Sumitomo Trust & Banking Co. has paid 6.3 billion yen to tax authorities over allegations it paid no withholding taxes in connection with overseas bond trading between 1999 and 2001, sources said Tuesday.
Despite paying the back taxes, the major trust bank is challenging the Tokyo Regional Taxation Bureau's allegations with the National Tax Tribunal, the bank's spokesman said.
Tax authorities found that a guarantee by Sumitomo Trust's New York branch that it would buy back bonds sold under repurchasing agreements at values higher than selling prices is tantamount to interest payment for fundraising, the sources said. The guarantee was used to procure short-term funds from foreign financial institutions.
Because the branch transferred the procured funds to the bank's Tokyo division, the authorities believed the Tokyo division was responsible for the transactions and should have paid taxes, they said.
Sumitomo Trust disagrees with the tax authorities, however, and is taking the case to the tax tribunal, the spokesman said.