Nagamine & Mishima Accounting Office

Accounting practice since 1989

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1st Edition Amazon and Japan Source Income

May 3, 2009

Amazon ordered to pay 14 billion yen in back taxes by Japanese tax authorities

According to the news media, Japanese tax authorities have levied 14 billion yen in back taxes on an affiliate of Amazon.com, headquartered in the US. The rationale behind this decision is that income earned by the US affiliate on sales of books and other merchandise to its Japanese customers is “Japan Source Income”. The Japanese tax authorities seem to have applied the “deemed PE principle” in making this decision, saying that the Japanese subsidiary is deemed to constitute a permanent establishment of the US affiliate and hence taxable in Japan. Amazon officials stated that the tax assessment is inappropriate and that they are currently in discussions with the authorities.
In a similar case on the deemed PE issue, the Japanese government has recently lost its case against Adobe Systems at the Supreme Court. It will be interesting to see how this issue will develop.

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People are Talking

  • “Our Group operates worldwide in the fashion and luxury goods sector and is active in the design, production and distribution of a wide range of products that includes prêt-a-porter, footwear and leather goods.

    We started our collaboration with Nagamine & Mishima Accounting Office since we decided to establish our subsidiary Aeffe Japan in November 2008. N&M supported us during the start up of this company in particular with the accounting, payroll, cash management and tax services and gave their total collaboration when Aeffe Japan built-up Its own financial department. We found a very high quality support and punctual answers to different one-shot questions that also helped us to understand, in an easy way, a really different way to operate.

    After the start up phase, we decided to confirm to N&M the tax and payroll services for Aeffe Japan and for Moschino Japan, our other Japanese subsidiary, and the daily relationship with them passed from the Italian HQ to the Japan subsidiaries in a very simple way.

    We are very satisfied to have chosen N&M.”

    Andrea Pagliarani, Group Financial Controller

    Aeffe Japan KK