Goods and Services Tax (Japan)
Japan, the equivalent of VAT or GST is known as Consumption Tax(CT) and was
introduced in January 1989. It requires re-calculation and payments to the tax
authorities at each transaction point in the onward sales chain.
Japanese Consumption Tax rate is currently 5% and out of which 4% is national
levy and 1% regional levy. Companies are not required to formally
register with the Japanese Tax authorities for Consumption Tax . The tax
authorities takes into account the first tax filing as the application for
registration and a tax office will be allocated to the company. A foreign,
non-resident trader is required to appoint a tax agent who must be a resident
of Japan. The agent takes care of all the communications between the company
and the Japanese tax authorities.
is an annual threshold of YEN 10 million, based on the base year of two
years prior to the tax year. However immediate CT compliance is required in
case of those resident companies where the start-up capital is greater than
YEN 10 million. Moreover, exporters are given a choice to become taxable
businesses to facilitate the recovery of an input CT even if their taxable
supplies are below this limit.
company is required to file periodic consumption tax returns once it becomes a
taxable business. The traderís turnover decides the frequency of these
returns. The tax filing lists consists of all of
the companyís transactions related to the supply of the relevant
goods or services. If there is any consumption tax due that should be paid
simultaneously with the filing of the tax return. The tax authorities require
payments of CT liabilities to be made in Japan at an authorised bank or post
may be a statutory obligation for foreign companies providing goods or
services in Japan to charge Consumption Tax. This includes the ongoing
compliance requirements to file periodic tax returns and pay over any
consumption tax due to the Japanese tax office. Following are the situations
which require Japanese compliance:
* Where goods are delivered within Japan
* Supply of services. For e.g: consulting services, sports events, entertainment events etc.
* If the foreign trader imports goods in Japan.
those traders who may be warehousing and distributing goods in Japan are
classified as Permanent establishment [PE]. In this situation , their company
could also be subject to direct as well as indirect tax.