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1. Accounting(The World’s Big Four Accounting Firms)

In 2017 the world’s Big Four accounting firms were ranked by global network revenue as follows (dollars in millions):

・1st, DTT, $43,200, (Last year $38,800), an increase of 11.3%
・2nd, PwC, $41,280, (Last year $35,896), an increase of 15.0%
・3rd, EY, $34,800, (Last year $31,404), an increase of 10.8%
・4th, KPMG, $26,400, (Last year $25,420), an increase of 3.9%
There is a gap between the 1st and 2nd ranked firms and the 3rd firm, and a big gap between the top 3 and the 4th firm. (source : Accountancy Age)

2. Tax(The Development of the system regarding intangible assets on transfer pricing taxation (3))

On December, 14th, 2018, the outline of the 2019 tax system reform was released. Continuing from the preceding e-mail magazine, we are going to explain the parts of this outline that are involved in international taxation, and give an overview of the price adjustment measure with regards to Hard-To-Value Intangibles transactions (specified intangible assets transactions).

(1) Requirement of specified intangible assets:
“Specified intangible assets” under this measure are defined as intangibles with all of the following characteristics.
a. Unique and having a significant value
b. The arm’s length price is calculated based on an income projection
c. Anticipation used in valuing the arm’s length price is considered to be uncertain

(2) Conditions to be exempt from the application of this measure:
This Measure will not be applied provided the following documentation (a) or (b) is submitted by the taxpayer at the request of the Japanese tax authorities.

(a) Documents for
(ⅰ) Details of the projections used in valuing the arm’s length prices of the specified intangible assets transactions and;

(ⅱ) Evidence to prove either that the discrepancy between the ex-ante projections and the ex-post outcomes could not be foreseen at the time of the specified intangible assets transactions, or that the arm’s length price was determined taking into account the probability of the occurrence of events to bring such discrepancy appropriately at the time of the specified intangible assets transactions.

(b) Evidence to prove that the ratio of the difference between the actual income and the projected income is 20% or less in total for 5 years starting from the beginning of the fiscal year in which the unrelated party revenue was first generated for the use of the specified intangible assets.

3. Labor Management (Upper Limit on Overtime Hours)

Long working hours make it difficult for workers to manage their health, to maintain a work-life balance and to work diversely.The relevant laws were amended as part of a work style reform, and accordingly the upper limit on overtime hours was regulated with penalties.This regulation will be effective from April 2019 for large-sized enterprises and effective April 2020 for small and medium-sized enterprises.

The upper limit of overtime hours are:
1. In principle, 45 hours per month and 360 hours per year (not including holiday working hours).
2. Under special circumstances where overtime work beyond those limit hours are required temporarily;

(a)720 hours per year (not including holiday working hours), and

(b)Less than 100 hours per month (including holiday working hours), and less than 80 hours per month on average in each consecutive period of 2, 3, 4, 5, and 6 months.
Even under the circumstances above, exceeding the general monthly limit (45 hours per month) is allowed only 6 times a year.

Due to this change, some forms such as the 36 Agreement will be partially revised.(Resource:“The upper Limit of Number of Working Hours; Plain explanation”, the Ministry of Health, Labor and Welfare)

4. This Month’s Words of Wisdom

No matter how successful you are in a public life, you can not compensate for family failures.
(Benjamin Disraeli)

Through my work, I have met a lot of successful people in life.
I felt that many of them had very good private life, however, I felt that there were the same number of people who did not.
That maxim seems to explain one of the reasons for my feelings.



For more details, please refer to Nagamine & Mishima JC Accounting K.K.

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