Tax & Accounting Professionals in Ginza, Tokyo, Japan

Ginza B Bldg.6F 1-6-5 Ginza Chuo-ku, Tokyo, 104-0061, Japan
Business hours: 9:30-18:00


Japanese Consumption Tax levied ?

Needless to say, the Internet is now a key platform for cross-border transactions. Electronic commerce (EC) like iTunes music, kindle, advertisements,etc., is very popular in Japan.

With regard to this EC business, it is important to know about how Japanese consumption tax is levied.

What is Japanese consumption tax ?

Japanese consumption tax (JCT) is a kind of Japanese version of VAT (Value Added Tax), so if you sell your products to Japanese customers, JCT (8% of product price) is added to the sales price (e.g. if products are sold for JPY 10,000, JPY 800 is added as JCT) and the seller needs to pay JCT. 

How JCT relates to EC?

Recent revision of JCT rule has a great impact on foreign companies after 1st October 2015. Before the revision, Japanese companies have to pay JCT if they sell digital products to Japanese customers. But if foreign companies (located in foreign countries) sell digital products to Japanese customers, they do not have to pay JCT. This is because Japanese companies are located in Japan but foreign companies are not. However, this treatment is considered unfair because, for example, Japanese customers pay JPY 10,800 (JPY 800 as JCT) to Japanese companies but they only pay JPY 10,000 (no JCT) to foreign companies to get the same product.

Therefore, the provision of digital product (only BtoC) by foreign companies is a taxable transaction now. In this case, a foreign company has to pay JCT to Japan (within 2 months after the end of the fiscal year). But there are some JCT exemption rules (if your business is small, you may be exempt from JCT).

Here is the link for more about JCT revision (information by Japanese government).

If you have any questions about this revision, feel free to ask us.