Asia-Pacific Transfer Pricing Handbook

Chapter Fifteen

Japan’s Directive on Transfer Pricing Operations

Japan’s National Tax Agency (NTA) has issued transfer pricing regulations in two parts, both the regulations themselves (the Commissioner’s Directive on the Operation of Transfer Pricing) and subsequent examples (the Reference Case Studies on the Application of Transfer Pricing Taxation; hereafter Reference Case Studies). The reader is forewarned that the Japanese transfer pricing regulations are complex compared with transfer pricing regulations in most other countries. Further, the examples address different issues from those issues the regulations raise. As a consequence, this analysis addresses Japan’s NTA’s transfer pricing regulations standing alone.

BACKGROUND

Japan’s NTA amended its Commissioner’s Directive on the Operation of Transfer Pricing on June 25, 2007. This directive serves as Japan’s Transfer Pricing Administrative Guidelines in applying the applicable transfer pricing techniques. The Japanese Transfer Pricing Administrative Guidelines take the place of the “Commissioner’s Directive on Procedure for Confirmation of Transfer Pricing Methodologies to Determine the Arm’s Length Price.” The NTA originally issued the guidelines on October 25, 1999. The 2007 Japanese Transfer Pricing Administrative Guidelines address operations that are related to Article 66-4 of the Act on Special Measures Concerning Taxation (i.e., the “Special Taxation Measures of Transactions between Corporations and Foreign-Related ...