Japanese Consumption Tax on e-services
Japan has levied Consumption Tax on cross border sales of electronic services to its consumers since October 2015. Income from e-services includes: e-books, streaming media, apps, cloud-based services and online gaming, services that post online ads. Voice and data telephony services are excluded.
Determining the place of supply as Japan
To demonstrate whether Consumption Tax is due, providers of e-services will have to identify the place of consumption as Japan. Evidence for this can include:
- Address of the service recipients
- Matched to details of the supplied credit card
Consumption Tax compliance
Consumption Tax registered providers must produce tax invoices. These should include: the name of the provider; Consumption Tax registration number; date of the transaction; description of the services; customer’s details; amount and tax calculation.
Consumption Tax returns are required on an annual basis. Failure to submit returns will result in a fine of 15% of the tax due. Interest at 2.8% is also due for a two-month payment delay, rising to 9.1% per annum for later payments.
Consumption Tax registration
The Consumption Tax registration threshold is Yen 10 million per annum.
When registering, the applicant must provide details of their company, proof of incorporation, business tax number, and address etc., as well as details of a Japanese tax agent – if appointed. They must also detail the nature of the electronic services being sold in Japan.
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.
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