By YUTA HANANO/ Staff Writer
November 1, 2023 at 17:37 JST
A publicity image for the Fortnite online game (Captured from Epic Games website)
A major online game company’s subsidiary was ordered to pay back taxes and penalties totaling about 3.5 billion yen ($23 million) for failing to pay consumption taxes over three years.
The unpaid consumption taxes relate to items that users purchased to play Fortnite, an online shooting game.
It is rare for Japanese tax authorities to investigate foreign companies and impose back taxes and penalties.
The Tokyo Regional Taxation Bureau conducted a tax audit and found that the Luxembourg-based subsidiary of Epic Games Inc. failed to remit some of the consumption taxes that game users paid to purchase various items in the game.
The amount of unpaid consumption taxes for the three-year period until December 2020 came to 3 billion yen.
An official with Epic Games acknowledged the tax audit had turned up unpaid consumption taxes on the part of the subsidiary and that the back taxes had already been paid.
Tokyo Regional Taxation Bureau officials found the Luxembourg subsidiary provided the Fortnite game to Japanese users and had obtained through some platform companies a total of about 30 billion yen in game revenues from such users, according to sources.
The subsidiary was required to submit consumption tax reports for some of that income but had failed to do so.
Japanese tax authorities have agreements with counterparts in other nations about exchanging information as well as monitoring the flow of funds of foreign companies that have business dealings with Japan.
The investigation into the Epic Games subsidiary was conducted through online interviews with subsidiary executives, sources said. That allowed for the audit to be completed in a relatively short period.
Nobuhiro Tsunoda, a retired National Tax Agency official who now serves as chairman of Ernst and Young Tax Co. in Japan, said the use of online interviews was one positive result that came out of the novel coronavirus pandemic, when such interviewing methods became more prevalent.
Tsunoda added that internationally famous companies want to avoid negative publicity, which likely helped create a quick resolution of the issue with Epic Games.
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