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.
As a practical matter, each import requires an individual amendment declaration, which results in a significant workload. To reduce the effort of future amendment declarations, it would be advisable to apply for a comprehensive valuation (blanket declaration) with Customs.
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 amendment filings.
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
Track Record – Attorney for Customs Procedures (ACP) Services
We have supported import and export operations in Japan for over 200 clients across more than 40 countries.
Examples of International Logistics Partners We Have Worked With
We have a proven track record of working with a wide range of logistics providers. As the Attorney for Customs Procedures (ACP), we handle customs-related responsibilities while logistics companies manage transportation and warehousing operations.
- Brink's
- CEVA Logistics
- Crane Worldwide Logistics
- DHL Express
- DHL Global Forwarding
- Dimerco
- DSV Air & Sea
- FedEx Express
- FERCAM
- Herport
- ICL Logistics
- JAS Forwarding
- Kintetsu Express
- Kokusai Express
- Kuehne + Nagel
- Mitsubishi Logistics
- MOL Logistics
- Nankai Express
- Nippon Express
- PGS
- Röhlig
- Sanyo Logistics
- Scan Global Logistics
- SEKO Logistics
- Sumitomo Warehouse
- UPS
- UPS Supply Chain Solutions
- Yamato Transport
...and many other logistics providers in Japan and around the world.