From the perspective of transfer pricing taxation, the price of a transaction with a foreign affiliate needs to keep an arm's length price (the price that would be established between unrelated parties). To ensure an appropriate profit margin, the global companies often make a retroactive adjustment (transfer pricing adjustment) between affiliates.
When the importer makes a payment for this retroactive transfer pricing adjustment, customs may point out the under-declaration of the already declared import value for a certain period in the past. As if an upward revision of the declared import value is necessary.
If the importer makes a correction of the customs value after being pointed out by customs in a customs audit, the importer should burden some amount of penalty. On the other hand, if the importer voluntarily makes a correction of the customs value in advance, the importer can minimize such penalty.
Have you made transfer pricing adjustments in the past? Or are you planning to make such adjustments in the future? We would be happy to assist you, if you would like to receive advice and practical support on how to handle such adjustments for customs purposes.
Our Services for transfer pricing adjustment
- First, we analyze the facts/risk assessment related to the payment of transfer pricing adjustments and confirm the necessity of filing an amended customs declaration.
- If we decide to file an amended return, we will consult with customs to confirm the most optimal way to proceed with the procedure.
- In addition, if transfer pricing adjustments will continue to occur in the future, we will apply for a blanket declaration and incorporate the amount of transfer pricing adjustments into the import declarations that are made on a regular basis, thereby eliminating the need for future amended declarations.
Cases of undeclared price adjustment payments
According to the Ministry of Finance's publication (2019), please refer to the following as an example of a large amount of penalty that occurred due to the pricing adjustment.
Case.4: Failure to declare the price adjustment paid by the importer
Importer D imported bulk pharmaceuticals from an exporter in Country X. Based on the agreement with the exporter, D retrospectively reviewed the prices of goods imported in the past and paid the increased amount as a price adjustment fee. Originally, this price adjustment should have been included in the import declaration value (customs value), but D had not filed an amended return.
As a result, the undeclared taxable value was 10,422,250,000 yen, and the penalty (additional tax due) was 950,021,000 yen.
FTA/EPA, Customs and International Trade Advisory Services
Our Customers - Japan IOR / Attorney for Customs Procedures (ACP) Service
All our clients have successfully become Japan Importer of Record (IOR) and imported goods into Japan under our guidance.
Logistics Companies with Collaboration Experience
Here is a list of our partner logistics and forwarding companies with whom we have had successful collaborations. Please note that this list is not exhaustive, as we are open to working with any logistics or forwarding companies. As Attorneys for Customs Procedures (ACP), we represent non-resident clients (IOR) and coordinate with these logistics companies, who manage the transportation of goods to and from Japan.
