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 not be taxable in Japan.
However, if the SME is having a storage facility in Japan in order to deliver its products for its usual business, it might be considered as a physical presence in Japan, and the business will be therefore taxable in Japan under Japanese tax law.
However the different tax treaties concluded between Japan and EU member states may affect this situation.
Many SMEs originating from EU member states will not be taxable under the classic permanent establishment definition in the Japanese law. A business conducted from abroad, even with products stored in Japan, will not be taxable in Japan for quite a number of EU-member states. This is the case when SMEs are based in the following countries:
For these countries, a business conducted online in Japan from abroad with storage facilities in Japan will be exempted of paying taxes in Japan.