In general, a remittance
made by a branch of a foreign corporation to its head office cannot be treated as
expenses of the payer branch. But, a remittance made by subsidiary company to its
parent company arise from business-to-business transactions, such as distributions
of profits and loans (or repayments of loans) may be regarded as payments of
costs/expenses of the said subsidiary and, therefore, certain of these
costs/expenses are deductible when calculating the taxable income of the payer
subsidiary company. However, certain income of the parent company, such as payments
of interest, dividends and usage fees, may be subject to the Japan withholding tax
at the source at the time of payment.
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