Sony sore over huge bill for additional taxes

Tokyo tax authority says electronics giant owes an extra $244 million due to underreporting in its games business.

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The Tokyo Regional Tax Bureau served Sony and Sony Computer Entertainment with a notice for 74.4 billion yen (about $650 million) in unreported income, ITmedia reported today. As a result, the tax authority claims that Sony owes about 27.9 billion (over $244 million) in additional taxes. Both Sony and SCE plan to protest the taxes, as is evident from the statement they released today condemning the tax bureau's behavior: "We have always made appropriate tax payments in compliance with the tax codes of [the relevant] countries; this notice [from the tax bureau] is unsatisfactory."

The penalty stems from the "transfer price tax system," which is designed to prevent companies from performing transactions between their domestic and overseas affiliates at lower than usual prices. The allegedly unreported revenues are related to transactions between SCE and its US subsidiaries in connection with its game business between FY 1999 and 2004, and CD and DVD disc transactions between Sony and multiple overseas subsidiaries from FY 2003 to 2004. The tax authorities hold that Sony was under obligation to report these transactions as they occurred at lower than normal prices.

For its part, Sony and SCE have stated "we are confident we can avoid this double taxation" by invoking [international] tax treaties to open bilateral talks.

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