Japan: Updates to Japan’s Administrative Guidelines for transfer pricing

In brief

In 2022, Japan’s National Tax Agency (NTA) finalized amendments to the Commissioner’s Directive on the Operation of Transfer Pricing (Administrative Guidelines) regarding cost contribution arrangements (CCAs) and financial transactions. This article revisits the revisions, particularly as relevant for inbound taxpayers into Japan, in the context of potential future tax authority scrutiny.

It is relevant to note that the Administrative Guidelines do not have the force of law in Japan. However, Japanese tax authorities at all levels can be expected to act in accordance with the Administrative Guidelines in connection with transfer pricing matters.

The revisions are effective (and will be referred to by tax administrations in audits and advance pricing agreements) for years beginning on or after 1 July 2022.