Public Procurement

E-business can easily follow the definitions of a permanent establishment in order to determine the taxable situation of a company doing business in Japan. If a SME is conducting business in Japan online without having any physical presence in Japan, it will generally speaking not be taxable in Japan.

For the cross-border supply of a number of services a different regime as far as consumption tax is concerned is in place since 2015.

Main points

• Tax treaties will modify the scope of exposure to Japanese taxes for a foreign company
• Many tax exemptions may apply to a foreign company
• In order to benefit from tax exemptions, the company has to notify the relevant Japanese tax office

Most of the European Union member states have signed a bilateral tax convention with Japan in order to avoid double taxation,  to prevent tax evasion

Under Japanese Tax Law, Japanese companies are taxed on their worldwide income, while foreign companies are taxed only on the income earned from their activities in Japan. A Japanese company is defined as a company whose head office or main office is located in Japan (usually when the company is firstly created and registered in Japan), the nationality of its shareholders or place of central management is not relevant. Companies other than this are regarded as foreign companies.

Accounting and tax support is provided by certified public accountants and tax accountants. The role of certified public accountants is to perform audits under the Certified Public Accountant Law, while tax accountants engage in typical tax agent services such as the preparation of tax documentation and giving tax consultations under the Certified Tax Accountant Law. Additionally, both professions provide additional services such as business consulting.