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SoftBank revises tax filing for $3.7bn in misstated losses

Tax agency told group to restate timing of loss on Arm-related share transfer

SoftBank is expected to declare the remaining $3.7 billion loss from the Arm share transfer in its fiscal 2018 filing. (Photo by Manami Yamada)   

TOKYO -- SoftBank Group has revised its tax return for the year ended in March 2018, Nikkei has learned, acknowledging that part of the 2 trillion yen ($18.4 billion) loss it declared on a transaction related to British chip company Arm Holdings and other moves should be booked later on.

The Tokyo Regional Taxation Bureau determined that 400 billion yen, or about $3.7 billion, of the losses SoftBank reported from its fiscal 2017 transfer of Arm shares to the SoftBank Vision Fund could not be recorded in that year, sources told Nikkei on Wednesday.

SoftBank reported an overall loss for tax purposes in fiscal 2017 even while logging net profit exceeding 1 trillion yen in its financial statements -- the third highest in Japan behind Toyota Motor and Honda Motor -- due to differences between tax and accounting standards.

The Japanese technology group attributed the loss, which did not affect its operating results, to factors including a decline in the stake's value from the time of its 2016 acquisition. The tax authorities had no issue with the loss itself, only when it was declared.

"There was a divergence between our view and that of the tax bureau," a SoftBank representative said. "Since it was just a discrepancy in the timing of recording the loss, and the bureau's argument was reasonable, we responded by revising our filing."

SoftBank already has submitted an amended return and is not expected to face additional tax costs, the sources said. The remaining 400 billion yen is expected to be included in the company's fiscal 2018 filing.

Under Japanese tax law, "companies can generate tax losses just from reorganizing their structures or moving capital around, even if no actual loss is suffered," said Hideki Tomonaga, head of the Taxation Institute of Japan. "It's important to determine whether such actions make economic sense or are for tax avoidance purposes."

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