Apple Inc.'s Tokyo-based subsidiary iTunes was ordered to pay some 12 billion yen in back taxes after the Tokyo Regional Taxation Bureau pointed out unpaid income tax on music and video distribution service revenues, it has been learned.

According to sources close to the matter, the tax authority judged that Apple's Japanese subsidiary needed to pay withholding tax on earnings it diverted to another Apple subsidiary in Ireland, since part of the profit should have been categorized as software royalty fees subject to taxation. The authority recognized that the iTunes company transferred some 60 billion yen to the Irish firm over a period of two years until 2014. The Japanese subsidiary has reportedly paid the full amount of back taxes.

Under the Japanese taxation system, when a Japanese firm pays a foreign company royalty fees, the former is required to deduct 20.42 percent of the amount and pay this as withholding tax in Japan.

When the tax bureau looked into the flow of transactions from iTunes to the Irish firm via Apple Japan and other affiliates, it discovered that iTunes had paid what should have been royalty fees to Apple Japan under other category names.

Since the scale of profits the iTunes company transferred to the Irish subsidiary has not changed, it is believed that the latest back tax payment will not affect the amount of corporate tax imposed on iTunes.