Transfer Pricing and Management Diagnosis

—Approach from a Comparison Concerning with a Transfer Price Taxation of Japan and China—

Abstract

In this paper, I examine the problem of transfer pricing when Japanese companies advance to overseas or trade with overseas affiliates. Focusing on transfer pricing taxation on Japan and China, I especially point out the necessity of recognizing the difference of their tax systems based on actual proof data. I state synthetically the usefulness of the measure for these problems and the Advance Pricing Agreement which the tax authorities of respective countries are recommending. Finally, I propose the necessary framework based on risks of transfer pricing until reaching decisions when performing business diagnosis in the overseas expansion of Japanese companies.