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Japan: Sales of Foreign Online Content to Be Taxed


 By October 2015, Japanese shoppers purchasing ebooks from Amazon will have to pay sales tax.

Currently in Japan, if you buy a book, it’s subject to the 5% consumption tax. That 5% tax will jump to 8% on April 1, 2014.

Currently in Japan, if you buy an ebook from a Japanese corporation, it is subject to the 5%-soon-to-be-8% consumption tax.

However, currently in Japan, if you buy an ebook from a foreign corporation, it is not subject to any consumption tax at all. Foreign corporations include Amazon.com.

Look out e-tailers

Plans are afoot to close the loophole that has long existed for foreign corporations selling electronic content into Japan. According to an official from Japan’s Ministry of Finance, “All cross-border services, not just e-books or music, are being considered (for taxation).” Foreign vendors selling consumer goods in Japan will have to “register with tax authorities and pay the tax.” (CIO News).

It should be said that foreign vendors are not the only beneficiaries of the loophole: savvy Japanese businesses have figured out how to sell to Japanese customers without the consumption tax. For example, Rakuten, the largest Japanese online retailer, acquired the Canadian company Kobo in 2012. “Now the Rakuten Kobo site offers electronic books to Japanese readers without the consumption tax they would pay on purely domestic sites….”

The Japanese government had considered “purchases made through overseas servers as foreign transactions that weren’t subject to the consumption tax.” However, Japan reportedly lost out on approximately 25 billion yen in untaxed online consumer goods and services in 2012 alone. Given that figure, reconsidering Japan’s stance on those transactions seems prudent.

The Japanese government hopes to “close the loophole by October 2015, when the sales tax is slated to rise to 10%.”

Does your company sell globally? How do you handle sales tax around the world?

photo credit: nikkorsnapper via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.