Thursday, October 10, 2013

Remittance from Japan branch and subsidiary company to home country

In general, a remittance made by a branch of a foreign corporation to its head office cannot be treated as expenses of the payer branch. But, a remittance made by subsidiary company to its parent company arise from business-to-business transactions, such as distributions of profits and loans (or repayments of loans) may be regarded as payments of costs/expenses of the said subsidiary and, therefore, certain of these costs/expenses are deductible when calculating the taxable income of the payer subsidiary company. However, certain income of the parent company, such as payments of interest, dividends and usage fees, may be subject to the Japan withholding tax at the source at the time of payment.

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