Question:

What is  schedule 17(4)? Also, which company does our company need to list?

Answer:

Schedule 17(4) is a form necessary for some Japanese corporate tax returns. As part of the larger and ongoing transfer pricing taxation project and legislation, companies that fall under the Transfer Pricing Tax System in Japan must report on their transactional interactions with and relationships to companies outside of Japan.

we would like to explain a little bit more about the “relationship” category as any companies transacting with Japanese companies and with these kinds of relationships must be reported on schedule 17(4). Per Japanese tax law, there are 5 categories of intercompany relationships as described below.

1.Parent-subsidiary
One company’s direct or indirect ownership is more than 50% in one company
2.Sibling
One company/person’s direct or indirect ownership is more than 50% in two different companies
3.Effective management (substantial control)
Any of the 3 following conditions are met:
1) Management through having representative rights or through controlling more than 50%
of company representatives
2) Control of a major operation of the business
3) Management through  equity loans, guarantorship, etc
4.Connection through stocks and effective management
5.Connection through any combination of stocks and effective management

If your company has transactions with a directly or indirectly related overseas company, you may have to file a schedule 17(4).