Shulou(Shulou.com)11/24 Report--

Beijing, Aug. 20 (Xinhua) for years, Japanese tax regulators have been trying to solve a puzzle that has given them a headache: why did Softbank Corp. Group, the most profitable company in Japan last year, pay so little tax?

Softbank Corp. has paid zero taxes for 11 years.

In recent years, officials from Tokyo's IRS have conducted tax inspections almost every year to check the accuracy of Softbank Corp. 's tax returns, and even flew to London to check documents.

So far, Softbank Corp. has the upper hand, and the company has not been accused of illegal tax evasion. But it has always been a thorn in the side of regulators. Tax authorities have been trying to plug the loophole used by Softbank Corp. to legally avoid taxes. In 2020, tax authorities introduced a new set of rules known as the Softbank Corp. tax rules to block a particular type of transaction. Experts say the deal helped Softbank Corp. save billions of dollars in taxes.

In the fiscal year ending March 2021, Softbank Corp. set the highest annual profit record in the history of a Japanese company. But this year, Softbank Corp. should pay zero enterprise income tax.

For Softbank Corp., increasingly stringent tax scrutiny not only threatens his profits, but also poses a risk to his reputation. "Softbank Corp. 's tax plans are so radical that they are extremely rare among Japanese companies." Said a former senior Japanese tax official.

Son Zhi

Japanese companies are known for their conservative ways of doing business, but under the leadership of Masayoshi Son, Softbank Corp. has become an ambitious and adventurous company. " Son is a difficult person to evaluate, "says a Japanese management consultant." he is one of the few CEO that can portray a big dream and make it come true, which is desperately lacking in this closed country. But some of his actions seem inappropriate. "

The reason why Softbank Corp. 's tax payment has largely avoided public scrutiny is that the tax information is strictly confidential. However, a survey by foreign media found that according to the non-consolidated financial statements, after excluding group subsidiaries that paid separate taxes, Softbank Corp. was only required to pay corporate tax in Japan four times in the 15 years since the fiscal year ended in March 2007. the total amount is about 17 billion yen (about 846 million yuan), which is about 0.25% of the company's pre-tax profit of 6.6 trillion yen in the same period.

Japan's current corporate tax rate is 23.2%. However, experts say corporate tax rates vary in different industries, and holding companies such as Softbank Corp. that generate income through dividends tend to have lower tax rates.

Softbank Corp. 's 11 years of zero corporate tax included the fiscal year ending March 2021, when the company reported a combined net profit of 5 trillion yen (249 billion yuan), the highest in Japanese corporate history. However, Softbank Corp. recorded a net loss of 1.7 trillion yen in the fiscal year to March 2022.

Unique business model tax experts say Softbank Corp. has a low tax liability but complies with the tax law, which stems from the group's unique business model as an investment holding company because its income comes from dividends paid by domestic and foreign subsidiaries. However, the huge gap between high profits and lower taxes may raise questions about the effectiveness of Japan's tax system and whether companies have disclosed enough tax information. At the same time, other large economies are taking a series of measures to improve tax compliance.

"it seems strange that a company that makes a profit of trillions of yen has not paid corporate tax for years, even if it is legal." "We should check whether there are any problems in the tax system," said Hideki Tomonaga, director of the Japan Institute of Taxation.

Softbank Corp. only paid corporate tax four times in 15 years.

In response to questions from foreign media about low taxes and low taxes, a spokesman for Softbank Corp. said: "apart from the corporate tax items listed in our annual securities report, we have no other information to disclose." there are a number of errors in the questions you submitted, but we declined to comment further. "

Japanese companies do not need to disclose the taxes they pay. The financial statements of listed companies contain some corporate tax information, but these data are based on financial accounting standards. An independent program based on tax accounting calculates the amount of tax the company will eventually pay. these details are included in the tax returns submitted by the company to the IRS, but are not disclosed.

The best indicator of Softbank Corp. 's actual tax obligations is the "income tax" item in the unconsolidated income statement published in his annual report. Tax experts say that if this figure remains unchanged for several years in a row, it is likely to only reflect local taxes determined by factors such as paid-in capital (capital actually owned) and will not produce corporate taxes that increase or decrease based on income.

Take Softbank Corp., whose income tax has been 5 million yen in 13 of the past 15 years. A person close to Softbank Corp. confirmed in 2020 that "there will be no corporate tax" when the income tax is set at Y5m.

Softbank Corp. 's revenue structure allows observers to see two very different faces. Last year, Softbank Corp. announced a net profit of Y5,000bn, which cheered investors. But when it appeared in front of the tax authorities, it was a company with huge losses.

According to the unconsolidated financial statements, Softbank Corp. generated 1.62 trillion yen (80.6 billion yuan) in operating revenue in the fiscal year ended March 2021. Almost all of this income comes from dividends, of which $4 billion (27.2 billion yuan) comes from a British subsidiary called Softbank Corp. Group Capital Co., which owns assets such as shares in British semiconductor design company ARM.

Most of Softbank Corp. 's dividend income is tax-exempt.

Under Japanese tax law, 95 per cent of a company's dividend income is tax-exempt if its dividend income comes from foreign subsidiaries with 25 per cent or more of its shareholdings; if dividend income comes from domestic subsidiaries with more than 1/3 shareholdings, then almost all dividend income is tax-exempt. It is not clear how much Softbank Corp. 's dividend income comes from domestic and foreign subsidiaries.

In addition to a small amount of taxable income, Softbank Corp. also accumulated a large number of tax losses, which can be used to offset future taxable income. Softbank Corp. 's consolidated tax loss was 3.4 trillion yen as of March 2020, a large portion of which is expected to be held by holding companies. Tax losses can be carried forward 10 years after the losses are incurred, offsetting taxable income. This means that Softbank Corp. can reduce his tax liability in the foreseeable future.

Tax experts say that tax rates for holding companies tend to be low because of non-taxable income, but it is rare for Softbank Corp. to have such a big difference between income and taxes.

"for large companies, disclosing as much tax information as possible to show reasonable tax payment is part of their 'tax governance'," said Mitsuhiro Honda, a professor of tax law at Tsukuba University in Japan. "it can also lead to constructive discussion about a fairer tax system."

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.