- Updated
- October 2025
- Sections
- 15
- Questions
- 44
Key Facts
Core Framework
Para 1 Article 66-4 of Act on Special Measures concerning Taxation (“ASMT”)
1-2(3) of Commissioner’s Directive on the Operation of Transfer Pricing (“CDOTP”).
The Commissioner’s Directive on the Operation of Transfer Pricing (“CDOTP”) prescribes that the OECD Transfer Pricing Guidelines shall be referred to in the course of examination or APA.
66-4(3)-3 of Commissioner’s Directive on Interpretation of ASMT
The Commissioner’s Directive on Interpretation of ASMT is basically consistent with the TPG.
66-4(3)-3 of Commissioner’s Directive on Interpretation of ASMT
The Commissioner’s Directive on Interpretation of ASMT prescribes that market conditions shall be taken into consideration in performing the comparability analysis.
Para. 17, 18 Article 66-4 of ASMT
If the Local File is not presented or submitted by a certain appointed date, the tax authorities can inspect persons engaged in similar businesses by asking questions. Information obtained through such inspections may be used to determine the arm's length price.
66-4(3)-4 of Commissioner’s Directive on Interpretation of ASMT
The Commissioner’s Directive on Interpretation of ASMT provides that no correction shall be made if the arm's length price of the transaction to be verified is within the range of several comparable transactions.
Documentation
Master file: Para. 1 Article 66-4-5 of ASMT; Local file: Para. 6 Article 66-4 of ASMT; CbCR: Para. 1 Article 66-4-4 of ASMT
Master file: Para. 1 Article 66-4-5 of ASMT; Local file: Para. 6 Article 66-4 of ASMT; CbCR: Para. 1 Article 66-4-4 of ASMT
Master file: Para. 1 Article 66-4-5 of ASMT; Local file: Para. 6 Article 66-4 of ASMT; CbCR: Para. 1 Article 66-4-4 of ASMT
Master file: Para. 3 Article 66-4-5 of ASMT; CbCR: Para. 7 Article 66-4-4 of ASMT; Local file: Para. 12, 14 Article 66-4 of ASMT
Master file/CbCR - Fine of up to 300,000 yen if corporations fail to submit a Master file/CbC Report to the District Director by the deadline without good reason. Local file - For ensuring the duty of transfer pricing documentation, if the local file is not presented or submitted by a certain appointed date, the tax authorities can impose tax by estimation.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Most appropriate method
Dispute Resolution
Japan’s MAP Profile
Japan has in place a bilateral APA programme that enables taxpayers to request rollbacks. Japan publishes clear rules, guidelines and procedures on access to and use of the MAPs. All the relevant information is available on the published Japan’s MAP profile as well as in the elements B.8 – B.10 of Japan’s Peer review report (Stage 2). In addition to the mechanisms above, judicial process is also permitted for resolving the transfer pricing disputes.
Japan’s MAP Profile
Japan has in place a bilateral APA programme that enables taxpayers to request rollbacks. Japan publishes clear rules, guidelines and procedures on access to and use of the MAPs. All the relevant information is available on the published Japan’s MAP profile as well as in the elements B.8 – B.10 of Japan’s Peer review report (Stage 2). In addition to the mechanisms above, judicial process is also permitted for resolving the transfer pricing disputes.
Simplifications
Frequently Asked Questions on the Simplified and Streamlined Approach (June 2025)
Currently, there are no guidelines regarding the simplified and streamlined approach for baseline marketing and distribution activities. However, we published a brief guidance on practical issues on 30 June, 2025.
Special Topics
66-4 (8)-2 and 7 of Commissioner’s Directive on Interpretation of ASMT; Chapter 3-12 to 3-14, CDOTP
The Commissioner’s Directive on Interpretation of ASMT and the CDOTP provide guidance on transactions involving intangibles addressing issues such as activities that contribute to the value of the intangibles, ownership of intangible property and licensing transactions.
Para. 8 to 10 Article 66-4 of ASMT.; 66-4 (9)-1 to 4 of Commissioner’s Directive on Interpretation of ASMT; Chapter 3-6 and 4-15, CDOTP
Basically, the approach as a whole is designed based on the guidance included in the TPG.
