Attention foreign businesses exempt from consumption tax!

This article highlights key changes and considerations from the 2024 Japanese consumption tax amendments that affect foreign corporations.

The 2024 tax reforms in Japan brought some significant updates to the consumption tax rules, particularly for foreign businesses engaging in transactions with Japanese customers.

These changes could have a big impact on companies operating in Japan without a local presence, so we’re breaking down the essentials for managers, finance teams, or anyone overseeing a foreign company’s Japanese operations.

Read on to get the key points you need to understand!

Table of Contents

1. Updates to the “Special Taxable Sales Period” Exemption for Foreign Businesses
2. Revised Tax Exemption Rules for Foreign Companies Starting Business in Japan
3. Adjustments to Criteria for “Specified Newly Established Corporations”
4. Changes to Simplified Tax Regimes for Foreign Businesses Without a Permanent Establishment
5. Wrap-Up

1. Updates to the “Special Taxable Sales Period” Exemption for Foreign Businesses

Previously, all businesses—whether domestic or foreign—were subject to consumption tax if their taxable sales during a specific period (usually the first six months of the prior year) exceeded ¥10 million, even if their full-year taxable sales from two years prior (the base period) were below that threshold.

Companies could also use total payroll expenses as an alternative measure to determine this ¥10 million threshold.

Under the 2024 amendment (effective for tax periods starting after October 2024), foreign businesses can no longer use payroll expenses to assess this specific period.

Now, if your taxable sales in that six-month window exceed ¥10 million, you’re liable for consumption tax—regardless of payroll figures.

This shift means foreign companies need to keep a closer eye on their Japanese sales figures to avoid unexpected tax obligations.

Illustrative Example:

• Current fiscal year: January 1, 2025 – December 31, 2025
• Base period (N-2): January, 2023 – December 31, 2023
• Base period taxable sales: 1,000,000 JPY
• Special Taxable Sales Period (six-month window): January 1, 2024 – June 30, 2024
• Special Taxable Sales Period taxable sales: 15,000,000 JPY

Tax status: Taxable and will need to file JCT tax returns in FY2025

Reason: Though the base period taxable sales was below 10,000,000 JPY, the taxable sales during the Special Taxable Sales Period was more than 10,000,000 JPY.

2. Revised Tax Exemption Rules for Foreign Companies Starting Business in Japan

For companies without a base period (typically the two years prior to the current fiscal year), tax exemptions used to hinge on the amount of capital or investment at the start of the year.

If that amount was ¥10 million or more, the exemption didn’t apply.

Even with less than ¥10 million, newly established companies meeting certain “specified” criteria were also ineligible for exemptions.

The 2024 update (effective for tax periods starting after October 2024) clarifies this for foreign businesses kicking off operations in Japan.

If a foreign company with an existing base period begins taxable transactions in Japan after the end of that period, the current business year is treated as having no base period.

In this case, exemption status depends solely on the capital or investment amount at the year’s start.

For example, a foreign company with a September 2025 year-end that starts business in Japan during that year won’t have a base period until the 2027 fiscal year.

Until then, if its starting capital is ¥10 million or more—or if it meets the “specified newly established corporation” criteria—it’ll owe consumption tax from the get-go.

3. Adjustments to Criteria for “Specified Newly Established Corporations”

Newly established companies with less than ¥10 million in capital and no base period can lose their tax exemption if they’re classified as “specified newly established corporations.”

This happens when:

Another entity owns more than 50% of the new company’s shares (directly or indirectly), or otherwise controls it; and

That controlling entity (or a related company) had taxable sales exceeding ¥500 million in a period equivalent to the new company’s base period.

The 2024 amendment (effective for tax periods starting after October 2024) expands this second condition.

Now, it’s not just taxable sales in Japan that count—if the controlling entity’s total revenue (including overseas income) exceeds ¥5 billion, the exemption is off the table.

This broader scope could catch more foreign businesses off guard, so double-check your parent company’s global figures.

4. Changes to Simplified Tax Regimes for Foreign Businesses Without a Permanent Establishment

Foreign businesses operating in Japan without a permanent establishment (like a branch or factory) have historically been subject to consumption tax unless exempt.

Two helpful options—Japan’s Simplified Taxation System (which estimates input tax based on sales) and the “20% Special Rule” (a tax relief measure for small businesses transitioning to invoicing requirements)—were available to lighten the load.

The 2024 amendment (effective for tax periods starting after October 2024) shuts this door for foreign businesses without a permanent establishment in Japan as of the tax period’s start date. If you don’t have a physical presence, you can’t use these regimes anymore, which could mean a higher tax burden and more complex calculations.

5. Wrap-Up

The 2024 consumption tax amendments have cleared up some gray areas for foreign businesses, but they’ve also tightened the rules.

If you’re selling to customers in Japan without a local office, now’s the time to assess whether you’re liable for consumption tax under these new conditions.

