FAQ on Japanese Consumption Tax (JCT) for Overseas Businesses
This page summarizes frequently asked questions related to the Japanese Consumption Tax (JCT).
Table of Contents
1.JCT Basics
Q1-1:
What is an overview of the Japanese Consumption Tax?
A:
Please refer to this article: Introduction to Japanese Consumption Tax (JCT).
Q1-2:
What is the difference between “hikazei” (非課税) and “fukazei” (不課税)?
A:
Both terms refer to transactions that are not subject to tax, but they have different meanings in Japanese.
Hikazei (非課税): Refers to transactions exempt from tax for policy reasons, such as basic necessities.
→ “非 (non)” + “課税 (taxation)”
Fukazei (不課税): Refers to transactions that are inherently outside the scope of taxation.
→ “不 (non)” + “課税 (taxation)”
Though both may be translated as “tax-exempt,” more accurate translations are:
Hikazei: “non-taxable”
Fukazei: “tax-free”
Refer to this article for more details.
2.JCT Registration
Q2-1:
Can foreign businesses without a physical presence in Japan register as Qualified Invoice Issuers?
A:
Yes. Even if a business has no physical presence in Japan, it may register as a Qualified Invoice Issuer. In such cases, a tax agent in Japan will need to be appointed.
Q2-2:
How is the registration number notified to foreign businesses?
A:
Once registration is complete, the tax office sends a registration notice with the number to the tax agent. The format is the same as Japanese companies: “T” followed by 13 digits.
Q2-3:
What happens if I don’t register as a Qualified Invoice Issuer?
A:
You won’t be able to issue Qualified Invoices, meaning your customers cannot claim input tax credits, which can disadvantage you in B2B transactions.
Q2-4:
How long does it take to get JCT registered?
A:
For domestic companies, around 1 month. For foreign companies, it generally takes longer. Early and accurate submission is essential.
For more details, please refer to this article.
Q2-5:
When does the JCT registration become effective?
A:
It becomes effective from the Registration Date, not the Notification Date. This means your status may be valid before the notice arrives.
For more details, please refer to this article.
Q2-6:
Can a foreign company with no physical presence in Japan still have JCT obligations?
A:
Yes. From October 2024, if your taxable sales exceeded ¥10 million during a specific base period or if you register as an invoice issuer, you may become a taxable business. Foreign companies are judged solely by sales, not salary payments. There are also capital size thresholds.
Q2-7:
Can foreign businesses apply for the simplified taxation or 20% special provision?
A:
No. From October 2024, foreign businesses without a permanent establishment in Japan cannot use these schemes. Regular JCT reporting is required.
For more details, please refer to this article.
Q2-8:
Is JCT registration necessary if our annual sales onAmazon is under ¥10 million?
A:
Not in principle, but Amazon requires either a JCT number or a declaration that you are tax-exempt.
For more details, please refer to this article.
Q2-9:
Are there advantages to voluntary JCT registration?
A:
Yes. Some key advantages include:
- Ability to issue Qualified Invoices (improves trust in B2B)
- Ability to deduct input tax credit (e.g., FBA fees, import JCT)
- Enhanced credibility and sales continuity on platforms like Amazon
Keep in mind that JCT filing becomes mandatory once registered.
3.Qualified Invoices
Q3-1:
Do foreign currency invoices require a JPY amount?
A:
Yes. The consumption tax amount for each tax rate must be shown in Japanese yen. Other figures may be in foreign currency.
For more details, please refer to this article.
Q3-2:
How can I check if an invoice from a foreign business meets Japanese JCT requirements?
A:
Check if it includes a valid JCT registration number (T+13 digits). Use the National Tax Agency’s website to verify the number and corresponding company name.
Q3-3:
How do I convert the JCT amount denominated in a foreign currency to JPY?
A:
There are four methods that are permitted:
1. Convert pre-tax amount to JPY → apply tax rate.
2. Convert tax-included amount to JPY → reverse-calculate tax (e.g., 10/110).
3. Calculate tax in foreign currency → convert to JPY.
4. Reverse-calculate tax in foreign currency → convert to JPY.
Use TTM (average of TTS/TTB on transaction date). Consistent use of invoice or settlement date rates is also acceptable.
4.Input Tax Credit
Q4-1:
Can Japanese companies claim input tax credit on purchases from foreign suppliers?
A:
Yes, if:
- The supplier is a registered Qualified Invoice Issuer.
- A compliant JCT invoice is received and retained.
Otherwise, no credit can be claimed unless transitional measures apply.
For more details, please refer to this article.
Q4-2:
Can import consumption tax always be credited? I do not have physical presence in Japan.
A:
No. Only if you are the Importer of Record (IOR). If another party (e.g., logistics firm) is the IOR, you generally can’t claim the credit. If you have no physical presence in Japan, you will need to appoint an ACP to become an IOR.
For more details, please refer to this article.
5.IOR / ACP
Q5-1:
Can a non-resident company become the IOR?
A:
Yes, by appointing an ACP (Attorney for Customs Procedures) in Japan.
For more details, please refer to this article.
Q5-2:
Can we continue using logistics firms as IOR after October 2023?
A:
No. Following regulatory changes, using third parties as IOR for non-sale imports is no longer allowed. The non-resident company must be the IOR, requiring an ACP.
For more details, please refer to this article.
6.Overseas Transactions
Q6-1:
Does JCT apply to services or goods purchased from overseas?
A:
Yes, in cases such as:
Digital services for businesses (e.g., SaaS, cloud)
→ The Japanese buyer pays JCT.
Events held in Japan by foreign entities
→ JCT applies to the Japanese host.
Imports
→ JCT is due when goods are withdrawn from bonded areas.
Refer to the linked articles for further information.
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