Japan
UnitedStates
China
Hong Kong
Mongolia
Russia
Thailand
Vietnam
Laos
Cambodia
Myanmar
Indonesia
Philippines
Singapore
Malaysia
India
Bangladesh
Pakistan
Sri Lanka
Mexico
Brazil
Peru
Colombia
Chile
Argentina
DubaiAbuDhabi
Turkey
South Africa
Nigeria
Egypt
Morocco
KenyaDubaiAbuDhabi
8 Chapter Tax
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Individual provision of international tax
When dealing with international transactions, it is necessary to think about not only the tax system of the destination but also the international tax problem. Regarding international taxation, there are no specific laws and regulations, and the tax regulations prescribed in each of the business partners are applied in a complex manner.Below, we will verify international tax rules related to international business individually. -
Tax treaty in UAE
Tax treaty is an agreement (treaty) by a statement to be concluded between countries for the purpose of avoiding double taxation and prevention of tax evasion. In applying it, it will be applied over the domestic law prescribed by each country. In other words, it is a "tax" in the domestic law, in the case where there is a "tax-free" in the treaty, can be handled as a "tax-free".In addition, also various treaty of non-tax treaty, it may have determined special handling on the tax items in Japan for such partner countries of the residents.Between the Government of Japan and the UAE government, for the "Treaty between Japan and the United Arab Emirates for the prevention of avoidance and tax evasion of tax on the double taxation of income", with the date 2012, October 17 We have reached a basic agreement.Also signed in May 2013, it is awaiting entry into force (as of October 2014)..png)
The tax treaties that the UAE has concluded are basically prescribed based on the OECD model tax treaty. OECD Model Tax Treaty is a model that the Organization for Economic Cooperation and Development (OECD) recommends recruitment for member countries. It is used for newly concluding a tax treaty or revising an existing tax treaty between two countries, such as between member countries and non - member countries that agree with the policy of the model tax treaty.Regarding tax treaties concluded between UAE and Japan, the following items are mainly set.Taxation on business incomeWith regard to income generated by business activities, tax can be imposed in the country of business only when the corporation establishes a permanent establishment (PE) in the country where it is advancing.Reduction rate on investment incomeRegarding income from investment (dividends, interest and royalties), as shown in the table, the tax on investment destination is reduced..png)
Talks between tax authoritiesTaxpayers can request consultations between tax authorities (mutual consultation) between Japan and UAE if they do not comply with the tax treaty provision, and the taxation problem is solved on the basis of this mutual consultation agreement It will be.Also, between Japan and UAE tax authorities, you can exchange information on all national taxes and local taxes of both countries mutually.OtherIn addition to the above provisions, the following provisions are established.· Adjustment of transfer pricing taxation· Taxation on income related to silent partnership agreement· Prevention of abuse of treatiesIn addition, along with the globalization of Japanese companies, it is expected that transactions will be conducted between overseas subsidiaries other than Japan and subsidiaries located in UAE, not direct transactions with Japanese parent companies. In that case, caution is required because it will consider the contents of the tax treaty between the UAE and the country where the foreign subsidiary is located, not the tax treaty between Japan and UAE. -
Tax · Haven countermeasure tax system
When establishing a corporation in an area where the tax burden is remarkably low when entering overseas from Japan, it is possible to lower the effective tax rate of corporate tax for the entire corporate group by conducting commercial transactions through that corporation.Therefore, in order to prevent the establishment of a subsidiary without a business entity in a low tax rate country and to avoid using corporate taxation in Japan, the taxation system of foreign subsidiaries (so-called tax and haven countermeasure tax system The system is set up.When investing in Dubai and Abu Dhabi from Japan, if the company in that Dubai / Abu Dhabi is regarded as an indefinite paper company, there is a possibility of applying tax and haven countermeasures tax treatment in Japan. In Dubai and Abu Dhabi, corporate income tax is not taxed except for some industries. Therefore, even if subsidiaries are established in Dubai / Abu Dhabi and income is reserved, if income tax and haven countermeasures are applied, income generated in Dubai and Abu Dhabi is taxed according to the Japanese corporate tax rate I will. In that case, you will be responsible for a large tax burden and penalty as a result, so it is necessary to take measures in advance.Below, we will look at the provision of tax tax haven tax system in Japan.