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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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  • “From the early days of our company’s establishment, N & M have given us a fine service not just for monthly and annual accounting, payroll processing and tax filing, but for financial reporting to our head office. In addition, we greatly appreciate their detailed responses to the head office for any small query about reporting.

    While the reporting schedule of overseas head office is sometimes very tight because it is out of consideration of Japanese holidays and other local schedule. Despite such a hard schedule, N & M have provided the service in time and it is a great reassurance to us.

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    Mr. Hiroshi Ohtaka, Representative Director

    Bel Japon K.K.