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IBM Japan did not abuse tax consolidation rules, court rules

Kyodo, AFP-JIJI

The Tokyo District Court on Friday endorsed the IBM Japan group’s complaint against back taxes ordered by the National Tax Agency for abusing tax consolidation regulations.

If the decision becomes final, IBM Japan is expected to receive a tax refund of some ¥120 billion plus interest.

The court said IBM AP Holdings, which now wholly owns IBM Japan, acquired IBM Japan shares from IBM Corp. of the United States in 2002. It then sold a portion of the shares to IBM Japan at a lower price and booked a loss of more than ¥400 billion on the sale.

Later, the group offset some of IBM Japan’s profit with the loss under the tax consolidation regime to substantially reduce tax payments.

“None can conclude that IBM abused the corporate tax law to avoid tax,” the presiding Judge Kazuhiro Yagi said of the tax accounting measure.

“We deem that the ruling has accepted our company’s position,” IBM Japan’s public relations office said in a statement.

“IBM takes the taxpayers’ responsibility very seriously and will continue fulfilling its tax obligations not only in Japan, but also in every country it does business.”