■ Application targetTax and haven countermeasure tax system in Japan is calculated by adding income of "specified foreign subsidiary companies etc. (those that do not satisfy exemption requirements of specified foreign subsidiaries)" together with income of domestic corporations and residents having certain interests It is a system to do. This means that the interests of overseas subsidiaries and affiliates deemed to be "specified foreign subsidiaries etc." are regarded as part of the profit of the parent company in Japan, and are taxed together in Japan.Tax-haven countermeasure taxation obligor is a family shareholder who directly or indirectly holds shares etc. of 10% or more of the total number or total of the issued shares or investments (excluding treasury shares etc.) of "specified foreign subsidiaries etc." It is a domestic corporation belonging to the group (Article 66-6 of the Tax Special Measures Law).[Definition of Specified Foreign Subsidiary Company]A specified foreign subsidiary or the like means a company that meets the following two conditions.· Foreign corporations (foreign affiliates) directly or indirectly holding shares or investments exceeding 50% of the total number of issued shares or total investment by Japanese resident, domestic corporation and special relationship nonresident,· Of foreign affiliated companies, tax burden ratio is 20% or less.png)
Tax / Haven Countermeasures The criteria for determining whether or not it falls under the category of "Specified Foreign Subsidiary, etc." that is subject to the tax system is whether or not the tax burden ratio is 20% or less, and the surface tax rate stipulated by the tax law It is judged by the burden ratio (effective tax rate) of corporate tax for each business year. The tax burden ratio is calculated as follows.
Therefore, even a single foreign affiliated company may fall into a specified foreign subsidiary, etc. in one fiscal year and may not fall under a specified foreign subsidiary etc in another business year.■ Exclusion requirementEven if the tax burden ratio in the above is less than 20%, it does not apply in cases where the company has an entity as an independent company and it is deemed to have sufficient rationality to do business in that country. Specifically, the following exclusion criteria for this "business entity" are stipulated.[Business Criteria]The main business shall not fall under the following· Holding of stocks and receivables (pure holding company)· Industrial property rights and other technical rights, production methods based on special techniques or equivalent or copyright· Lending of vessels and aircraft (leasing industry)[Entity Criteria]Having the office, shop, factory and other fixed facilities necessary for the main business in the country where the head office of the subsidiary is located[Control and Control Standards]Make sure to manage, control and operate its business in the country where the subsidiary's head office is located[Unrelated party standards or the country country standard *]Non-relevant standardsIf you run a wholesale business, banking business, trust business, securities business, insurance business, water transport business or air transportation business, more than 50% of transactions are done with non-related persons※ As a general rule, general shareholders' meetings and board meetings are held in the country of residence, the duties of executives are executed, accounting books must be prepared and kept, but it is not necessarily denied with only formal acts Not exclusivelyCountry standard of locationIn the case of industries other than the above (manufacturing industry, etc.), the projects are mainly conducted in the country or region where the head office or the main office is locatedWith only the exclusion criteria listed above, despite the existence of business entities, overseas holding companies are subject to tax and haven countermeasures tax due to the high percentage of affiliate transactions and high dividend income Because there were many cases that occurred, the following provisions were also added.· Of the main businesses that are not excluded from the business standards, exemption for exemption is available for the shares etc. of the controlled company owned by the controlling company in terms of holding judgment on holding shares and receivables· Due to the judgment of unrelated party standards, transactions of purchase and sales conducted by the controlling company with wholesale business as its main business with the controlled company do not fall under the transaction between related personsThe controlling company is a specified foreign subsidiary or the like that meets the following requirements (Article 39 of the Tax Special Measures Law Enforcement Order 39 ⑤ ⑥).