Investing in Japan
How to Set Up Business in Japan
Laws & Regulations on Setting Up Business in Japan
Section 3. Taxes in Japan
3.9 Other taxation regarding international transactions
3.9.1 Foreign tax credits
In order to avoid double taxation of income internationally, a domestic corporation is allowed to credit foreign taxes imposed on its business against Japanese tax up to the creditable limit, and to credit foreign taxes imposed on a foreign subsidiary against Japanese tax up to the creditable limit.
3.9.2 Transfer pricing taxation
In order to prevent corporations from setting the prices for transactions with a parent company or other overseas affiliate at a different amount from ordinary (i.e. arm's-length) prices so as to transfer profits overseas, a transaction is treated as having occurred at the arm's length price and the amount of tax calculated accordingly if the income derived from the transaction differs from the arm's length price.
3.9.3 Anti-tax haven taxation
In order to prevent domestic corporations from evading taxes by retaining income through a foreign subsidiary established in a so-called tax haven, a domestic corporation is taxed by including in its taxable income an amount corresponding to its interest in the retained earnings of that foreign subsidiary.
3.9.4 Thin-capitalization taxation
If a corporation's borrowing from an overseas controlling shareholder exceeds three times its equity (or an alternative reasonable ratio), interest on borrowing corresponding to the excess cannot be deducted from taxable income.
- 3.6 Overview of consumption tax
- 3.7 Overview of personal tax system
- 3.8 Other principal taxes
- 3.9 Other taxation regarding international transactions
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