66-4 (8)-6 of Commissioner’s Directive on Interpretation of ASMT; Chapter 3-9 to 3-11, CDOTP
The Commissioner’s Directive on Interpretation of ASMT and the CDOTP provide guidance on IGS addressing issues such as the relationships between services and intangibles, benefit tests and the TPMs to be applied.
66-4(8)-5 of Commissioner’s Directive on Interpretation of ASMT; Chapter 3-7 to 3-8, CDOTP
The Commissioner’s Directive on Interpretation of ASMT and the CDOTP provide guidance on intra-group loans, which is basically consistent with the TPG.
Full OECD Questionnaire
Legal ReferencePara 1 Article 66-4 of Act on Special Measures concerning Taxation (“ASMT”)
Legal Reference1-2(3) of Commissioner’s Directive on the Operation of Transfer Pricing (“CDOTP”).
The Commissioner’s Directive on the Operation of Transfer Pricing (“CDOTP”) prescribes that the OECD Transfer Pricing Guidelines shall be referred to in the course of examination or APA.
Legal ReferencePara 1 Article 66-4 of ASMT; Para 1 to 4 Article 39-12 of Order for Enforcement of ASMT
“A foreign-related party” is defined as a foreign corporation having an “associated relationship” with another corporation. A corporation is treated as “associated” with the other if either of them holds 50 percent or more of the total number of issued stocks or the amount of investment of the other corporation. The Order for Enforcement of ASMT prescribes the other cases to be treated as having an “associated relationship”.
Legal ReferencePara. 2 Article 66-4 of ASMT; Para. 6 to 8 Article 39-12 of Order for Enforcement of ASMT; Chapter 4-1, CDOTP; 66-4(2)-1 of Commissioner’s Directive on Interpretation of ASMT; 66-4(3)-3 of Commissioner’s Directive on Interpretation of ASMT
In respect of “Other”, the Order for Enforcement of ASMT provides for the valuation technique based on projected cash flows. The Commissioner’s Directive on Interpretation of ASMT and the CDOTP provide guidance on the selection of the most appropriate method, which is basically consistent with the TPG.
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
Legal ReferencePara. 2 Article 66-4 of ASMT
From the above methods, the most appropriate method should be selected, considering the facts and circumstances of each controlled transaction, including functions performed and risks assumed.
- Hierarchy of methods (not selected)
- Most appropriate method (selected)
Legal ReferencePara 2 Article 66-4 of ASMT
For controlled transactions involving commodities, the guidance contained in paragraphs 2.18-2.22 of the TPG is followed.
Legal Reference66-4(3)-3 of Commissioner’s Directive on Interpretation of ASMT
The Commissioner’s Directive on Interpretation of ASMT is basically consistent with the TPG.
Legal Reference66-4(3)-3 of Commissioner’s Directive on Interpretation of ASMT
The Commissioner’s Directive on Interpretation of ASMT prescribes that market conditions shall be taken into consideration in performing the comparability analysis.
Legal ReferencePara. 17, 18 Article 66-4 of ASMT
If the Local File is not presented or submitted by a certain appointed date, the tax authorities can inspect persons engaged in similar businesses by asking questions. Information obtained through such inspections may be used to determine the arm's length price.
Legal Reference66-4(3)-4 of Commissioner’s Directive on Interpretation of ASMT
The Commissioner’s Directive on Interpretation of ASMT provides that no correction shall be made if the arm's length price of the transaction to be verified is within the range of several comparable transactions.
Legal ReferencePara. 2 Article 66-4 of ASMT.; Para. 6 to 8 Article 39-12 of Order for Enforcement of ASMT; Chapter 4-4, CDOTP
The CDOTP prescribes differences such as trade terms and settlement terms as a case where comparability adjustment is required.
Legal Reference66-4 (8)-2 and 7 of Commissioner’s Directive on Interpretation of ASMT; Chapter 3-12 to 3-14, CDOTP
The Commissioner’s Directive on Interpretation of ASMT and the CDOTP provide guidance on transactions involving intangibles addressing issues such as activities that contribute to the value of the intangibles, ownership of intangible property and licensing transactions.
