Some foreign companies who are doing business not only in Japan but also other counties
recognize that they have transfer price issues for foreign related transactions.
In order to reduce the transfer price tax risks, it is required to prepare a transfer price policy.
If the operating margin of the subsidiary in Japan is lower than other related group companies,
the company must investigate reasons and to prepare documentation regarding these reasons to reduce
tax risks. Therefore, it is better to face the transfer price issue within the group companies.
One of the characteristics of transfer price taxation is that it is retroactive for 6 years,
and it can cause a much higher tax imposition rather than what the company estimated it to be.
For example, the company whose annual turnover is several billion yen might have an additional
taxation of several hundred million yen. In this case, the additional taxation might lead to
bankruptcy for SMEs. Therefore, since the transfer price issues cannot be solved within the
accounting department, top management needs to understand the issues and to be involved with