Japan Comments On Central Corporate Services In New TP Guidelines

; posted on
May 31st, 2018

The Japanese Ministry of Finance has revised the administrative instructions on transfer pricing that takes place in, among other things, the central corporate services performances. In principle, these changes are in line with the OECD BEPS reports of October 2015. A simplified approach is presented with regard to the billing of central corporate service performances. This stipulates that these services are considered settled in accordance with foreign comparison, provided that they are charged at 5% using the cost surcharge method.

Simplified Approach

The following requirements are set for the application of the simplification approach:

  • Activities should be of a supportive nature;
  • The supply of services does not include intangible assets;
  • The supply of services does not pose any major risks in this respect;
  • The benefits do not fall in areas such as R&D, production, sales, purchasing, logistics, marketing, finance or insurance / reinsurance;
  • No of provided service performances;
  • Cost calculation is mainly based on full cost (i.e., direct and indirect costs);
  • Documentation is available.

The guidelines also comment to limit services and shareholder costs. For example, costs associated with creating a country-by-country (CbCR) report as non-billable shareholder costs.

All in all, with regard to the payoff from central company services, the Japanese method made smaller exceptions from the OECD BEPS reports.

Sources: TPA Global 

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