/

Apple unit in Japan slapped with ¥12 billion in back taxes over software sales

Kyodo

The Tokyo Taxation Bureau has imposed about ¥12 billion ($118 million) in additional tax on a Japanese subsidiary of Apple Inc. in connection with profits from software sold via the iTunes Store, sources familiar with the matter said Friday.

The tax bureau said iTunes K.K. in Minato Ward, Tokyo, should have paid taxes on some ¥60 billion in software profits it transferred from 2012 to 2014 to an Apple subsidiary in Ireland that holds the software copyright, they said.

The iTunes company in Tokyo is believed to have since paid the roughly ¥12 billion amount in full, according to the sources.

In Japan, Apple Japan Inc. sells iPhones and other Apple products, while fees for software, including music and videos, supplied via the iTunes Store are paid by customers into the iTunes company in Tokyo.

The National Tax Agency has found that a large amount of profits was transferred from the iTunes company in Tokyo to an Apple subsidiary in Ireland via Apple Japan, the sources said.

The agency said that the money transferred to the Irish company should be defined as royalty fees subject to income tax payment but that the iTunes company did not declare it as such, they said.

The Irish company sells iPhones to Apple Japan via an Apple subsidiary in Singapore. The tax authority has found Apple Japan buys the iPhones at prices that include software fees, they said.

Thus, the authority believes the money transferred among the companies includes software fees destined for the Irish company, they said.

The iTunes company in Tokyo, set up in 2005, posted ¥152.2 billion in sales in the year ended in September 2015.