Legal ReferencePara. 8 to 10 Article 66-4 of ASMT.; 66-4 (9)-1 to 4 of Commissioner’s Directive on Interpretation of ASMT; Chapter 3-6 and 4-15, CDOTP
Basically, the approach as a whole is designed based on the guidance included in the TPG.
Legal ReferencePara. 8 to 10 Article 66-4 of ASMT.; 66-4 (9)-1 to 4 of Commissioner’s Directive on Interpretation of ASMT; Para. 14 to 18 Article 39-12 of Order for Enforcement of ASMT
Briefly, the HTVI approach would be applied to the transactions of specific intangibles, and the main conditions are summarized as follows (*). - The intangibles are unique and valuable (therefore, there would be no reliable comparables). - The intangibles are considered to be priced based on the projection of future income (or cash flows) expected to be derived from the transferred intangibles. - The assumptions used in pricing the intangibles (including the above projection of future income or cash flows) are considered highly uncertain. (*) There are also some exemptions for the transactions to which the HTVI approach would not be applied. Basically, the approach as a whole is designed based on the guidance included in the OECD Transfer Pricing Guidelines.
In general, the transactions falling within the scope of the HTVI approach would be subject to the transfer pricing analysis same as for other transactions for transfer pricing purpose.
Legal ReferencePara. 27 Article 66-4 of ASMT.
In general, for the corporate income tax, the statute of limitations for transfer pricing purpose is 6 years (7 years for the business years commencing on or after 1st April 2020). This is not relevant whether the transactions are falling within the scope of the HTVI approach.
APA procedures in Japan are prescribed in the Administrative Guidelines (CDOTP and Commissioner’s Directive on the Mutual Agreement Procedure). The Administrative Guidelines allow a taxpayer to request a bilateral or a multilateral APA for a transaction falling within the scope of HTVI approach as well as other types of transactions.
Legal ReferenceChapter 3-6 and 4-15, CDOTP
Domestic legislation prevents the use of hindsight for making adjustments in the HTVI approach, and the Administrative Guideline also includes key points in applying the HTVI approach in accordance with such provision.
In Japan, such approach as described in this question is not necessary because there is de facto no time limit for implementing MAP agreements entailing downward adjustments to be made by Japan under Japan’s tax law.
There are no specific provisions to the HTVI approach regarding this question.
Legal Reference66-4 (8)-6 of Commissioner’s Directive on Interpretation of ASMT; Chapter 3-9 to 3-11, CDOTP
The Commissioner’s Directive on Interpretation of ASMT and the CDOTP provide guidance on IGS addressing issues such as the relationships between services and intangibles, benefit tests and the TPMs to be applied.
The CDOTP provides guidance on the simplified approach for low value-adding intra-group services, which is basically consistent with the TPG.
Legal Reference66-4(8)-5 of Commissioner’s Directive on Interpretation of ASMT; Chapter 3-7 to 3-8, CDOTP
The Commissioner’s Directive on Interpretation of ASMT and the CDOTP provide guidance on intra-group loans, which is basically consistent with the TPG.
Legal ReferenceArticles 66-5 to 66-5-3 of ASMT
Articles 66-5 to 66-5-3 of ASMT provide rules to limit interest deductions that are in line with BEPS Action 4.
Legal ReferenceChapter 3-15 to 3-19, CDOTP
The CDOTP provides guidance on CCA addressing issues such as the definition, treatment of CCA including the treatment of pre-existing intangibles and documentation.
Legal ReferenceMaster file: Para. 1 Article 66-4-5 of ASMT; Local file: Para. 6 Article 66-4 of ASMT; CbCR: Para. 1 Article 66-4-4 of ASMT
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
- Specific transfer pricing returns (separate or annexed to the tax return) (not selected)
Legal ReferenceMaster file: Para. 1 Article 66-4-5 of ASMT, Article 22-10-5 of Ordinance for Enforcement of ASMT; Local file: Para. 6, 12 to 15 Article 66-4 of ASMT, Para 6 to 8, 11, 12 Article 22-10 of Ordinance for Enforcement of ASMT; CbCR: Para. 1, 5 Article 66-4-4 of ASMT, Article 22-10-4 of Ordinance for Enforcement of ASMT
Master file (Submitted in Japanese or English): To be submitted to the competent District Director within one year of the day following the one when the Ultimate Parent Entity's fiscal year ends. Local file (no language specific requirement): Deadline for preparation: To be prepared by final return filing due to date, and to be maintained for seven years. Deadline for submission: To be presented or submitted within a certain appointed period if requested during the course of a tax examination. CbCR (in English): Deadline for submission: To be submitted to the competent District Director within one year of the day following the one when the Ultimate Parent Entity's fiscal year ends. Deadline for notification: To be notified to the competent District Director no later than the last day of the Ultimate Parent Entity’s fiscal year.
