With the advancement of globalization, there has been an increase in small and medium-sized enterprises (SMEs) that have overseas group companies and manufacturing facilities. In the 2016 tax system revision, certain companies with transactions involving overseas group companies were required to simultaneously document a “Local File.” Specifically, if there were overseas transactions between group companies, and if the transaction amount with foreign entities in the previous fiscal year exceeded 5 billion yen or the total amount of intangible asset transactions (inflows and outflows) exceeded 300 million yen, the obligation was imposed to create a Local File based on reasonably obtainable information at the time of the transaction or filing, and to keep it until the tax return deadline.<\/p>\r\n
Companies conducting transactions with overseas-related entities, even SMEs, may undergo tax audits related to transfer pricing. Failing to create a “Local File” can lead to the risk of paying unnecessary taxes and a higher probability of extended tax audits. There’s also a risk of being subject to estimated taxation or taxation based on the investigation of comparable companies.<\/p>\r\n
The creation of transfer pricing documentation is a critical tax issue for companies engaged in international business expansion. We are here to assist in the preparation of appropriate Local Files to minimize tax-related risks.<\/p>\r\n\r\n\r\n