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.
The standard VAT rate in Japan in 2022 is 10%.
CT Reduced rate
Certain products and services are eligible for the special reduced rate, including:
- Food except for alcoholic drinks
- Newspapers issued twice a week or more
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.
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.