Japanese VAT registration

In Japan, the requirement to register for consumption tax (JCT) depends on whether the business is established in Japan, the level of taxable sales in the base period, and — for newly incorporated entities — the company’s stated capital at the time of incorporation.

For Japanese-established businesses, consumption tax registration is generally required once taxable sales in the base period — the fiscal year ending two full fiscal years before the current year — exceed ¥10 million. This is the primary statutory threshold under the Consumption Tax Act. Businesses below this threshold are classified as tax-exempt enterprises and are not required to register unless they choose to do so voluntarily or meet one of the override conditions described below.

The base period threshold is subject to several important exceptions:

• Capital-based exception: If a company’s stated capital is ¥10 million or more at the time of incorporation, consumption tax obligations begin from the first fiscal year regardless of actual sales. This exception is particularly significant for foreign companies, as most foreign subsidiaries established in Japan are capitalised above ¥10 million. Such companies have no startup exemption period and must register from day one.
  
• Large shareholder rule: If a company’s stated capital is below ¥10 million but a shareholder holding 50% or more of the company had taxable sales exceeding ¥500 million in the base period, the company is treated as a taxable enterprise from its first fiscal year.
  
• Specified period test: If taxable sales — or, for domestic businesses, total payroll — in the first six months of the preceding fiscal year exceed ¥10 million, the company becomes a taxable enterprise in the current fiscal year regardless of base period sales.

Businesses below the ¥10 million threshold may elect voluntary registration to recover input tax credits on purchases. Voluntary registration creates a mandatory minimum commitment of two fiscal years — once elected, the election cannot be revoked for at least two years.

There is no consumption tax registration threshold for nonresident businesses supplying digital services to consumers in Japan (B2C). Nonresident businesses cannot rely on the standard base period threshold exemptions used by domestic businesses to delay or avoid registration obligations. Foreign businesses providing B2C digital services must register from the first taxable supply. For B2B digital services, the reverse-charge mechanism applies and the Japanese business customer accounts for the consumption tax, removing the need for the foreign supplier to register.

Japan has no equivalent simplified foreign supplier regime; nonresident B2C digital service providers must register directly with the National Tax Agency or appoint a Japanese tax agent to do so on their behalf.

Foreign businesses may need to register for Japanese consumption tax if they engage in activities such as:
 

• Importing goods into Japan (imports are subject to consumption tax at customs clearance)
• Selling goods within Japan through a permanent establishment, branch, or domestic inventory
• Providing B2C digital services — including software, streaming platforms, online content, cloud services, and SaaS — to Japanese consumers, from the first taxable supply
• Making domestic business-to-consumer (B2C) supplies of goods or services within Japan
• Holding inventory in Japan (for example, in a warehouse or fulfilment centre) for resale
• Running ecommerce operations delivering taxable goods into Japan
• Registering as a qualified invoice issuer under the Qualified Invoice System, regardless of sales volume, to enable B2B customers to claim full input tax credits

For B2B digital services, the reverse-charge mechanism generally applies and no registration is required unless the foreign supplier also makes B2C supplies or elects qualified invoice issuer registration.

Consumption tax registration in Japan involves two separate but related processes: filing a taxable enterprise notification and, separately, registering as a qualified invoice issuer under the Qualified Invoice System. Both are submitted to the National Tax Agency (NTA).

Applicants typically need to provide:
 

• A completed taxable enterprise notification form (消費税課税事業者届出書) submitted to the competent tax office
• For qualified invoice issuer registration: a completed Qualified Invoice Issuer Registration Application (適格請求書発行事業者の登録申請書) — this may be submitted simultaneously
• Certificate of incorporation or equivalent founding document
• Legal representative details: name, role, and identification document (passport for foreign representatives)
• Description of business activities and the nature of taxable supplies to be made in Japan
• Tax agent notification form (納税管理人の届出書) — mandatory for nonresident businesses without a permanent establishment in Japan; the tax agent must be a resident individual or Japanese corporate tax practitioner
• Power of attorney authorising the tax agent to act on the applicant’s behalf

Domestic businesses and those with a valid Japanese digital identity may register via the NTA’s e-Tax system. Foreign companies without a Japanese entity or Japanese digital identity cannot register online and must submit the application by post to the NTA’s designated regional registration centre or through an appointed Japanese tax agent. Registration is typically processed within two to four weeks of a complete application being received.

Consumption tax registration should generally be completed before taxable supplies begin, as late registration may result in penalties and backdated consumption tax assessments.

• Structure: T + 13 digits for corporations — the “T” prefix followed by the entity’s corporate number (法人番号) already assigned at the time of incorporation. Sole proprietors and nonresident entities without a Japanese corporate number receive a separately assigned 13-digit number.
• The registration number is publicly searchable through the NTA’s online qualified invoice issuer registry, enabling buyers to verify a supplier’s registration status before claiming input tax credits.
• Used for qualified invoice issuance, consumption tax reporting, and all interaction with the National Tax Agency.

After registering for consumption tax in Japan, businesses must comply with ongoing obligations, including:

• Filing periodic consumption tax returns — annually for most businesses with base period taxable sales below ¥100 million (due within two months of the fiscal year end); quarterly or monthly interim payments are required for larger businesses
• Charging and collecting consumption tax at the applicable rates (standard rate 10%; reduced rate 8% for qualifying food, non-alcoholic beverages, and newspaper subscriptions meeting prescribed criteria)
• Issuing qualified invoices in accordance with Japan’s Qualified Invoice System, containing all seven mandatory elements including the T-number, transaction date, description, amount by tax rate category, and consumption tax amount by rate
• Maintaining consumption tax records — including qualified invoices received and issued — in accordance with Japan’s Electronic Books Preservation Act (電子帳簿保存法), which mandates electronic storage of electronically received documents
• Claiming input tax credits against output tax where applicable, supported by qualified invoices from registered suppliers
• Paying consumption tax due by the statutory deadlines

Failure to comply with Japanese consumption tax requirements may result in penalties, interest charges, and enforcement action by the National Tax Agency, particularly in cases of late registration, failure to issue qualified invoices, incorrect filings, or unpaid consumption tax liabilities.