Question

We are in Japan for business activities, companies that are providing us with services charge us Consumption Tax. Can we get a refund of the Consumption Tax paid in Japan?

Answer

You can only receive a return of Consumption Tax paid in Japan, if you have taxable sales within Japan with in a base period.

Example: You are participating in a trade-fair in Japan to find new business partners and had to pay the organizers and transporters of materials. They will charge you consumption tax. Because you do not have any direct sales in Japan, you cannot claim repayment of CT.

Example: You are organizing trips to Japan and are cooperating with Japanese event companies to entertain participants. As the activities are taking part in Japan, you are charged Consumption tax. Because your customers are not Japan residents, you do not have taxable sales subject to CT. Therefore you are not eligible for a tax return.  

Question

What are the effective corporate tax rates in Japan?

Answer

The Japanese government has adopted a policy to lower the effective corporate tax rates in recent years. Current effective corporate tax rates are available here.

For SMEs, i.e. companies capitalized at less than 100 million yen, special treatment exists. The government currently employs a special tax benefits program, where corporate taxation is lowered to 15% from the usual 19%. This program was extended for another two years from April 2019 onwards, until March 2019.

(Last update: December 2019)

Question

How do I avoid double taxation?

Answer

If your income is taxable in Japan and you wish to prevent being taxed for your income in Japan again in your country, or vice-versa, you will need to notify the tax authorities. One of the first things you need to do is to check whether your country of residence has concluded a tax treaty with Japan. For a list of EU countries that have concluded tax treaties with Japan can be found here.

If you wish to be taxed on your Japanese income in your country:

- You will have to notify the Japanese tax authority that you are a resident in your country, please consult with your local tax office.

You wish to be taxed on your Japanese income in Japan:

- You will have to notify the tax authority in your country that you are a resident there. You can apply for a document certifying that you are a resident of Japan, using this form at the tax office for the area that you live.

(Last update: December 2019)

Question

What is the Consumption Tax rate in Japan?

Answer

Japan has introduced a diversified consumption tax system in October 2019. For most goods and services the current rate is 10%, which includes a 2.2% local consumption tax rate. A reduced tax rate of 8% is applied to sales of food and beverages and subscriptions to newspapers. This 8% rate includes a 1.76% local consumption tax rate. For alcoholic drinks and dining out etc. the 10% rate applies.  

(Last update: December 2019)

Question

What are the rules regarding travel and commuting allowances and taxation in Japan?

Allowances and income tax

The allowances paid to employees are usually regarded as part of their income and therefore taxable. However, normal expenses to a certain amount for business-travel and commuting are usually non-taxable (J). 

Nontaxable allowances are:

  • Commuting allowances (J) up to a certain amount:
    • Public transportation: Using the most economical route, to a maximum of 150.000 JPY per month. (Upper class costs for Shinkansen (green cars) not included)
    • Private transportation: The total of expenses up to 150.000 JPY per month for
      • § The amount for regular monthly commuter tickets when using public transport
      • § The maximum amounts paid for one-way distance for travelling to work by private means

One way commuting distance

Maximum monthly amount

Less than 2 kilometers

Fully taxable

2-10 kilometers.

4,200 JPY

10-15 kilometers

7,100 JPY

15-25 kilometers

12,900 JPY

25-35 kilometers

18,700 JPY

35-45 kilometers

24,400 JPY

45-55 kilometers

28,000 JPY

More than 55 kilometers

31,600 JPY

Source: NTA

  • Travel costs for business trips or job transfers, which have been designated as normally necessary costs
  • Allowances for night or day duties up to a certain amount.

 

Commuting and business travel allowances and VAT

Normal domestic travel expenses, hotel costs and daily allowances paid to cover employees’ costs are taxable for VAT. However expenses made for business travel abroad are not taxable.

Expenses made for commuting within the normal range are also VAT taxable for the whole amount.

Source: NTA

(Last update: December 2019)

Do the Japanese tax authorities exchange tax information with other countries?

Yes, Japan participates in the OECD-developed Common Reporting Standard (CRS) an international standard to automatically exchange information on financial accounts of non-resident companies, in order to address tax evaxsion and avoidance through offshore accounts. With most of the EU-member states this takes place automatically. A list of countries Japan makes exchanges with is available here.  (Source: NTA

(Last update: April 2021)

We are selling our products electronically through online platforms. Do we need to pay Consumption Tax? 

In case of cross-border supplies of electronic services, such as online games, Japan has a special arrangement in place. Information on this is available here

Whether you will be obliged to pay CT in Japan, will depend firstly on the amount of taxable sales you generate in Japan during a business year. There is a exemption threshold of ¥10 million. If your sales are below this threshold, you do not need to file for CT and you can keep to CT charged.

If the sales you generate in Japan are higher than this threshold, you will need to file for taxes.  Normally, this needs to be done within 3 months after the end of the business year. Japan currently does not have a system where you need to register for CT.  If you need to file for taxes, and you do not have a legal presence in Japan, you will need to appoint a tax agent. This can be anybody (including private persons) with a legal residence in Japan, who can file tax declaration on your behalf. If you do not have somebody in Japan who can act as your tax agent, the Helpdesk will be happy to introduce you to one of the tax attorney we work with.

(Last update: April 2021)

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