Authorities have told SoftBank Group Corp. that it failed to declare income of some ¥93.9 billion ($875 million) from its tax haven-based units in the four years through fiscal 2015, sources close to the matter said Wednesday.
The telecommunications giant has paid an additional tax of some ¥3.7 billion including a penalty for understatement after its deficits were offset, they said.
“We have already submitted a revised report to the Tokyo Regional Taxation Bureau and have taken appropriate responses,” SoftBank said.
SoftBank had failed to report income from subsidiaries of U.S. telecommunications unit Sprint Corp. and U.S. mobile device distributor Brightstar Corp., which were acquired in 2013 and 2014 respectively.
The subsidiaries are located in Bermuda, a British island territory known as a tax haven.
Sprint and Brightstar had shifted part of their insurance fees paid for business operations to the Bermuda-based units, which Japanese authorities recognized as shell companies, to benefit from low tax rates, the sources said.
The Tokyo Regional Taxation Bureau has apparently judged that the shifted fees at the Bermuda units should be added to SoftBank’s income under regulations to prevent proceeds from being transferred to low-tax countries or regions.
Accounting mistakes over stock sales are also responsible for some parts of the undeclared ¥93.9 billion, the sources said.
A Brightstar subsidiary in Singapore that distributes secondhand cell phones is also believed to have been regulated under Japanese tax haven countermeasures.
In total, authorities determined some ¥74.7 billion of income from subsidiaries as SoftBank’s income. However, as no cover-ups were identified, the company was able to avoid heavy additional taxes, the sources said.
The decision by authorities was first reported by the Asahi Shimbun daily Wednesday morning. The Asahi suggested SoftBank’s rapid global expansion strategy, through acquisitions of foreign companies, may have been a possible cause of the latest tax accounting errors.
The daily pointed out that SoftBank probably failed to keep tabs on what its overseas units were doing.
Quoting a former company executive, the Asahi said SoftBank’s accounting system had not caught up with the pace of growth of business operations the firm has been experiencing in recent years.