Countries: Japan

Japan vs. Universal Music Corp, June 2019, Tokyo District Court, Case No 平成27(行ウ)468

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An intercompany loan in the form of a so-called international debt pushdown had been issued to Universal Music Japan to acquire the shares of another Japanese group company. The tax authority found that the loan transaction had been entered for the principal purpose of reducing the tax burden in Japan and issued an assessment where deductions of the interest payments on the loan had been disallowed for tax purposes. Decision of the Court The Tokyo […]

Japan vs Denso Singapore, November 2017, Supreme Court of Japan

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A tax assessment based on Japanese CFC rules (anti-tax haven rules) had been applied to a Japanese Group’s (Denso), subsidiary in Singapore. According to Japanese CFC rules, income arising from a foreign subsidiary located in a state or territory with significantly lower tax rates is deemed to arise as the income of the parent company when the principal business of the subsidiary is holding shares or IP rights. However, the CFC rules do not apply when the subsidiary has substance and it makes economic sense to […]

Japan vs C Uyemura & Co, Ltd, November 2017, Tokyo District Court, Case No. 267-141 (Order No. 13090)

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C Uyemura & Co, Ltd. is engaged in the business of manufacturing and selling plating chemicals and had entered into a series of controlled transactions with foreign group companies granting licenses to use intangibles (know-how related to technology and sales) – and provided technical support services by sending over technical experts. The company had used a CUP method to price these transactions based on “internal comparables”. The tax authorities found that the amount of the […]

Japan vs. Publisher Corp, April 2017, Tokyo District Court, Case No 第267号-56(順号13005)

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A Japanese company entered into a transaction with a foreing group company to import English-language learning materials into Japan. The learning materials were then resold to Japanese customers. The Japanese tax authority found that the resale price method should be used for setting the arm’s-length price for the transaction. The arm’s-length price for the controlled transaction was the price at which the Japanese company resold the English-language learning materials to customers, minus a normal profit […]

Japan vs Cayman Islands Corp, 2008, Tokyo District Court 2011 ( Gyou ) nr 370

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In this case a tax assessment based on Japanese CFC rules (anti-tax haven rules) had been applied to a Japanese Group’s subsidiary on Cayman Islands. According to Japanese CFC rules, income arising from a foreign subsidiary located in a state or territory with significantly lower tax rates is deemed to arise as the income of the parent company when the principal business of the subsidiary is holding shares or IP rights. However, the CFC rules […]

Japan vs Honda Motor Company Limited, May 2015, Tokyo High Court judgment, Case No 13 May 2015 Heisei 26 gyou-ko No 347

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In the Tokyo High Court judgment, dated 13 May 2015, Honda Motor Company Limited, a major Japanese automobile manufacturer, obtained a cancellation of a tax assessment of ¥25.4 billion. The court held that the tax authorities had erred in the selection of companies comparable to the tested party (Honda’s foreign subsidiary in Brazil). The tested party was doing business in the Free Economic Zone of Manaus in Brazil – whereas the selected comparables was located outside the zone. The […]

Japan vs. IBM, March 2015, Tokyo High Court, Case no 第265号-56(順号12639)

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An intermediate Japanese holding company in the IBM group acquired from its US parent all of the shares of a Japanese operating company. The Japanese holdings company then sold a portions of shares in the operating company back to the issuing company for the purpose of repatriation of earned profits. These sales resulted in losses in an amount of JPY 400 billion which for tax purposes were offset against the operating company’s taxable income in […]

Japan vs “Banana Corp”, April 2013, Tokyo High Court, Case no 229

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A Japanese distributor “Banana Corp” imported Ecuadorian bananas from a group company for wholesale in Japan. The Japanese tax administration ruled that the amount of consideration paid by Japanese distributor had exceeded the arm’s length price and issued an assessment of additional tax and penalties for FY 1999 – 2004. At first Banana Corp brought the case before the regional court who decision in favour of the tax administration. Banana Corp appealed this decision to […]

Japan vs Manufacturing Co. March 2013, Tokyo High Court, No 19

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A Japanese manufacturing company was issued an estimated tax assessment due to lack of transfer pricing documentation. The District Court ruled in favor of the tax authorities. The Court decided that accounts and documents necessary for calculating arms’s length prices should be presented or submitted to the tax authorities without delay. If sufficient documentation is not submitted, the requirement for an estimated taxation is satisfied. Furthermore, in such cases the burden of proof shifts to […]

Japan vs “Banana Corp”, April 2009, Tokyo District Court

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The “Banana Group” is based in Ecuador and is engaged in the business of exporting Ecuadorian bananas. The Japanese distributor was part of the Banana Group. An Ecuadorian group company purchases bananas produced on plantations in Ecuador, exports and sells them to another intermediate group company, who in turn sells them to the Japanese distributor for wholesale in Japan. At issue was the arms length price of the bananas imported by the Japanese distributor. The […]

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