Tag: Splitting factors

Tokyo High Court rules in favour of NGK Insulators

Tokyo High Court rules in favour of NGK Insulators

In a decision issued on March 10, 2022 the Tokyo High Court upheld a 2020 decision from the district court and ruled mostly in favour of NGK INSULTATORS, LTD. in an appeal filed against a transfer pricing correction issued in 2012 by the Japanese tax authorities. The case At issue was whether the royalties received by NGK Insulators, the HQ of a Japanese group, from its Polish subsidiary, were lower than the arm’s length price. Due to the tightening of European emission regulations, only two companies at the European market, the Polish subsidiary and IBIDEN (Ibigawa Electric Power Co., Ltd.), were able to provide parts that complied with those regulations. This resulted in an oligopoly situation and excessive profits in the subsidiary. In regards of the residual profits the tax authority had argued that the split should be based on NGK Insulators’ research and development costs on the one side and the Polish subsidiary specific departmental research and development costs ... Read more