OECD) has developed transfer pricing guidelines for multinationals, with the aim of bringing leading nations together to stop base erosion and profit shifting (BEPS) and global tax evasion.
BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. This is considered unjust and has the effect of eroding tax bases through deductible payments, such as interest or royalties.
Working together within the OECD, Japan and other jurisdictions coordinate on the implementation of 15 measures to tackle tax avoidance, including specific transfer pricing guidelines to improve consistency and transparency in the international tax environment.
Member countries of the OECD include the US, Canada, Mexico, Japan, South Korea, Australia, and most European nations. All multinationals within these countries are required to adhere to appropriate transfer pricing methods and process accurate reports on their activities.
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Rules regarding transfer pricing in Japan and the enforcement of these rules by the government are largely in line with OECD standards. This means that it adopts the “arm’s length principle” and looks to enforce the key measures set out in the OECD/G20 Inclusive Framework on BEPS.
The arm’s length method relies on the fact that the different parties of a transaction are independent and on an equal footing. It is an important part of international tax law and allows an adequate allocation of profit taxation rights among different jurisdictions.
In this regard, transactions between associated enterprises have to be priced as if these enterprises were independent and operating at arm’s length — engaging in transactions under equally applied conditions and economic circumstances.
This includes when a corporation sells property to, or buys property from, a foreign-related person, or provides services or conducts other transactions with them.
A foreign-related person is an entity that has a special relationship with another corporation, whether this is under the umbrella of a parent-subsidiary or substantial control relationship.
The arm’s length price for the transaction of assets may be determined using a number of approved methods. The most suitable approach should be determined based on the individual situation. Some examples of these include:
An advance pricing agreement (APA) system is available to approve the arm’s length pricing procedure set forward by a tax paying organization undertaking transfer pricing in Japan. This is a complex process that requires a significant body of documentation, but once completed, can secure an agreement between your business and Japan’s tax authorities.
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If a specific subsidiary or division of a parent company exists in a higher tax country (company A), they can save on taxes if they allocate more of their income to another subsidiary or division (company B), which exists in a lower tax jurisdiction.
Through this process, company A charges lower prices to company B and therefore boost profits through income generation in this lower tax jurisdiction. The result is that less tax is applied to company A, resulting in greater profits for the parent company.
This ultimately allows the parent organization to negotiate how much tax is paid in a way that would not happen if company A charged market prices to company B.
Tax authorities have strict rules influenced by the arm’s length method to prevent companies using transfer pricing as a way to avoid taxes and increase overall company profits, which negatively impacts the tax generating potential of a tax authority.
If a subsidiary exists in a higher tax country, they can save on taxes if they allocate more of their income to a subsidiary in a lower tax jurisdiction.
Determining the appropriate cost of transactions between related entities within a company can be a complicated process for large multinationals entering the Japanese market. Errors in accounting can lead to breaches of the tax regulations and result in penalties.
This will apply if transfer values are not priced accordingly or documentation such as financial statements are not sufficient evidence for tax auditors or regulators, resulting in a fee, or penalty.
Also, if it is deemed that a corporate group has partaken in artificial profit shifting and tax avoidance through inappropriate transfer pricing methods, they may be issued with tax penalties by the Japanese government.
Disputes with the tax authorities over issues regarding transfer pricing in Japan can be costly and complicated. They may be brought to an administrative quasi-judicial body (National Tax Tribunal) and subsequently to the courts.
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Transactions between a Japanese corporation and its affiliated overseas company are always potentially subject to transfer pricing taxation, so careful preparation is always necessary.
Transfer pricing is not an exact science and requires an in-depth understanding of tax regulations, market conditions, and accounting processes. Therefore, companies will be prudent to ensure they stay on top of intra-group transactions with the help of advisors or dedicated tax accountants who are familiar with the Japanese landscape.
At HLS, we have helped several international companies, including many European and US organizations entering the Japanese market, overcome such hurdles by helping them to achieve efficient transfer pricing and international tax accounting.
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Corporations operating across multiple jurisdictions must adhere to the different laws and regulations required for each location. However, there are still advantages that arise from having access to assets across multiple geographies, including resources, goods, and labor.
To make the most of these opportunities, it is important to understand how principles of transfer pricing and international trade can help you to build an efficient and strategic tax system.
If you would like to know more about the international business strategies and tax procedures used by some of the most successful MNE Groups operating in Japan, or want to learn more about how your organization can operate smoothly across multiple tax jurisdictions, get in touch with one of our experts at HLS who will happily advise you on how to navigate cross-jurisdictional tax landscapes.
この度、2019年9月27日（東京）と10月30日（カリフォルニア）にて、米国に子会社を有する日本企業様、あるいは今後米国への進出を検討する日本企業様を対象に、税理士法人HLSグローバルとHotta Liesenberg Saito LLP の主催による「国際税務セミナー」を開催いたしました。当日は、日・米の国際税務の専門家が、「タックスヘイブン税制に係る令和元年度改正」、「移転価格文書化導入後の移転価格調査」及び「米中貿易摩擦についての関税及び移転価格対策」について解説しました。
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