The Japanese National Tax Administration is seeking comments in line with their efforts to conform with the updated OECD guidelines. The most significant changes include the abolishment of the priority of methods and the adoption of the three profit based methods into law – comparable profit split, contribution profit split, and residual profit split. A practitioner, who spoke on condition of anonymity commented:
“The revisions relieve both the taxpayer and the Japanese tax authority of the need to show that none of the three basic methods—comparable uncontrolled price, resale price, and profit split—is appropriate when they elect to use another method. The change should give “psychological relief” even if it does not lessen documentation burdens, the practitioner added.”
A separate aspect of the revisions includes revised guidelines on the submission of pricing data. Under the new standards, the NTA can extend the deadline for the submission of data where the tax payer has legitimate business reasons for the additional needed time. The NTA will resort to the use of its other alternative methods, including the use of secret comparables when it appears that the requested information will not be provided.