Commisions (Transactions outside Japan)

Commisions (Transactions outside Japan)

When making commission payments to non-Japanese entity or individuals overseas, you will need to ask the following questions regarding such commission.

1. Is the commission subject to withholding income tax?
2. Will it be subject to withholding for special reconstruction income tax?
3. Is the tax treaty applicable?

In case of intercompany commission, executed signed agreement must be in place. And to make sure of the following,

1. Actual transaction is made in accordance with the intercompany agreement
2. Proof of transaction
3. Logical explanation for the transaction amount

There are incidents when commission transaction expands to transfer pricing issues. Relevant transfer pricing documentation will be necessary in these circumstances.