Legal ReferenceMaster file: Para. 3 Article 66-4-5 of ASMT; CbCR: Para. 7 Article 66-4-4 of ASMT; Local file: Para. 12, 14 Article 66-4 of ASMT
Master file/CbCR - Fine of up to 300,000 yen if corporations fail to submit a Master file/CbC Report to the District Director by the deadline without good reason. Local file - For ensuring the duty of transfer pricing documentation, if the local file is not presented or submitted by a certain appointed date, the tax authorities can impose tax by estimation.
Legal ReferenceMaster file: Para. 1 Article 66-4-5 of ASMT, Para. 4 Article 66-4-4 of ASMT; Local file: Para. 7 Article 66-4 of ASMT; CbCR: Para. 1 Article 66-4-4 of ASMT, Para. 4 Article 66-4-4 of ASMT
Master file/CbCR - MNE Groups with total consolidated revenue for the Ultimate Parent Entity's preceding fiscal year of less than 100 billion yen. Local file - Corporations are exempted from the duty of contemporaneous documentation for Controlled Transactions with one foreign-related party during the current business year, if: (1) the amount of transactions (total of receipts and payments) with the foreign-related party during the previous business year (the current business year if there was not the previous one) was less than five billion yen, and (2) the amount of transactions of intangibles (total of receipts and payments) with the foreign-related party during the previous business year (the current business year if there was not the previous one) was less than 300 million yen.
Legal ReferenceJapan’s MAP Profile
Japan has in place a bilateral APA programme that enables taxpayers to request rollbacks. Japan publishes clear rules, guidelines and procedures on access to and use of the MAPs. All the relevant information is available on the published Japan’s MAP profile as well as in the elements B.8 – B.10 of Japan’s Peer review report (Stage 2). In addition to the mechanisms above, judicial process is also permitted for resolving the transfer pricing disputes.
- Rulings (not selected)
- Enhanced engagement or cooperative compliance programmes (not selected)
- Advance Pricing Agreements (APA) (selected)
- International Compliance Assurance Programme (ICAP) (selected)
- Mutual Agreement Procedures (selected)
- Other (selected)
Legal ReferenceFrequently Asked Questions on the Simplified and Streamlined Approach (June 2025)
Currently, there are no guidelines regarding the simplified and streamlined approach for baseline marketing and distribution activities. However, we published a brief guidance on practical issues on 30 June, 2025.
Legal ReferenceChapter 3-21, CDOTP
The CDOTP provides for guidance on year-end adjustments requiring reasonable grounds to be treated as acceptable under the ALP.
In 60 tax treaties as of 1 June 2025 (Article 7 as it read before 2010). In 14 tax treaties as of 1 June 2025 (Article 7 as it reads after 2010).
Japan’s domestic law is consistent with the AOA. Where tax treaties contain Article 7 as it read before 2010, the domestic law is subject to the provisions of those treaties.
Legal ReferenceArticle 142 of Corporate Tax Act; Articles 66-4-3 of ASMT; 66-4-3(1)-1 to (10)-2 of Commissioner’s Directive on Interpretation of ASMT; Commissioner’s Directive on the Operation of AOA
Corporation Tax Act and the ASMT provides definition of permanent establishments of non-resident entities and rules related to transfer pricing that are in line with AOA in the 2010 Report. In addition, the Commissioner’s Directive on Interpretation of ASMT and Commissioner’s Directive on the Operation of AOA provide guidance for the attribution of profits to permanent establishments, which is basically consistent with the AOA in the 2010 Report.
- Yes, they follow the AOA as described in the 2008 Report (not selected)
- Yes, they follow the AOA as described in the 2010 Report (selected)
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