Japanese VAT rates and VAT compliance

Japan Consumption Tax (JCT) is administered by the National Tax Agency (NTA), an agency under the Ministry of Finance.

Japan applies a standard consumption tax rate alongside a reduced rate for specific essential supplies and zero-rating for exports.

Certain transactions are outside the scope of consumption tax (non-taxable) in Japan. These commonly include:

• Transfers and leasing of land

• Sales of securities, government bonds, and foreign currency

• Interest on loans and insurance premiums

• Medical services covered by Japan’s public health insurance

• Residential rent (commercial rent is taxable at 10%)

• Tuition fees and educational services provided by accredited schools and universities

• Welfare services provided by authorised social welfare providers

• Postal services at face value and related services

These transactions are fundamentally different from zero-rated exports. Exempt transactions do not generate output tax and do not allow recovery of input tax credits on related purchases. Businesses with significant exempt activities must apply the apportionment rules to determine the recoverable portion of their input tax.

A consumption tax registration is required for businesses carrying out taxable activities in Japan, subject to the registration thresholds and exceptions described below.

Japanese-established businesses must register once taxable sales in the base period (the fiscal year ending two full years before the current year) exceed ¥10 million. Below this threshold, registration is not mandatory unless the capital-based exception (stated capital at or above ¥10 million), the large shareholder rule, or the specified period test applies. Businesses below the ¥10 million threshold may register voluntarily for a minimum of two fiscal years to access input tax credits.

Non-established (foreign) businesses supplying B2C digital services to consumers in Japan must register directly with the NTA, or comply through the platform taxation regime (see below) if their services are facilitated by a designated platform operator. For B2B digital services, the reverse-charge mechanism applies and the Japanese business customer accounts for the consumption tax. Foreign businesses making physical supplies in Japan, importing goods, or holding domestic inventory must generally establish a Japanese legal entity through which registration is obtained.

Foreign suppliers of digital services to Japanese consumers must generally register and account for consumption tax at the standard 10% rate from the point at which taxable sales in the base period exceed ¥10 million.

Get more information on consumption tax registration in Japan.

Consumption tax-registered businesses in Japan must file periodic consumption tax returns. Filing frequency is typically:

• Annual: The default for most businesses, with the final return due within two months of the fiscal year-end. This is the same deadline as the corporate income tax return.

• Quarterly: Required where the prior fiscal year’s consumption tax liability exceeded approximately ¥4.8 million but was less than approximately ¥48 million.

• Monthly: Required where the prior fiscal year’s consumption tax liability exceeded approximately ¥48 million.

Returns include output tax on taxable sales and creditable input tax on qualifying purchases, supported by qualified invoices under the Qualified Invoice System. All filings are submitted electronically through the NTA’s e-Tax system.

Get more information on consumption tax returns in Japan.

Foreign businesses storing goods in Japan must consider consumption tax registration obligations if those goods are held for domestic sale. Holding inventory within Japan for resale — for example in a bonded warehouse or third-party fulfilment centre — typically requires the foreign business to establish a Japanese legal entity and register for consumption tax. Importing goods into Japan triggers consumption tax at customs clearance, particularly where the foreign business acts as the importer of record.

Consumption tax is generally payable on the importation of goods into Japan.

• Import consumption tax is due at customs clearance, calculated on the customs value of the goods (CIF: cost, insurance, and freight) plus applicable customs duties.

• The standard import consumption tax rate of 10% applies to most goods; the reduced rate of 8% applies to qualifying food and non-alcoholic beverages.

• Consumption tax-registered businesses applying the credit method may recover import consumption tax as input tax, provided the goods are used for taxable activities and the customs import declaration is retained as the supporting document.

• Import consumption tax on goods used for non-taxable (exempt) activities or personal consumption is not recoverable.

Foreign businesses supplying digital services — including ebooks, streaming content, music, software, cloud services, SaaS, online platforms, and electronically supplied advertising — to recipients in Japan are subject to Japanese consumption tax obligations.

The applicable regime depends on the transaction type:

• B2B digital services: The reverse-charge mechanism applies. The Japanese business customer self-assesses and remits the consumption tax on its return. The foreign supplier is not required to register for or remit consumption tax on B2B transactions.

• B2C digital services: The foreign supplier must register with the NTA and charge, collect, and remit consumption tax at 10% on supplies to Japanese consumers (individual and certain business recipients). The base period ¥10 million threshold applies.

• Platform taxation: Where a foreign supplier provides B2C digital services through a designated platform operator — a platform whose facilitated services exceed ¥5 billion annually — the designated platform is treated as the deemed supplier and is responsible for filing and paying consumption tax. The foreign supplier is relieved of its own registration and payment obligations for those services and is not required to issue qualified invoices for them.

Japan does not operate a simplified VAT registration regime equivalent to the EU One-Stop Shop. Foreign B2C digital service providers that are not covered by the platform taxation regime must register directly and appoint a Japanese tax agent.

Consumption tax-registered businesses applying the credit method may recover input tax incurred on taxable business purchases by offsetting it against output tax on their consumption tax returns. Recovery requires retention of a qualified invoice from a registered qualified invoice issuer — a document containing the supplier’s T-number, applicable tax rates, and tax amounts separated by rate.

Japan does not operate an EU-style nonresident consumption tax refund scheme. Foreign businesses not established in Japan and not registered for consumption tax generally cannot recover Japanese input tax. Nonresidents that register through a Japanese tax agent may recover input tax through their consumption tax returns in the ordinary way.

Japan applies zero-rating to qualifying exports of goods and to services supplied to nonresidents and consumed entirely outside Japan. Zero-rating allows consumption tax to be charged at 0% while preserving the right to recover all related input tax, provided the relevant documentary requirements — including export declarations and customs records — are met and retained. Export-oriented businesses commonly accumulate persistent refund positions and may elect to shorten their taxable period to quarterly or monthly to accelerate refund claims.

Businesses must issue qualified invoices containing all seven mandatory elements:

• Supplier name and T-number (T + 13 digits)

• Transaction date

• Description of goods or services

• Tax-exclusive consideration amount, separated by applicable tax rate (10% or 8%)

• Consumption tax amount, separated by applicable tax rate

• Name or other identifier of the recipient (for invoices of ¥50,000 or more)

Qualified invoices are the sole basis for claiming input tax credits in Japan. Invoices from suppliers without a registered T-number do not support full input tax credit claims; only the transitional credits (80% until September 2026, then 50% until September 2029, then zero) may apply.

Under the Electronic Books Preservation Act (電子帳簿保存法), documents received electronically must be stored in electronic form. Printed copies of electronically received invoices are not compliant for record-keeping purposes. Records must generally be retained for seven years.

Time-of-supply rules:

• Goods: Consumption tax generally becomes chargeable when the goods are transferred or delivered, or when consideration is received, whichever occurs first.

• Services: Consumption tax is generally due when the service is completed or when consideration is received, whichever occurs first.

• Imports: Consumption tax is due at customs clearance.

Japan does not operate a real-time invoice clearance or SAF-T reporting regime. Compliance is monitored through periodic consumption tax returns and NTA audits. Consumption tax returns and payments are due within two months of the fiscal year-end (for most corporations) or by 31 March (for sole proprietors), with interim payment obligations for businesses above the applicable prior-year liability thresholds.