HP Japan, Hewlett Packard’s Japanese subsidiary, has been investigated by the Tokyo Regional Tax Bureau (TRTB), resulting in a JPY23bn (USD270m) unpaid tax assessment for the two years ending October 2006 according to an Asahi news article.
The point at issue was a sum in excess of JPY20bn which the Japanese subsidiary paid to its parent as a management fee and routed through a Swiss company called HPIS. The sums paid, totalling JPY47bn, were classed as “expenses for general management, group support and management of assets,” but during the audit it was noted that the fees were not supported by a consistent group-wide policy on fees charged to subsidiaries generally.
The TRTB did not regard the total of the fees as an allowable expense in the absence of tangible consideration, and this led to the under-reporting of taxable income. Although HP has not made public comment on the issue, other than that it pays its taxes correctly, it was reportedly appealing the decision.
This comprehensive report in our Intelligence Report series examines the global and national landscapes in which companies can use transfer pricing to improve their after-tax returns, including summaries of recent developments in design of the corporate supply train, the usefulness of 'offshore' in international corporate tax planning, and a section covering the spread of DTAAs and CFC laws. It is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report16.aspTags: tax | law | transfer pricing | corporation tax | audit | Japan | fees | Japan
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