Japan Consumption Tax Highlights
1. Japan Consumption Tax (JCT) Definition
Consumption Tax (Value-added tax or VAT) is levied when a business enterprise transfers goods, provides services, or imports goods into Japan. The applicable rate is 8%, and as of 1 October 2019, the rate has increased to 10%. Exports and certain services from Japanese residents to non-residents are taxed at a zero rate. Specified transactions, such as sales or lease of land, sales of securities, and provision of public services, are not subject to taxation.
2. Who needs to pay JCT?
2.1 Taxable Person
Businesses which fall under either of the following categories is a “Taxable Person” who is required to file the final return.
(1) Businesses which had taxable sales amounting to more than 10 million yen during the Base Period.
* the Taxable Period for sole proprietors is from January 1st to December 31st, and the Taxable Period for corporations is their business year.
* the Base Period for sole proprietors is the second preceding year before the Taxable Period.
(2) Businesses that have submitted the “Report on the Selection of Taxable Proprietor Status for Consumption Tax”.
(3) Businesses that have taxable sales in the Specified Period that exceeds 10 million yen.
* specified Period is in principle the first six-month of the preceding year before the Tax Period. “10 million yen” for a Specified Period can be judged by using the total amount of salary and related payments instead of using the amount of taxable sales.
2.2 Exemption Threshold for Businesses
In principle, a business is exempted from consumption tax obligation in a Taxable Period if its taxable sales in the Base Period for the Taxable Period are equal to or less than 10million yen.
3. What does this mean for (external) Amazon Sellers?
Amazon sellers, that are not based in Japan and intend to enter the Japanese market, must pay a 10% Consumption Tax (or an 8% tax for foodstuffs), which is the Japanese equivalent of VAT. Enterprises, with taxable sales of ¥ 10 million or less, are still required to pay CT, but do not need to file a CT return and can base it off of their total salary and payments instead.
TBA Global has specialised in the tax service sector for over 10 years. Our experienced team, consisting of Certified Chartered Accountants, would be happy to guide you through the whole process of JCT registration and filing. Contact TBA Global today, we are delighted to act as your tax agent!