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Japan

Goods

Local name for CT: Consumption Tax (CT)

New amendments are effective from 1st October 2015 under the Act for Partial Revision of the Income Tax Act and Other Acts (Act No. 9 of 2015). Foreign companies engaged in possessing warehousing and distributing goods in Japan may be subjected to Consumption tax.

 

CT Standard rate
10 %

 

CT Reduced rate
8%

Certain products and services are eligible for the special reduced rate, including:

  • Food except for alcoholic drinks
  • Newspapers issued twice a week or more

 

Threshold

Base period threshold
A company will be required to register for CT, file returns and pay CT in Japan for the current period, where its sales in the “base period” exceed JPY 10 million (approximately EUR 81,000).  The “base period” is the fiscal year two years before the current fiscal year. For example, if a foreign company had CT taxable sales exceeding JPY 10 million in Japan in 2018, the entity would be considered a mandatory CT payer for 2020 concerning sales on or after January 1, 2020.

 

Specified period threshold
Even if CT taxable sales, in the base period (i.e. 2018) did not exceed JPY 10 million, the entity will still be considered a mandatory consumption taxpayer for the current fiscal year (i.e. 2020) if CT taxable sales in the first half of the previous year (the “specified period”; in the case of 2020, the period of January to June in 2019) exceeded JPY 10 million. We know that it sounds complicated – you may link your Japan Amazon store to the LOVAT platform and we will inform you when you will reach the threshold. This service is free.

 

Deductible CT
CT on taxable purchases paid to Japanese suppliers may be deducted from CT on taxable sales when calculating the amount of CT to be paid.

 

Registration procedure

When a company should register, the owners will be required to complete and submit a CT registration form, along with supporting documentation:

  • Certificate of incorporation (along with the translation into Japanese)
  • Trade register extract (along with the translation into Japanese)
  • Articles of Associations (along with the translation into Japanese of main provisions)
  • Passports of Directors and shareholders
  • Power of Attorney for a tax agent

Tax representative

Foreign taxable companies are obliged to appoint a tax representative to handle all formalities related to VAT registration and filling.

Record keeping

Japan’s consumption tax law currently has not adopted a CT invoicing system. However, Japan requires taxpayers to maintain books and records to support amounts paid and claimed. All valid tax invoices must contain the following particulars:

  • the full name of the supplier
  • the date of the taxable transaction
  • the description of the taxable transaction
  • the total amount charged on the taxable transaction
  • the full name of the person to whom the goods or services are supplied

CT payment and filing date

CT returns and payments are due on an annual basis within two months from the end of the business year – February 28th.

Companies can also keep track of deadlines at the LOVAT portal.

Penalties

No-filing tax

Failure to file tax returns (which are due two months after year-end) exposes the non-resident to penalties as follows:

  • Penalty for not filing a return – 15% of the CT payable (plus an additional 5% of the portion exceeding JPY 500,000);
  • Interest – the rate is 9.1% per annum for the period from the original due date to two months after the payment due date on an assessment or late filing.

 

Late-payment tax

Where СЕ is paid after the due date, late-payment tax is levied by the tax office on the tax amount for the period from the due date to the date when the tax was paid:

  • The tax rate is 7.3% for the first two months
  • The tax rate is 14,6% for the period after the first two months.

Website of Tax authority of Japan

Digital services

Local name for VAT: Consumption Tax (CT) 

New amendments are effective since 1 October 2015 under the Act for Partial Revision of the Income Tax Act and Other Acts (Act No. 9 of 2015).  

 

Web: Japan’s Tax Agency

 

VAT Standard rate 
10 % 

VAT Reduced rate
There is no reduced rate established. 


Threshold
A business with taxable sales not exceeding 10 million yen in the base period for the taxable period is exempt from consumption tax obligation.  

Pieces of evidence

Evidence for identification of place of consumption can include:

  • Address of the service recipients
  • Matched to details of the supplied credit card 

E-services list

The provision of electronic services covers for instance the following transactions when these transactions involve payment for services:

  • Provision of e-books, digital newspapers, music, videos, and software (including various applications such as games) via internet 
  • Services that allow customers to use software and databases in the cloud 
  • Services that provide customers with storage space to save their electronic data in the cloud 
  • Distribution of advertisements via internet 
  • Services that allow customers to access shopping and auction sites on the internet (e.g., charges on posting goods for sale etc)
  • Services that allow customers to access the place to sell game software and other products on the internet 
  • Provision via internet reservation website for accommodation and restaurants (those who charge on posting for the website from the businesses that operate accommodation and restaurants) 
  • English lessons provided via internet 

Electronic services do not include the provision of services that mediates other people’s telecommunications using telephone, telegraph, and other telecommunication equipment – in other words, use of telecommunication networks such as telephone, FAX, and access to the internet.  

Electronic services also exclude services notifying the results of transfer assets via telecommunication networks, when the notification is ancillary to the transfer of other assets. 

Registration procedure

A foreign service provider that intends to register as a registered foreign business is required to fill in an “Application for registration as a registered foreign business” form and submit the application to the Commissioner of NTA via the district director of the tax office with jurisdiction over the place for tax payment.

A sole proprietor without an address or domicile in Japan and a corporation without a head office or an office in Japan are required to designate a Tax Agent to deal with submission of tax returns and notification documents, and tax payment

Penalties

Failure to file tax returns (which are due two months after year end) exposes the non-resident to penalties as follows:

  • Penalty for not filing a return – 15% of the JCT payable (plus an additional 5% of the portion exceeding JPY 500,000); 
  • Interest – for 2015 the rate is 2.8% per annum for the period from the original due date to two months after the payment due date on an assessment or late filing. Any amount unpaid after this date is subject to 9.1% per annum interest charge.