Tax & Legal

On 20 January 2022 the OECD released the 2022 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The current version consolidates in one publication the changes and adjustments that have taken place to the 2017 version of the OECD Transfer Pricing Guidelines.

In this newsletter, we will explain the points where inbound companies are likely to be misled with respect to Japanese transfer pricing taxation rules.

In a preliminary request from Romania the European Court of Justice was asked, i. a., whether the amounts invoiced by a parent company to a subsidiary established in another Member State using the transactional net margin method (a method recommended by the OECD Guidelines) may constitute a consideration for a supply of services for consideration which falls within the scope of the VAT Directive. In its judgment the ECJ answered in the affirmative.

The Supreme Tax Court has rejected a tax office assessment attempt on the basis of a hidden distribution of profits because of a delay in agreeing management charges in writing, saying that the double tax treaty related party provision bases the arm’s length standard on amount, rather than on the reason for, or documentation, of a transaction.

In its decision in Hamamatsu Photonics Deutschland (C-529/16) the European Court of Justice (ECJ) held that Articles 28 to 31 of the Customs Code (old version) must be interpreted as meaning that they do not permit an agreed transaction value, composed of an amount initially invoiced and declared and a flat-rate adjustment made after the end of the accounting period, to form the basis for the customs value, without it being possible to know at the end of the accounting period whether that adjustment would be made up or down.

On 6 June 2023, the Federal Ministry of Finance published its new principles for the correction of income pursuant to Section 1 External Tax Relations Act on its website. These are to be applied to all open cases with immediate effect. Only the chapter on relocation of functions is applicable to cases that are realised after 31 December 2021.

New "Administrative Principles Transfer Pricing - Principles for the Adjustment of In-come Pursuant to Section 1 of the External Tax Relations Act".

The Supreme Tax Court has held that a taxpayer cannot claim forgiveness of the interest due on the tax payment following a transfer pricing adjustment on the grounds that an associated company had no claim for interest receivable on the corresponding adjustment in its home country.

The Supreme Tax Court has held that internal or other restrictions on the excise of ownership rights do not obviate an association by common shareholding of more than 25%. It has also held that the application of the transfer pricing documentation rules to cross-border transactions only is, while discriminatory, justified by the need to protect tax revenue.

In a recent judgment, the Supreme Tax Court decided that tax-relevant emails are generally subject to retention requirements as commercial and business correspondence and may be requested by the tax authorities during an external audit. This also applies to digital documentation on group transfer pricing, the Supreme Tax Court said.

Issue 3 of our Newsletter for 2019, including news about the Research & Development Subsidy Bill, the Finance Bill 2019 and the Supreme Tax Court decision in relation to the impact of Article 9 (1) of the OECD Model Tax Convention on transfer pricing income adjustments.

According to the Supreme Tax Court in its ruling of 27 February 2019, published on 15 May 2019, and contrary to its previous case law, Article 9 (1) of the OECD Model Tax Convention, does not prohibit an income adjustment under domestic transfer pricing rules, where the write-off of an unsecured group loan is not recognised as a deduction from taxable profits.

In a most recent judgment, the Supreme Tax Court decided on the transfer pricing method to determine an arm's length interest on intercompany loans. In its decision the highest tax court also provides some guidelines on the parameters to be observed from a purely tax point of view. Also, the court takes time to compare the adequacy of the various standard methods under review.

BEFIT指令案の公表に伴い、2026年以降のEU各加盟国の移転価格ルールの統一を目的とした、「欧州移転価格指令案（A Council Directive on Transfer Pricing）」および、零細・中小企業のための「欧州本店簡易申告指令案（A Council Directive establishing a Head Office Tax system for micro, small and medium sized enterprises, and amending Directive 2011/16/EU）」（HOT指令案）が、2023年9月12日に公表されました。

On 12 September 2023, the European Commission adopted a key package of initiatives to reduce tax compliance costs for large, cross-border businesses in the EU, called “Business in Europe: Framework for Income Taxation” (BEFIT), to make life easier for both businesses and tax authorities by introducing a new, single set of rules to determine the tax base of groups of companies.

The Ministry of Finance (MoF) has published some information on the so-called transaction matrix pursuant to Section 90 (3) sentence 2 no. 1 Fiscal Code which requires taxpayers to keep records of the nature and the content of their business relationships within the meaning of Section 1 (4) of the Foreign Tax Act.

In a decision published today, the Supreme Tax Court held that Section 1 (5) Foreign Tax Act does not constitute an independent rule for determining permanent establishment profits. General allocation methods such as the cost-plus method require a clear legal basis - otherwise they are inadmissible.

Advocate General Kokott is of the view that the Commission erred in deciding that Luxembourg had granted unauthorized state aid to Amazon in the form of tax advantages.

On 20 December 2016 legislation was passed introducing measures to combat base erosion and profit shifting. A part of this legislation - introduced in the new Section 138a of the General Tax Code - imposed an obligation on multinational enterprises to report annually for each tax jurisdiction in which they do business, so-called Country-by-Country (CbC) reports.