The Japan unit of Facebook Inc failed to declare about 500 million yen ($4.7 million) in taxable income over the two years through 2017, sources close to the matter said Thursday.
The tech giant’s advertisement revenues earned in Japan were paid to its branch in Ireland, where the corporate tax rate is lower, in an attempt to reduce taxable income at the Japan unit, the sources said.
Facebook is believed to have corrected its tax declaration and paid the additional levies of over 100 million yen imposed by the Tokyo Regional Taxation Bureau, the sources said.
“We are cooperating with taxation authorities to comply with legal regulations in each country,” the Japan unit said.
Regulators are stepping up scrutiny over tax-saving measures taken by digital hegemons such as Facebook, Apple Inc, Amazon.com Inc and Google LLC, including transferring locally derived revenues to a unit in a country with lower tax rates.
In the Facebook case, the Ireland office paid the Japan unit of Facebook remuneration equal to total expenses plus several percent commission for supporting its ad business in Japan, the sources said.
The tax bureau apparently judged that the Japan unit was effectively running the ad business in the country and that the remuneration it receives should be linked to the revenues, the sources said.
The effective corporate tax rate in Japan is around 30 percent compared to 12.5 percent in Ireland.
Facebook, which opened its Japanese version of the social networking site in 2008, set up the local unit the following year. Its net profit for 2018 jumped to 219 million yen from 11 million yen in 2017.
Google’s unit in Japan was found to have failed to declare about 3.5 billion yen in taxable income for 2015 by shifting advertisement revenues to its branch in Singapore, where the tax rate is lower, other sources close to the matter said in January this year.
Failure to declare is a big no no in any country.
What will the penalty be?
What’s their excuse?
See, the trickle down effect works…
Tax evasion in Japan is a National Pastime…. it is bigger than Sumo, Soccer and Baseball put together. Why do think people cash is still used so much in Japan… so earnings won’t have to be reported. All of those foreign cars you see… they buy those under a company name as a tax write off. But when a foreign company messes up a few numbers… its big news. Bunch of hypocrites.
Almost every person that make above a certain amount commit tax evasion. When I became a director at my previous company in the US, you have the ability of receiving your entire bonuses in the form of company shares. So instead of actually getting a monetary value, you would receive a set amount of shares. What this does is allow you to avoid being taxed 48% on bonuses and placed you at a maximum of 15% on any gains. This is why many people above a certain amount make far more than others yet pay far less taxes than someone making $40,000 to $115,000 per year. This is not the same as an Employee stock purchase plan.
JJ@ What if there were no gains?
Most countries are starting to crack down on the tax scams operated by multinational digital companies. About time, it has taken them long enough to catch on to a change that has been happening for twenty years!
Most countries are starting to crack down on the tax scams operated by multinational digital companies.
Not only the “digital” ones.
For example : https://fortune.com/2016/03/11/apple-google-taxes-eu/
JJ@ What if there were no gains?
Then you don’t pay taxes at all.
Facebook is not Japanese company so Mark Zuckerberg won’t finish like Ghosn.
Is that all they made in Japan ?
Wait until Zuck the Crook launches his new cryptocurrency, then the tax office will have a real bonanza — if they can figure it out.
Vince BlackAug. 29 04:07 pm JST What’s their excuse?
“We’re Facebook and you’re not!”
Zuckerberg is an arrogant twit.
JJ JetplaneAug. 29 04:57 pm JST Almost every person that make above a certain amount commit tax evasion. When I became a director at my previous company in the US, you have the ability of receiving your entire bonuses in the form of company shares. So instead of actually getting a monetary value, you would receive a set amount of shares.
Stock has no value until it is sold – it’s an asset but not income. So you weren’t getting one over on the tax man. The problem, at least in the case of the U.S., is that unearned income is under taxed, but I digress.
I’m glad that they’re doing this in Japan. Because with what they’re doing in the US combined with this, It just shows that these companies can no longer really feel like that they can get away with tax dodging or money laundering anymore. Or even privacy breaches, which is what I think they were doing in the US actually.
@JeffHuffman
You are correct that stocks have no value until they are sold. That is why I said after selling them for their value, I would simply pay 15% of any gains as opposed to 48% of the money value of my bonus. It’s not getting over on the tax man. It’s working within the system and not paying your fair share of taxes.
The same way Jamie Dimon in his quote where he said “the rich can afford to pay more but the government has to spend more effectively.” He took home $29.5 million in bonuses but paid a little over $40,000 in taxes on those bonuses.
@Tom
No gains or losses help offset your actual income.