· It is a specified foreign subsidiary, etc. pertaining to a domestic corporation, etc., and all of the issued shares etc. are directly or indirectly owned by the domestic corporation etc· Having two or more controlled companies and conducting certain tasks to oversee the business of the managed company· Having fixed facilities and employees related to supervising operations in the country of residence (excluding directors of the specified foreign subsidiary etc, who are engaged in general supervision exclusively). The supervisory work refers to a work that contributes to the improvement of profitability through comprehensive management or adjustment of the business activities of the managed company by the controlling company (Article 66-6)Foreign corporations that satisfy the following requirements fall under the supervising company (Article 39-17 (2), (6) of the Act)· A person who directly owns 25% or more of issued shares, etc. and who directly holds 25% or more of the voting rights (related persons in non-affiliated persons standards and limited to foreign corporations) , Excluding related persons related to family related persons such as domestic corporations)· Having a worker recognized as necessary for doing business in the country of residence· Foreign corporations controlled by subsidiaries, sub-subsidiary companies, domestic corporations that correspond to sub-subsidiaries, ie, domestic corporations related to supervising companies and controlling companiesAs a result of this amendment, a foreign overseas holding company is excluded from the combined taxation, making it easier for global expansion using this.In order to establish a headquarters that meets the above requirements in Dubai and Abu Dhabi, we need to establish a company within an economic zone called a free zone. Within the free zone 100% foreign capital can be established, whereas outside the free zone the upper limit of foreign capital is 49%, "A foreign foreign subsidiary etc related to a domestic corporation etc, It is impossible to establish the management company outside the free zone because it can not satisfy the requirement of the controlling company that "all of them are directly or indirectly owned".■ Calculation of total incomeTax / Haven Countermeasure Tax calculation method is calculated by combining income retained in a subsidiary located in Tax Haven Country with income in Japan and applying Japanese income tax to such combined income..png)
■ Exceptions to asset incomeTax / Haven countermeasure If a corporation subject to the tax system falls under the above-mentioned four application exclusion requirements, there is no application of combined taxation. However, due to the revision of the tax system in FY 2010, even if it falls under the exemption requirements, for corporations with certain asset income (specified income), they will be subject to the combined taxation on their asset income there is.[Amount of Specific Income]Specific income means seven types of income: dividend income, interest income of bonds, gains / losses on redemption of bonds, transfer income of bonds, transfer income of stocks etc, royalties such as patent rights, ship or aircraft lease income. If there is a fact that falls under any of the following amounts for these income amounts, they will not be added.· Specific income amount is less than 10 million yen per year· Of the gross income amount, the proportion of the amount of the specified income is 5% or lessAs income tax does not exist in Dubai / Abu Dhabi, it can be said that it is particularly easy to point out from the tax authorities. Low tax rate For overseas subsidiaries that exist in the country, caution is necessary when the ratio of specific income is large.Establishment of corporation by individual shareholderWhen individuals residing in Japan establish a company in Dubai / Abu Dhabi, it is necessary to pay attention to the application of the tax and haven countermeasure tax system as in the case of corporations. In other words, if a shareholder of a Japanese corporation establishes a separate company in Dubai / Abu Dhabi, we will not be subject to the tax and haven countermeasures tax corporation as a corporation, but will be subject to the tax and anti-tax countermeasures tax treatment under the income tax law I will. The income targeted for the combined taxation is classified according to the calculation of income tax as "miscellaneous income". -
Foreign subsidiary dividend income non-inclusion system
When a Japanese corporation receives a dividend from an overseas subsidiary, there is a system to make a certain amount of dividends received in Japan non-profitable in order to avoid international double taxation with foreign countries.Since this system is based on the idea that dividends are not subject to taxation in Japan in the first place, even if withholding tax is paid overseas, there is no application of foreign tax credit for the withholding tax and it is not expensive in tax reporting Hmm.If a Japanese parent company receives a dividend from an overseas subsidiary that satisfies the following requirements, the amount after deducting the amount equivalent to 5% of the dividend will be tax-exempt and will be tax exempt.By applying this system, the cost of substantial dividends is the sum of the local taxation (withholding tax) and the equivalent of 5% of the dividend as the cost..png)
