With global tax competition, each nation’s tax authorities are actively strengthening the audit and enforcement of transfer pricing. According to each nation’s regulation on transfer pricing system, trading prices between internationally related enterprises must abide by “The Arm’s Length Principle.” Nonetheless, due to the complexity of present trading form, increase in the importance of invisible and special property, and rapid development of business integration, present approaches of transfer pricing have failed to meet actual need, for under “The Arm’s Length Principle” of trading between enterprises, seeking for a counterpart enterprise has become increasingly difficult or no longer existed. Therefore, disputes between enterprises and tax authorities keep arising. The aim of the study is to search for solutions to the problem.
Main purpose of this research is to conduct detailed analysis on how Japanese enterprises lower their tax cost and risks through international tax strategy planning. Hindered by internationalism and commercial secrets, it is difficult to research on individual cases. Thus, by means of organizing and reviewing literature, the study illustrates Japanese international enterprises’ strategies and operation in tax dealing with a view to serving as a reference for governmental auditing and enterprises’ proper tax planning.
Solving international conflicts caused by transfer pricing is the urgent goal for each nation’s tax authorities and international enterprises. The study suggests that auditing of proper transfer pricing should cooperate with main trading countries in a bilateral or multilateral manner, signing overall tax conventions, negotiating taxes on transfer pricing, and setting up mechanism of relative adjustment. Furthermore, it is suggested that enterprises should endeavor to produce and preserve related documents as well as make use of advance pricing agreement program to establish mechanism of bilateral cooperation.
Moreover, if allowed, follow-up researchers can conduct research on individual industry and enterprise.