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Japan reviews Consumption Tax VAT on ebooks

  • Jul 8, 2012 | Richard Asquith

Japan reviews Consumption Tax VAT on ebooks

Japan has announced that it would like to start charging foreign sellers of ebooks over the internet with the local indirect tax, Consumption Tax.  The new charge would come into place in 2014.  The change comes as pressure mounts from local suppliers who are subject to unfair competition from foreign, non-resident ebook sellers who escape the tax under the current regime.

Japan will require sellers of ebooks, such as Amazon’s Kindle, to register as a non-resident trader, and charge, collect and report on Consumption Tax.  The current tax rate is 5%, although Japanese Consumption Tax is set to double to 10% by 2015.

At present, the Japanese ebook market is dominated by Rakuten, which believes it will be facing unfair competition from Amazon as it builds its Japanese language library – resident companies are subject to Consumption Tax.  Amazon’s Japanese position contrasts with Apple’s, which distributes its local sales through a Japanese subsidiary, making it liable to tax. As one point last year, Rakuten look set to base all of its Japanese sales offshore in order to avoid Consumption Tax.

Japan follows EU lead

Last week, the EU announced plans to block reduced VAT in France and Luxembourg on ebooks.  This has been giving Amazon and other sellers a large tax subsidy when selling across Europe.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.