Loan Firm Accused Of Escaping Tax On 50 Bn Yen

by Mary Swire, Tax-News.com, Hong Kong

03 June 2003

According to a report in the Japanese daily the Yomiuri Shimbun, the Tokyo Regional Taxation Office has accused a consumer loan company of understating corporate income by about 50 billion yen ($420 million) in order to reduce its tax bill.

The Yomiuri report states that the loan firm DIC Finance now known as CFJ K.K., transferred income to the Netherlands via a Dutch subsidiary company where the Japanese tax authorities have no jurisdiction. As a result, DIC failed to report earnings for a three year period up to 2002.

It is alleged that DIC Finance secured funds for lending from the Dutch firm using the anonymous association structure of the Commercial Code. Utilising this technique, business profits were paid to investors in the form of a dividend, and as the taxation agreement between Japan and Holland is vague on anonymous association dividends, the former's tax authorities cannot impose tax on them.

It is thought that the company transferred 99 per cent of its profits to the Dutch arm as dividends, thus escaping tax on 50 billion yen of income, according to the Tokyo Taxation Office.

Recommended