• Service: Tax, International Tax
  • Type: Regulatory update
  • Date: 11/11/2013

Japan - Proposed changes to taxation of permanent establishments  

November 11: The Ministry of Finance in late October 2013 submitted a report that includes proposals for changes intended to mitigate double taxation / no taxation issues by generally adopting the “attributable income principle” with respect to the income of permanent establishments.

The report—known in English as: Tax reform regarding a change from the Entire Income Principle (the Force of Attraction Principle) to the Attributable Income Principle—was submitted a meeting of the International Taxation Discussion Group of the government’s tax commission.

The report is also referred to as the AOA Report,* and in addition to describing a change from the “entire income principle” to the “attributable income principle,” it proposes changes to the tax treatment of the calculation of profits attributable to a permanent establishment.

*The AOA (Authorised OECD Approach) is an approach developed by the OECD to calculate income attributable to a permanent establishment.

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