From tracking taxable sales to reviewing your capital structure, a little preparation can save you from surprises down the road.

Who in Japan Can Help Me With This and Other JCT Challenges?

Japan Professional Alliance can offer immediate assistance in complying with Japanese Consumption Tax and other Japanese Tax requirements that you may have.

We offer a comprehensive JCT solution that will help you meet the minimum requirements of JCT at an affordable price.

All work will be led by bilingual CPAs fluent in English and Japanese.

• Assess whether the transaction with your Japanese customer is subject to JCT
• Complete your registration as a “Qualified Invoice Issuer” with the Japanese Tax Authorities
• Provide you with an invoice template that meets the requirements of a “Qualified Invoice”
• Act as your tax agent in Japan
• Prepare and submit Japanese consumption tax returns
• Make tax payments to the tax authorities on your behalf

Reach Out To Us!

Reach out to us using the contact form below and let’s schedule a call to discuss next steps!

The post You May No Longer Be Exempt from JCT (Japanese Consumption Tax) appeared first on Japan Professional Alliance.

The invoice system is scheduled to start on October 1, 2023.

In order to become a qualified invoice issuer, it was necessary to complete the registration application by March 31, 2023.

However, the deadline has now been extended to September 30, 2023.

This article will explain the background of the deadline extension, the registration status of qualified invoice issuers as of March 2023, and important points to note regarding the timing of application.

Why was the Deadline Extended?

As mentioned earlier, until now, the registration application for qualified invoice issuers had to be completed by March 31, 2023.

However, in the tax reform outline approved by the cabinet in December of 2022, it was decided to extend the deadline to September 30, 2023.

The extension is intended to allow more time and resources for establishing a system to accommodate invoice registration, as well as to increase the number of registrants by extending the application period, considering the low number of businesses that completed the application by the initial deadline.

Under the previous rules, if you applied for registration after the initial invoice registration application deadline of March 31, 2023, you were required to state the “difficult circumstances preventing the submission of the registration application by the deadline”.

With the extension of the deadline, this statement is no longer necessary.

Registration Status of Qualified Invoice Issuers

The National Tax Agency reported the registration status of invoices in a meeting on April 24, 2023.

The breakdown of taxable and tax-exempt businesses was disclosed as follows:

Entities:
Total registrations: 1,822,000
Taxable businesses: 1,681,000 (approximately 88% of registrations)
Tax-exempt businesses: 147,000

Sole entrepreneurs:
Total registrations: 856,000
Taxable businesses: 575,000 (approximately 53% of registrations)
Tax-exempt businesses: 281,000

Furthermore, the cumulative number of applications submitted by the end of the original application period (end of March 2023) was approximately 3.2 million.

It is estimated that about 2.68 million applications were from taxable businesses, indicating that about 90% of all taxable businesses have applied.

Approximately 95% of taxable entities and 75% of individual businesses are reported to have submitted applications.

Source:
https://www.cas.go.jp/jp/seisaku/tekikaku_seikyusyo/dai2/siryou.pdf

Don’t Wait Until the Last Minute to Register

As of May 15, 2023, the application and registration process for domestic businesses takes approximately:

– 1.5 months for e-Tax submission
– 3 months for paper-based submission

It is expected to take even longer for foreign companies (currently around 3 months).

Even though the deadline has been extended, it is better to prepare for the application in advance.

For any questions or requests regarding your JCT registration, JPA is here for you!

Please feel free to contact us through the inquiry form for any questions.

The post The JCT Qualified Invoice Issuer Registration Deadline has been Extended appeared first on Japan Professional Alliance.

In previous articles, we’ve been covering the upcoming changes to JCT.

Upcoming Changes to Japanese Consumption Tax in 2023

The important points are:

1. Japanese tax authorities will be introducing the JCT Qualified Invoice System in 2023
2. Only Qualified Invoices can be deducted when your customer files a consumption tax return
3. Only Qualified Invoice Issuers can issue qualified invoices
4. In order to become a qualified invoice issuer, you need to register as such with the tax authorities by March 31, 2023

In this article, we’ll be covering the registration process in becoming a JCT Qualified Invoice Issuer.

Let’s dive in!

JCT Qualified Invoice Issuer Registration

What do I need to do to register as a Qualified Invoice Issuer under JCT?

Before we get into the actual registration process, let’s first understand that only taxable businesses (taxable for consumption tax purposes) are permitted to register as a Qualified Invoice Issuer.

If you are currently tax exempt, you will need to give up the exempt status if you decide to become a Qualified Invoice Issuer.

With that in mind, let’s proceed.

Businesses seeking to register as a Qualified Invoice Issuer must submit a registration application form to the head of the tax office in charge of their tax jurisdiction.

The registration application form can be submitted using e-Tax, which is an online system provided by the Japanese National Tax Agency (NTA) for filing and paying taxes electronically.

