Japan tax bulletin

Revenue recognition for licence transactions

Taxable revenue (“Ekikin”) is revenue from selling assets, the transfer of assets or provision of services either for consideration or for free, the receipt of assets for free or revenue from transactions other than those of capital nature (Article 22(2) of the Corporation Tax Law(“CTL”). As revenue is recognized for transactions that have no consideration, the Arm’s Length Principle is applied under the general revenue recognition rules. Where a corporate taxpayer sells an asset whose fair value and tax basis are 100 and 80 respectively, the taxable revenue and deductible cost are 100 and 80. 20 is a cost subject to restriction on deduction (Donation: Kifukin) for tax purposes.

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