Transfer Pricing in Japan

Japan, as the world's second largest economy and with one of the world's most stringent transfer pricing regulatory regimes (not to mention its relatively high rates of corporate taxation), is of enormous importance to the tax directors of most MNEs with significant worldwide operations. An understanding of Japanese regulatory requirements and the enforcement environment is crucial to managing a MNE's tax risks and tax costs related to doing business in Japan. The authors of Transfer Pricing in Japan hope that this publication, by presenting not only a comprehensive description of Japanese rules and regulations but also significant practical information on the administration of Japanese transfer pricing rules, will help taxpayers understand the enforcement climate and provide practical insight on how to respond to the various requirements and how to prepare for inquiries from the tax authorities.

Since the first edition of this book was published, Japanese transfer pricing rules have undergone significant changes. Clarifications and expansions have been made to the regulations on intangible transactions and intercompany service transactions. Additional guidance regarding the applicability of Japan's donation rules to intercompany transactions has been released. The deadline for filing Advance Pricing Arrangement applications has been changed, and clarifications have been made to the guidelines regarding transfer pricing documentation. This book covers all of these changes and provides an up-to-date, comprehensive explanation of Japanese transfer pricing rules as of August 2010.

Transfer Pricing in Japan begins with background information including a brief history of Japanese transfer pricing regulation and a detailed explanation of the legislation and related circulars and guidelines. This is followed by a discussion of Japan's administration and enforcement of its transfer pricing rules. A detailed description of Japan's APA system follows, and the publication concludes with a discussion of recent trends in Japanese transfer pricing enforcement.