VAT in Japan guide

Japanese consumption tax for digital service providers

Since October 2015 Japan has levied Consumption Tax on cross border sales of electronic services to its consumers.

Where e-services are sold by providers to Japanese resident tax payers, then the customer may account for the Consumption Tax. This may be done through the ‘reverse charge’ mechanism. Suppliers must inform their business customers in advance of their intention to use the reverse charge. In addition, businesses whose sales are >95% B2B are exempted from registering for Consumption Tax for any B2C element.

List of digital services that are the subject of Japanese consumption tax

• E-books,
• streaming media,
• apps,
• cloud-based services and online gaming,
• services that post online ads.

Voice and data telephony services are excluded.

CT rates

The term “taxable supplies” refers to supplies of goods and services that are liable to consumption tax (CT). CT is charged at a flat rate of 8% (6.3% national tax and 1.7% local tax). There is currently no reduced rate available in Japan.

However, a rate increase to 10% is scheduled to take effect from 1 October 2019. At that time, the reduced rate of 8% will apply to the following supplies:

• Supplies of food and drinks, excluding alcoholic beverages and dining out

• Subscriptions to newspapers (limited to newspapers that are issued at least twice a week and feature information on general topics such as politics, economics, society and culture)

Late – registration penalties

There are no penalties applicable for late registration. Penalties apply for late filing/payment.