1. The implementation status of BEPS Actions in Japan Masao YOSHIMURA Associate Professor Hitotsubashi University (Tokyo) 1 Asia-Pacific Regional Conference 2016 of IFA

2. Taxable Year Within 1 Year BEPS Action 13: TP documentation requirements Have been satisfied by the 2016 Tax Reform Act 1.Introduced CbCR and Master file requirements 2.Enhanced TP documentation rule 2 CBCR Master File A April 1, 2016 Asia-Pacific Regional Conference 2016 of IFA

3. BEPS Action 13: TP documentation requirements CbC Reporting – MNE groups with consolidated revenue of 100 billion YEN or more in the preceding fiscal year – About 1,000 corporations will be subject to reporting requirements Master file Local file – Contemporaneous documentation will be required by due date of return – Effective after April 1, 2017 3 Asia-Pacific Regional Conference 2016 of IFA

4. Action 13: how the businesses view and react Keidanren (Japan Business Federation) – Was concerned about keeping confidentiality under CbCR. – Strongly opposed to the suggestion to require each MNE subsidiary to file CbCR to local tax authorities. Leakage risk: Release of trade secret to rival firms from Joint Venture. – Submitted comments and participated in the public consultation on Action 13 (May 19, 2014) 4 Asia-Pacific Regional Conference 2016 of IFA

5. BEPS Action 15: Japan Already participates in the ad hoc Group. – Committed to mandatory binding arbitration Has modified bilateral treaties to include – (i) Clear statement to prevent tax avoidance in the titles and preambles and (ii) PPT (BEPS action 6) – Recent examples Germany (revised treaty, Dec 17, 2015) Chile (new treaty, Feb 22, 2016) 5 Asia-Pacific Regional Conference 2016 of IFA

6. How Japanese government views the BEPS Project Strongly supports the BEPS project – That can protect its tax base Tax avoidance incentive is present due to the high statutory tax rate in Japan – For example, NTA challenged PE status of Amazon in 2009. Increasing TP cases involving intangibles – The Chair of Committee on Fiscal Affairs is Japanese (Mr. Asakawa) 6 Asia-Pacific Regional Conference 2016 of IFA

7. How Japanese corporations view the BEPS Project At first, Keidanren opposed the BEPS project and submitted no comments. – BEPS actions would only increase their compliance costs – BEPS problems have nothing to do with Japanese MNEs because aggressive tax planning is not popular in Japan and the effective tax rate is high In the middle of BEPS project, Keidanren actively provided its opinion on discussion drafts. Now Keidanren appreciates BEPS package “to a certain degree.” – BEPS actions could help support the level playing field – Keidanren calls for consistent implementation 7 Asia-Pacific Regional Conference 2016 of IFA