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Sony ordered to pay 27.9 bil. yen in extra tax, to file objection
[July 03, 2006]

Sony ordered to pay 27.9 bil. yen in extra tax, to file objection

(Kyodo News International (Tokyo) (KRT) Via Thomson Dialog NewsEdge) Jul. 1--TOKYO -- Sony Corp. said Friday Japanese tax authorities have ordered it and group firm Sony Computer Entertainment Inc. to pay 27.9 billion yen in additional tax on 74.4 billion yen in income they failed to declare in Japan over six years to March 2005.

The two companies will pay the additional tax as the Tokyo Regional Taxation Bureau ordered and file an objection to the order, which resulted from their dispute with the bureau over the division of income between Japan and the United States under the transfer pricing tax system, it said.

The bureau has alleged that the firms saved tax payments in Japan by transferring part of their income subject to Japanese tax to their U.S. subsidiaries. But Sony claimed the companies have complied fully with Japanese and U.S. tax laws.

In a bid to win a tax refund in Japan or the United States, Sony and Sony Computer Entertainment will ask the two countries' tax authorities to hold talks on how best to avoid double taxation.

The transfer price tax system is intended to prevent manipulation of income between Japanese firms and their overseas units.

Mitsubishi Corp. and Mitsui & Co. said the same day that the same taxation bureau has ordered them to pay 2.2 billion yen and 2.5 billion yen, respectively, based on the system for failing to declare a combined 9.9 billion yen in income from their joint crude oil and liquefied natural gas business in Australia.

Takeda Pharmaceutical Co. said earlier this week it was suspected of failing to declare 122.3 billion yen in taxable income over six years to March 2005, also under the system.

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