| Tokyo, June 29, 2004
- Honda Motor Co., Ltd. announced today that it has received notification from
the Tokyo Regional Taxation Bureau, of a reassessment of the profits Honda earned
from its transactions with Moto Honda da Amazonia, Ltda., its local subsidiary
in Brazil, for the 6-year period of 1997-2002. The Taxation Bureau claims that
distribution of the profits between Honda Motor Co., Ltd. and Moto Honda da Amazonia,
Ltda. was too low on the Japan side. Income was reassessed at an additional 25.4
billion yen resulting in Honda incurring an additional tax of approximately 13.0
billion yen. Honda has voiced its objection to this reassessment and from the
standpoint of preventing double taxation, plans to file a formal request for bilateral
consultations between the two countries based on the Tax Convention.
Honda established Moto Honda da Amazonia, Ltda. in 1975. Local production began
in 1976. Situated in Manaus, Amazonas, a designated industrial development region,
Moto Honda da Amazonia, Ltda. has increased its local content ratio to approximately
90%, in line with the Brazilian government’s strategy of having main production
processes take place locally. Improvements in quality and productivity have led
to the realization of substantial cost reductions. Further, in the area of sales,
Brazil’s unique installment sales system has been utilized and expanded
into the largest scale operation of its kind in the nation resulting in the establishment
of a strong sales network. Through such local efforts to expand its business,
Moto Honda da Amazonia has been able to weather major fluctuations in the economy,
proactively reinvest profits locally and rapidly increase sales by over 10-fold
in a period of 10 years.
In the fiscal year which ended December 31, 2003, Moto Honda da Amazonia, Ltda.
produced approximately 820,000 units and achieved domestic sales of roughly 730,000
units. Approximately 90,000 units were exported to 68 countries in North America,
Europe and Oceania as well as Central and South America. Exports of finished motorcycles
from Honda Motor Co., Ltd. to Brazil totaled roughly 300 units during the same
In their business activities, Moto Honda da Amazonia, Ltda. and Honda Motor Co.,
Ltd. have determined the business terms relating to the transactions between them
based upon applicable laws and regulations in Brazil and have paid appropriate
taxes in Japan and Brazil on profits earned from these business activities in
accordance with the tax laws of both countries.
Over a period of many years, Honda has made dedicated efforts to grow its local
operation in Brazil and the Taxation Bureau’s allegation that the bulk of
profits earned there must be allocated to Japan is totally unacceptable. Honda
is confident that its assertion will be fully respected during the course of relevant
proceedings and that this case will be resolved in a manner acceptable to Honda.