The operator of the Muji-brand goods store chain failed to pay 7.5 billion yen ($69 million) in income tax in the three years through February 2017, sources close to the matter said Wednesday.
The Tokyo Regional Taxation Bureau has judged that Ryohin Keikaku Co. transferred income to China that was subject to taxation in Japan, the sources said.
The company, which sells items ranging from furniture to kitchenware under the Muji brand, has been ordered to pay the tax as well as penalties of around 2.1 billion yen, the sources said.
"We have decided to pay the tax," it said in a statement, while adding its view regarding double taxation differed from that of the tax bureau.
The company said it has requested the Japanese and Chinese tax authorities to hold bilateral talks to avoid double taxation in the future.
According to the sources, Ryohin Keikaku set lower product prices and license fees for its subsidiary in China.
The tax bureau is believed to have concluded that such a practice reduced the profits that Ryohin Keikaku booked in Japan, resulting in a lower tax payment, the sources said.
Ryohin Keikaku has outlets in over 20 countries and regions. It operates 256 stores in China, its biggest overseas market.
The company posted operating revenue of around 75 billion yen in China in the year through February 2019. In Japan, the company booked revenue of around 246.2 billion yen in that year.
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