This foreign subsidiary non-dividend system for distributing dividends is also a useful system in that it has the merit of mitigating the obstacles to fund return to Japan and increasing the freedom of building an international taxation strategy, but the system of overseas subsidiaries If the withholding tax rate is high, or if the corporate tax rate is high in the first place, the tax burden may increase due to dividend remittance.For that reason, we do not refund profits to Japan, it is advantageous to reserve income on the local subsidiary side to reinvest it, so it is necessary to consider it. -
Transfer price taxation
When a company deals with an overseas affiliate, by increasing or decreasing the setting of the transaction price (transfer price), it becomes possible to transfer the profit of the company in one country to the company in the other country I will.Regarding transaction pricing, it is a major principle under free trade to be entrusted to the free will of the enterprise, but by adjusting the transaction price within the corporate group, you can freely control the tax burden of each country It will be like..png)
In the case of Figure 1-1, a sales company (parent company) in a high tax rate country purchases a product (cost 100 yen) from a manufacturing company (affiliated company) in a low tax rate country for 150 yen, and sells it to customers at 300 yen If you do, the profit of the selling company (parent company) and the manufacturing company (affiliated company) is 150 yen and 50 yen, respectively, and a lot of profits are taxed in the high tax country.In the case of Figure 1-2, a sales company (parent company) in a high tax rate country purchases a product (cost 100 yen) from a manufacturing company (affiliated company) in a low tax rate country for 250 yen and sells it to customers at 300 yen If you do, the profit of the selling company (parent company) and the manufacturing company (affiliated company) is 50 yen and 150 yen respectively, and many profits are taxed in the low tax rate country.In the case of arbitrarily determining the transaction price between affiliated companies with the aim of arbitrarily transferring the profit to the low tax rate country, the transaction price (transfer price) between the group companies is taxed as if it was done at the independent company price Transfer pricing taxation is the system that requires income to be calculated.For transfer pricing taxation, it is necessary to examine mutual transactions. In terms of transactions between Japan and Dubai and Abu Dhabi, there is no transfer pricing taxation on the Dubai-Abu Dhabi side, so it is necessary to pay attention to the transfer pricing taxation on transactions at the Japanese side.Applicable corporationThe corporation to which the transfer pricing taxation is applied is a foreign corporation having a special relationship with the corporation, and the judgment of special relations is based on the following two.[Capital ties]A relationship in which one corporation directly or indirectly holds the issued shares of the other corporation, the total number of contributions, the number of 50% or more of the total amount, the shares of the amount, the investment (shares, etc.)[Substantial Relationship]A relationship in which one corporation can substantially decide the whole or a part of the policy of the business of the other corporation depending on circumstances such as the fact that the officer of one corporation occupies the majority of officers of the other corporationTransaction pricing applicable to transfer pricing taxationTransactions subject to transfer pricing taxation in Japan Transactions subject to transfer tax treatment are trading of assets, providing services and other transactions (foreign affiliated transactions) that a corporation makes with foreign affiliated persons, capital transactions (investment, dividends, etc.) Except for all transactions, it is eligible.For trading transactions related to intangible assets such as royalty fee and royalty payment, it is practically difficult to calculate the inter-company price, and most of the amendment from the tax authorities for both intangible asset transactions It is said that it is a highly risky transaction.■ How to calculate intercompany priceThe method of calculating interindependent enterprise price is decided by considering transaction details / form from several methods. Generally, the following calculation method is used.[Independent price comparison method]Comparable Uncontrolled PriceMethod (CUP) means the amount of consideration for transactions made between non-related parties (third party transaction) under almost the same conditions as the foreign affiliated transactions, It is a way to make that independent company price. In the case where the transactions to be compared are sales of goods etc., it may be difficult to compare because the transaction conditions change due to the business strategy and market conditions etc. As a result, this method is often used for interest rate transactions with little fluctuations in terms of transactions and for commodity transactions with quotes, and it is not widely adopted for ordinary goods transactions.[Resale Price Price Standard Law]The Resale Price Method (RP method) is a price obtained by subtracting the amount of profits that would normally be obtained from the transaction from the resale price to a third party as the inter-independent price How to do. This method is often used when overseas related transactions are import transactions (especially in the case of import transactions, since data to be compared is published in many cases)..png)
