International taxation (Transfer price)

Specialized Tokyo Kyodo Accounting Office teams for the transfer price taxation system, with extensive experience in global corporations dealing with transfer pricing, offer strategic advisory services.

Specialized Tokyo Kyodo Accounting Office teams for the transfer price taxation system, with extensive experience in global corporations dealing with transfer pricing, offer strategic advisory services.

In recent years, there have been a significant number of cases in which multinational corporations with global business operations have transferred income in excessive volume to countries with low tax rates by means of manipulating transfer prices for the purpose of cutting down their tax burdens. For this reason, issues related to transfer pricing have attracted global attention. The Organization for Economic Cooperation and Development (OECD) announced its Base Erosion and Profit Shifting (BEPS) Action Plan in order to ensure fair taxation. Many countries have taken action to organize their domestic laws in compliance with this plan.

This global movement to strengthen compliance regarding transfer pricing has led to a rise in potential taxation risks at multinational corporations. For those corporations that place importance on their accountability to its shareholders, action on transfer pricing has become an important management issue that they no longer can afford to ignore.

In addition, information pertaining to international taxation including transfer pricing is attracting interest as part of the ESG (environment, social, and governance) data. In view of the fact that ESG-conscious management has become essential today in achieving long-term business growth, development of policies having outstanding transparency regarding transfer pricing has become an urgent issue.

Tokyo Kyodo Accounting Office offers strategic transfer pricing advisory services with attention to practical issues and trends in transfer pricing investigations in the evolution of systems in response to the growing complexity of schemes in Japan and other countries. We offer strategic transfer pricing advisory services in which matters related to transfer prices are perceived as a management issue, by making active use of our overseas partner offices (RSM International), accurate analysis and assessment of matters pertaining to transfer prices for our clients, and engaging in discussions on the ideal image.

Financial transactions conducted by business companies (financial loan transactions, liability guarantee entrustment, cash pooling, captive insurance, etc.) have not been governed by guidelines under the transfer pricing taxation system in the past. With the announcement of the OECD Transfer Pricing Guidance (hereinafter called “Guidance”) in February 2020, followed by its revision as the OECD Transfer Pricing Guidelines (hereinafter called “OECD Guidelines”) in January 2022, changes have been applied to these financial transactions. In addition, the announcement of the revision of Japan’s Commissioner’s Directive on the Operation of Transfer Pricing (hereinafter called “the TP Directive”) to reflect the OECD Guidelines has increased the need to conduct transfer price analysis based on the OECD guidelines and the TP Directive, conduct reviews on price settings, and take action in response to the transfer pricing investigations.

The OECD Guidelines and the TP Directive show practical details on methods for analysis regarding interest and guarantee rates pertaining to the aforementioned financial transactions conducted most frequently especially among business companies. In the future, the tax authorities are expected to further intensify their transfer price investigations in relation to financial transactions, raising transfer price taxation risks for these transactions at business companies.