Coca-Cola Japan unit faces billions in added tax

Japan

Co. will likely have to pay additional taxes of around 16 billion yen after the settlement of a tax dispute between Japan and the United States, according to industry sources.

At issue were the royalties Coca-Cola (Japan) pays to its U.S. parent for using the trademark and gaining marketing knowhow.

The Japanese company paid more than 56 billion yen in royalties in the three years from 1990-1992 and deducted this amount from its income as expenses when filing taxes.

But the Tokyo Regional Taxation Bureau claimed the amount was too high and considered it an improper transfer of income abroad.

It concluded the company needed to report around 38.5 billion yen in additional income.

As a result of consultations between Japanese and U.S. tax authorities, the additional income for the three years was settled to around 14 billion yen.

For the seven years starting in 1993, Coca-Cola (Japan) also sought bilateral consultations, after which it was agreed that around 45 billion yen in additional income had to be reported.