The Japanese authorities have accused Virgin Entertainment Japan of undertaking an 'abnormal' international transaction in order to avoid Japanese taxes.
According to reports in the national media, the Tokyo Regional Taxation Bureau took issue with the Virgin subsidiary's decision to sell its shares in Virgin Cinemas Japan to Toho Co. via an affiliate in Switzerland.
The regional tax authority argued that the move was designed to unfairly reduce the tax liability on the share sale, as the tax rate for such transactions is significantly lower in Switzerland than in Japan.
Virgin Entertainment Japan has been ordered to pay the back tax owed on the allegedly improperly gained profits, in addition to a 1.5 million yen penalty. However, the firm is reportedly filing a complaint on the matter.
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