Japanese Adjustments Steadily Trend Upward

June 4, 2018

Japanese Adjustments Steadily Trend Upward

~1-minute read. This article is part of our CrossBorder Audit Alert series.

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Audit Visits Turn into Major Profit for Japanese Tax Authorities

 

Japanese audits have shifted from large enterprises to medium and small size companies. The number of transfer pricing assessment cases in 2015 was 3,340 which was a 70% increase from the previous year.

In 2015, the total transfer pricing assessment imposed was JPY 220.6 Billion. The average TP assessment was less than JPY 100M, which was a substantial decrease from previous years, indicating that smaller companies were targeted.

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In an attempt to raise revenue and lower the budget deficit, HM Revenue and Customs announced that that between 2011-2016, HMRC secured 5.9 billion of additional tax by challenging the transfer pricing arrangements of multinational corporations! The total amount secured in 2016/17 was 1.6B which was a 50% increase over the amount collected in 2015/16.

Similarly, the Diverted Profit Tax, which is designed to encourage large companies to comply with international tax rules including transfer pricing, raised 281M in 2016/17. This was a 90% increase from 2015/2016.

To collect this amount, the HMRC has 82 full time staff in its specialist transfer pricing group. This number is expected to increase dramatically.

CrossBorder Solutions predicts that this upward trend will continue and MNC taxpayers should expect transfer pricing audits and adjustments to increase dramatically.

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