Asia-Pacific Transfer Pricing Handbook

Chapter Seventeen

Applying Japanese Intangible Transfer Pricing Methods

The Japanese tax authorities reissued the Reference Case Studies in the Application of Transfer Pricing Taxation (hereafter Reference Case Studies) following the 2007 Japanese Supreme Court decisions. These Reference Case Studies specifically examine 26 “cases,” or examples. Six of these 26 cases specifically address intangible transfer pricing issues, which is our present focus. The Japanese tax authorities examine an array of intangible issues across the wide spectrum of intangible properties:

• Research and development (R&D) and marketing activities as being intangible property, Case 10
• Distribution channels and quality control know-how as being intangible property, Case 11
• Human resource business activities as being intangible property, Case 12
• Contributions to create, maintain, and develop intangible properties, Case 13
• Delineating creation-only intangibles, Case 14
• Determining when loans of employees create intangible property, Case 15

A taxpayer might be engaged in a situation in which its intangible activities go beyond the specific transfer pricing intangible examples. Such a taxpayer should seek to ascertain the commonalities that would apply to all of the Japanese intangible transfer pricing based on these six cases.

CASE 10: INTANGIBLES CREATED BY R&D AND MARKETING ACTIVITIES

A taxpayer can create intangible properties through its R&D and marketing activities. The schematic of business relations ...