MUJI Responds To Tax Evasion, Applies Bilateral APA Arrangements To Avoid Double Taxation.

Japan's lifestyle brand Muji Printing Co., Ltd., which is suspected of missing money in the country, is in a credit crisis. And the incident involves the dealings between Chinese companies and the Japanese head office.

In March 23rd, Muji China headquarters responded to the Beijing Commercial Daily reporter, "Tokyo, Japan, the IRS really pointed out that the omission declaration", but for the company thought itself "has always complied with the Japanese tax payment system", and "with the views of the IRS in Tokyo is different."

Japanese media recently reported that, after being investigated by the Tokyo internal revenue service, the plan was suspected to have lost 7 billion 500 million yen (about 485 million yuan) in Japan within three years of February 2017.

Tokyo's Internal Revenue Service believes that the pricing of the good plan and its subsidiary companies in terms of commodity and trademark usage is lower than the normal price, which is alleged to be tax avoidance in the form of "transfer pricing", that is, to reduce the amount of tax by reducing profits. To this end, the good plan needs to make up about 2 billion 100 million yen (136 million yuan) tax.

In response to this, the good plan responded to its Japanese official website that the tax related issues related to the pricing policy of intra company transactions, namely the transfer pricing tax system, responded well to the proposal of the transfer pricing system. Meanwhile, the company had been improving its system internally, complying with the laws and regulations of Japan and other countries, and implementing it at a reasonable transaction price. Dealings with Chinese subsidiaries also follow relevant laws and regulations, implement them on reasonable terms, and pay reasonable taxes in Japan and China. The two-tier APA arrangement requires the completion of the dispute settlement in the past and the payment of the tax. Therefore, despite the disagreement with Tokyo's IRS, the good plan still decides to pay the double taxation.

In an interview with the Beijing Commercial Daily reporter, the China headquarters of the good plan reiterated its position and said that the company had always complied with the Japanese tax payment system, which was different from that of Tokyo's IRS. "The good quality plan of the company and the Chinese subsidiary will pay reasonable taxes in Japan and China, but they are different from those of the IRS in Tokyo. In the future, in order to avoid double taxation, the company has submitted a bilateral APA arrangement to the tax authorities in Japan and China."

It is understood that "transfer pricing" is the pricing of products, labor services or technology between parent companies and subsidiaries, between subsidiaries and subsidiaries. Through this pricing method, enterprises can transfer profits to countries with less tax burden, so as to minimize the overall tax revenue. This approach is commonly used by multinational companies in international fund dispatching management. But to a certain extent, the tax source will be lost overseas, affecting the revenue of the national government. To this end, Japan and some western countries have formulated the "transfer pricing" tax system, which gives the tax authorities the right to impose sanctions on enterprises to transfer profits through related companies.

The good plan emphasizes that the reasonable tax payment in Japan and China, and the collection of taxes has been included in the final accounts of the February 2019 financial statements, which has no effect on future performance.

According to the latest earnings report, the company's main business income increased by 7.9% to 328 billion 200 million yen from the 3 quarter of March 1, 2019 to November 30, 2019, and sales increased 7.9% to 327 billion 500 million yen compared with the same period last year. The operating profit decreased 14.5% to 29 billion 800 million days compared with the same period last year, attributable to the parent company's net profit of 20 billion 500 million yen, a decrease of 32.4% over the same period last year. Among them, in Japan, the good plan revenue of 205 billion 700 million yen, an increase of 8.8% over the same period. The East Asian market, which includes mainland China, gained 90 billion 300 million yen, an increase of 4% over the same period, with a profit of 11 billion 500 million yen, down 13.3% from the same period last year.