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 District Court decided in favour of Universal Music Japan and set aside the assessment.
The Court held that the loan did not have the principle purpose of reducing taxes because the overall restructuring was conducted for valid business purposes. Therefore, the tax authorities could not invoke the Japanese anti-avoidance provisions to deny the interest deductions.
The case is now pending at the Tokyo High Court awaiting a final decision.
Click here for English Translation
Jap UM 2019