Tokyo tax authorities have found that Google Japan failed to declare about ¥3.5 billion in income for 2015, a source close to the matter said Tuesday.
The authorities are believed to have determined that the Japan unit of the American tech giant reduced its income by shifting locally derived ad revenue to Google’s branch in Singapore, where tax rates are lower.
The Japanese unit has already paid back taxes and penalties amounting to some ¥1 billion, the source said.
Although the unit sold advertising and offered consulting services domestically, payments by its clients were allegedly made to the Singapore entity.
The Japan unit received remunerations equal to its total business expenses plus an 8 percent commission from the Singapore office, according to the source.
The Tokyo Regional Taxation Bureau pointed out that the company’s remunerations failed to match the ad revenue, the source said.
The alleged understatement of income at the Google unit came amid growing concerns that multinational tech giants including Apple Inc. are reducing their tax burdens by transferring profits to countries with lower corporate tax rates.
After the tax office highlighted the questionable accounting practices for 2015, Google Japan voluntarily reported an extra ¥6 billion in corporate income for 2016, the source said.
Google Japan did not immediately respond to a request for comment.
The Japanese unit was established in 2001 as a stock company but became a limited liability company in 2016, meaning it is not required to release financial earnings reports.