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Transfer Pricing
Revision of the Basic Corporation Tax Circular regarding the Special Documentation and Record Retention Requirements for Related-Party Transactions.
As discussed in our recent newsletter regarding the Special Rules for the Preparation and Retention of Documents Relating to Related-Party Transactions, the National Tax Agency (NTA) published the “Partial Amendments to the Basic Corporation Tax Circular and Related Administrative Guidance (Interpretive Circular)” on June 30, 2026 (Joint Circular No. Ka-ho 2-9 and others, dated June 30, 2026). The principal amendments are as follows. ◆Clarification of the definitions of related-party transactions, the scope of industrial property rights and similar intangible assets, and specific examples of service transactions. ◆Clarification that, for recurring and continuous transactions, a single Specified Information Document may be used provided that there are no changes to the underlying transaction terms or conditions. ◆Clarification that where the required information can be confirmed from multiple existing documents, it is not necessary to obtain or prepare an additional Specified Information Document. Our firm can also assist your organization in preparing, organizing, and retaining documentation relating to related-party transactions. Please feel free to contact us for further information.
Transfer pricing
Publication of Administrative Guidelines on the Basic Policy and Practical Treatment for Applying the Special Provisions on the Organization and Retention of Documents for Related-Party Transactions
On June 30, 2026, the National Tax Agency published administrative guidelines concerning the special provisions for the retention of documents related to transactions between related parties, with the aim of ensuring proper enforcement while reducing the administrative burden on taxpayers.The above special provisions for document retention (hereinafter referred to as the “Special Provisions”) require the preparation and maintenance of explanatory documents because, in intra-group transactions, it is often difficult for third parties to ascertain the details of transactions and the basis for calculating consideration, making it more difficult to clarify the actual circumstances.The key points of the administrative guidelines published this time are as follows:◆ The guidelines are not intended to uniformly require excessively detailed materials; rather, it is considered sufficient if the information can be objectively understood by a third party.◆ If the required information is sufficiently described in the transfer pricing documentation (local file), application of the Special Provisions is not necessary.◆ The retention of documents stating specified matters — in other words, documents that supplement insufficient descriptions — is not a requirement for deductible expense treatment. Instead, the determination is made after ascertaining the actual circumstances based on books and records, etc.◆ In principle, the place of retention of the documents is deemed to be the tax payment place, etc. of the domestic corporation. However, even if the documents are centrally managed by a parent company or similar entity, they will be treated as being retained if there is a system in place that enables them to be obtained and presented without delay.◆ If the documents are not retained or are insufficient, the tax examiner will specify a reasonable period and request the acquisition, preparation, and presentation of documents stating specified matters.◆ The obligation to retain documents stating specified matters is included in the book and document retention requirements for blue return filing. If retention is insufficient, there is also a possibility that the application of the net operating loss carryforward deduction may not be allowed.◆ The Special Provisions also apply to corporations other than blue return filing corporations.◆ If it is difficult to ascertain the actual amount due to the status of document retention, estimated taxation may be considered.
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