OSAKA – Sumitomo Life Insurance Co. failed to declare about 2.4 billion yen in taxable income from 1995 to 2000 and allegedly hid some 650 million yen of that amount, which mainly came from investment gains through an affiliate in the Bahamas, sources said Tuesday.
The Osaka Regional Taxation Bureau ordered the major life insurer to pay about 900 million yen in back taxes, including a heavy penalty, after detecting the misdeed during a recent inspection of the company, the sources said.
A Sumitomo Life spokesman said that while the company did not agree with the allegations made by the tax authorities, it complied in paying the taxes.
According to the sources, the National Tax Agency’s Osaka bureau concluded that the company intentionally did not declare as income about 450 million yen in gains from investment trusts made through the affiliate in the Bahamas, where corporate taxes are exempted.
Under Japanese tax laws, companies are required to calculate gains made by subsidiaries in countries with lower tax rates than Japan and declare them as parent income in fiscal yearend book-closings.
Sumitomo Life established the Bahamas affiliate in January 2000 with 20 billion yen in capital for corporation-type investment trust business.
The sources said the Osaka bureau also determined that part of the expenses for arranging and producing television advertisements through several ad agencies should have been declared as taxable entertainment expenditures.