[Cost basis method]The cost method (CP method: Cost Plus Method) is calculated by adding to the amount of costs incurred by targeted foreign affiliated transactions, adding the amount of profit that the other corporation would normally obtain from the transaction It is a method to make the amount made as independent company price. The normal profit in this case is calculated by multiplying the cost of the product by the normal profit margin (gross profit margin ÷ cost). In the case that costs are included in manufacturing costs, we will calculate the cost of manufacturing related parts based on the price in the case of transactions between third parties. For example, if you purchase raw materials from related persons, you will calculate the manufacturing cost by replacing the purchase price of that raw material with the price you purchased from a third party.This method is adopted for raw material processing / export, service provision transaction, etc..png)
[Profit division method]The Profit Split Method (PS method) is a method of allocating the total amount of operating income realized by overseas related transactions according to the extent contributing to its realization, and there are the following methods.Contribution profit division methodHow to allocate the total amount of operating income according to the amount of expenses spent, the value of fixed assets used, and other contribution to operating profitComparative profit division methodMethod using a profit split ratio in non-related party transactions carried out under similar circumstances as overseas related transactions[Residual profit division method]The Residual Profit Split Method (RPS: Residual Profit Split Method) is used when a corporation related to transactions and overseas related persons have significant intangible assets. In transactions that do not take into consideration the significant intangible assets of the total profits, we allocate amounts equivalent to the profits that would normally be obtained, and the value of the significant intangible assets each of which has the remaining amounts (intangible assets The cost of the development etc., etc.) is allocated according to.[Transaction unit operating profit method]The transaction unit operating profit method (TNMM: Transaction Net Margin Method) is a method based on gross profit margin, operating profit margin, markup rate, etc. realized by transactions with third parties, It is a method of calculating the transaction amount compared with each profit ratio.In any of the above calculation methods, the selection of the transaction to be compared becomes important. There are two methods of selection based on the transaction price and profit ratio related to the transaction, either between the corporation and non-related persons, or between non-related persons.As long as there is a targeted transaction within the company, it is common to refer to the above, but in practice there are many cases where there are no targeted transactions within the company, so non-related persons It is often based on external transactions between.Mutual consultation systemIndependent intercompany prices are adopted as a basic concept of transfer pricing taxation in many countries and there is no big difference in the basic way of thinking. However, even if there is a difference in interpretation depending on the country, even if another surcharge collects additional taxation amount in one country, not all taxes will be refunded in full in the other country due to request for correction.In such a case, mutual consultation will be a procedure to apply for authorized authorities and then to adjust the double taxation.■ Prior confirmation systemWhen the transfer pricing tax system is applied and income revision is done, the impact on enterprises is small, so it can be said that it is a highly risky tax system. Therefore, in Japan, there is a pre-confirmation system (APA: Advance Pricing Agreement) in which taxpayers and tax authorities agree on the method of calculating transfer pricing etc. in advance, and it is possible to avoid the risk of transfer pricing taxation by this motion , It will take a considerable period of time to confirm the confirmation. -
Other international taxes
In Dubai and Abu Dhabi there is limited tax on income and there is little risk of taxation on international transactions. Therefore, it is necessary to pay attention to international tax provisions mainly on the partner side. However, as investment from foreign capital goes forward in Dubai and Abu Dhabi, taxation may occur, so we need to pay close attention to future trends in tax reform.
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