The following domestic business transactions are exempted from Consumption tax:
- Export transactions,
- Transfer or lease of a tangible or intangible asset for use outside of Japan,
- Performance of services for a company resident outside Japan*
- Sales or leases of land,
- Sales of securities and similar instruments,
- Monetary transactions including loans, guarantees, distributions from joint operation trusts or other investment trusts and insurance premiums,
- Specified activities carried out by the central and local governments,
- Medical treatment under public medical insurance law,
- Social welfare activities,
- School tuition and examination services,
- Rental of housing,
- Services related to childbirth, burial and welfare centres for aged and handicapped persons.
Please note that these last transactions may however be taxable under another taxation rules.
All business transactions related to export activities from Japan are not subjected to Consumption tax and only require evidence in writing of the export documents to be added to the annual book keeping records.
For newly established companies in Japan, it is possible to be exempted to pay the Consumption tax when the taxable sales per fiscal year do not exceed JPY 10 million. This decision will be legally binding for two taxable years.
However, in case the taxable sales subjected to Consumption tax exceed the JPY 10 million threshold, the company will have to file a tax return at the local tax office. Moreover, a newly established company whose capital exceeds JPY 10 million cannot be exempted.
Many exemptions of Consumption tax can be applied depending on the business undertaken.
*JCT exemption will depend on where the service is performed. Services provided in Japan to a company resident outside of Japan, such as trade-fair support will be subject to JCT, as Japan's Tax authorities regard this as 'taxable sales' Also, since October 2015, special regime exists for cross-border supply of electronic services, in those instances the so-called 'reverse charge mechanism' applies) See also: KPMG, Taxation in Japan 2019