Intercompany Loan

During the past few years, intercompany loans has become a hot topic during tax audit in Japan. The reason for this is because many companies do not have a loan agreement in place. This makes it easier for tax auditors to challenge intercompany loan related transactions. You should always consult with your tax accountant on the following items for intercompany loans.

1. What items needs to be included in the loan agreement
2. What is a reasonable interest rate?
3. Does the loan agreement need to be in Japanese?

The best way to deal with this is to have the accounting office review the loan agreement after the draft is completed by the legal office so that intercompany loan agreement is in place meeting all your requirements.