The Tokyo Regional Taxation Bureau has found that SoftBank Group Corp., the holding company of the telecommunications business group, failed to declare about 93.9 billion yen in taxable income over the four years until the fiscal year ending in March 2016, it has been learned.
The tax authority has concluded that subsidiaries in Bermuda -- a tax haven -- of U.S. firms that were acquired by SoftBank had no business status and that therefore incomes of the subsidiaries should be reported as part of income of the group in Japan, according to sources.
The total taxable income of the subsidiaries is about 74.7 billion yen. The tax authority did not impose heavy additional taxes on the company because it judged that SoftBank did not intentionally evade paying taxes, including its miscalculation of expenses over profits from sales of shares.
The amount of penalty taxes imposed was about 3.7 billion yen, including additional taxes due to underpayment, after offsetting its past losses. SoftBank has already filed revised tax returns, the sources said.
According to the company and persons concerned, the company acquired major U.S. mobile phone carrier Sprint Corp. and major U.S. mobile phone distributor Brightstar Corp. from 2013 to 2014. Both companies had owned subsidiaries in Bermuda, which has a low tax rate, before the acquisition, and part of the insurance premiums they had paid for business purposes had been allotted to their subsidiaries' income.
The taxation bureau concluded that their subsidiaries in Bermuda were dummy companies that did not have actual business. Based on the anti-tax haven rules, which were introduced to prevent tax evasion by transferring taxable income to countries and regions with low tax rates, the bureau decided that incomes earned by the subsidiaries should be included in that of parent company SoftBank.
"As the acquired companies paid taxes in the United States, we thought there was no problem with the tax system," said a SoftBank Group spokesperson. "But we filed revised tax returns in accordance with the taxation bureau's indication that taxes should be also paid in Japan."
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