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Global Business Services

Japan JCT

Foreign | Equipment | Taxable Supplies

Japan VAT Information

In Japan, the value-added tax (VAT/GST) was established in January 1989 under the name Consumption Tax ('CT'). It's quite similar to the value-added tax (VAT) system used in the European Union, in that each sale triggers recalculation and payment of tax to the government.

When a company moves inventory, renders a service, or imports items into Japan, they must pay consumption tax, often known as value-added tax or VAT. The rate was 8%, but it was raised to 10% as of October 1, 2019. There is no tax on exports and certain services provided to foreigners. Certain exchanges are exempt from taxes, including real estate purchases and leases, securities sales, and the delivery of public services.


When Should You Register?

Consumption Tax may be required by law to be charged by international enterprises offering products or services in Japan. Regular tax filings and payment of any remaining CT to the Japanese tax office are part of this ongoing compliance. The use of CT in Japan is often required in the following situations:

  • If the foreign merchant is delivering products inside Japan

  • Importing items into Japan

  • Providing services (such as consultancy, athletic, or artistic performances), etc.

If a foreign merchant is storing or delivering products in Japan but does not have a physical location there, they may be considered a PE (permanent establishment). As a result, their business can be liable to both direct and indirect forms of taxation.

Annual Consumption Tax Compliance Limit

Annual Consumption Tax Compliance Limit

The CT compliance level is YEN 10 million each year, calculated using the prior-base year as the basis. If your company's initial capital is more than 10 million yen, either as a resident company or as a PE of a foreign entity, you must comply with CT immediately.

To simplify the recovery of an input CT, exporters with a taxable supply below this threshold may choose to become taxable enterprises.

Consumption Tax Registration Requirements

Consumption Tax Registration Requirements

The Japanese tax authorities do not require businesses to explicitly register for CT. The first tax return serves as the registration application, and a tax office will be assigned to the firm based on it.

To comply with Japanese tax law, a foreign trader who is not a resident of Japan must designate a tax representative who is a resident of Japan. All interactions between the firm and Japanese tax authorities must be handled by the agent.

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