Significant changes to the Japanese consumption tax

The scope of taxable transactions subject to Japanese consumption tax will be increased
Effective 1 October 2015, digital services provided by foreign suppliers to businesses and consumers in Japan will be categorised as domestic transactions subject to an 8% consumption tax. The requirement to pay consumption tax is imposed at the time the payment obligation arises, typically when the services are provided or the download is made, and not the date of the actual payment. A number of transactions will be affected by this change for example payments related to:
  • digital downloads of books, newspapers, music, movies, or software (including games and applications);
  • software and database usage on the cloud;
  • advertisements and postings on the internet;
  • usage of online shopping and auction sites;
  • cloud-based gaming;
  • the online booking of accommodations and restaurants;
  • language lessons offered online;
other online digital services purchased from foreign suppliers.

Transactions between foreign suppliers and distributors in Japan (B2B)

Where a business in Japan resells or distributes digital goods or services from a foreign supplier in Japan, such businesses will be required to declare and pay consumption tax on behalf of the foreign supplier. The requirement to pay consumption tax is imposed at the time the payment obligation arises, typically when the services are provided or the download is made, and not the date of the actual payment. Further, the foreign supplier will be obligated to inform customers in Japan that the transaction is subject to Japanese consumption tax.

Transactions between foreign suppliers and consumers in Japan (B2C)
A foreign supplier selling to consumers in Japan is required to provide their company name and address in order to obtain a tax registration ID number from the Japanese tax authorities. The company name and tax ID number must be disclosed on the invoice issued by the foreign supplier to the consumer in Japan. Such a foreign supplier must file a tax return in Japan.

This policy change is still developing and we will keep you up to date with any significant changes. To find out more about the Moore Stephens International Technology Group please click here.

Contacts

Mark Ayres