Sole proprietors can also use their smartphones to complete the registration procedures.
If submitting the registration application form by mail, it should be sent to the invoice registration center at the National Tax Agency.

The head of the tax office that receives the registration application form will, if the registration is not denied, enter the required information into the Qualified Invoice Issuer Registration Directory and notify the business of their registration.

Additionally, the following information of the Qualified Invoice Issuer will be displayed on the NTA’s website.

1. The name of the Qualified Invoice Issuer
2. For entities, the location of the main office (Sole proprietors may request that their business name and location of business be disclosed)
3. For foreign businesses (excluding Specified Foreign Businesses; foreign businesses that have no office, business or similar presence within Japan), the location of the office, business or similar presence in Japan
4. Registration number
5. Registration date
6. Termination or Expiration date of registration

We Can Take Care of the JCT Registration For You

Japan Professional Alliance can offer immediate assistance in complying with the new “Qualified Invoice System” and other Japanese Tax requirements that you may have.

We offer a comprehensive JCT solution that will help you meet the minimum requirements of JCT at an affordable price.

All work will be led by bilingual CPAs fluent in English and Japanese.

• Assess whether the transaction with your Japanese customer is subject to JCT
• Complete your registration as a “Qualified Invoice Issuer” with the Japanese Tax Authorities
• Provide you with an invoice template that meets the requirements of a “Qualified Invoice”
• Act as your tax agent in Japan
• Prepare and submit Japanese consumption tax returns
• Make tax payments to the tax authorities on your behalf

Reach Out To Us!

Reach out to us using the contact form below and let’s schedule a call to discuss next steps!

The post How to Register as a JCT Qualified Invoice Issuer appeared first on Japan Professional Alliance.

As mentioned in our previous post, the Japanese Consumption Tax (JCT) will be going through major changes in 2023.

Upcoming Changes to Japanese Consumption Tax in 2023

The key points regarding these changes are:

1. Japanese tax authorities will be introducing the JCT Qualified Invoice System in 2023
2. Only Qualified Invoices can be deducted when your customer files a consumption tax return
3. Only Qualified Invoice Issuers can issue qualified invoices
4. In order to become a qualified invoice issuer, you need to register as such with the tax authorities by March 31, 2023

In this post we will cover the requirements regarding the Qualified Invoice.

1. Is there a mandatory format?
2. What information needs to be on the Qualified Invoice?
3. What will a Qualified Invoice actually look like?

Let’s find out!

Is there a mandatory JCT Qualified Invoice format?

The short answer is no, there is no mandatory format that is required by law or other regulations. (Source: Question 25 of the “Q&A on the storage method of eligible invoices etc. under the system for deductible input tax on consumption tax”)

As long as the document includes the “necessary information”, it will be considered a Qualified Invoice, regardless of the name of the document.

For example, such documents are often referred to as the following in practice:

• Invoices
• Delivery Slips
• Receipts

What information needs to be on the Qualified Invoice?

The following information needs to be displayed on a Qualified Invoice

1. The name and registration number of the issuer of the qualified invoice
2. The date of transfer or other disposition of the taxable asset (*)
3. The content of the asset or service related to the transfer or other disposition of the taxable asset (if the transfer or other disposition of the taxable asset is a transfer or other disposition of reduced-rate asset, the content of the asset and the fact that it is a transfer or other disposition of reduced-rate asset)
4. The total of the tax-excluded or tax-inclusive amount of the taxable asset for each tax rate, and the applicable tax rate
5. The consumption tax amount, etc., for each tax rate
6. The name of recipient of the invoice

* If a qualified invoice is prepared for multiple transfers or other dispositions of taxable assets made during a certain period within the same tax period, that period can be used instead of a single date.

What if my invoice is denominated in a foreign currency?

The yen amount of “the consumption tax amount, etc., for each tax rate” will need to be displayed on such invoices.

The other amounts may be in foreign currencies.

(Source: Question 59 of the “Q&A on the storage method of eligible invoices etc. under the system for deductible input tax on consumption tax”)

There are several ways to do the calculation:

1. Calculate consumption tax etc. after converting the total of the tax-excluded amount of the taxable asset for each tax rate (foreign currency tax-excluded) into yen.
2. Calculate consumption tax etc. after converting the total of the tax-inclusive amount of the taxable asset for each tax rate (foreign currency tax-excluded) into yen.
3. Calculate consumption tax etc. in the foreign currency using the total of the tax-excluded amount of the taxable asset for each tax rate (foreign currency tax-excluded), then converting that into yen.
4. Calculate consumption tax etc. in the foreign currency using the total of the tax-inclusive amount of the taxable asset for each tax rate (foreign currency tax-excluded), then converting that into yen.

The foreign currency conversion should be done in a way that is in accordance with income tax law and corporate tax law.

However, when such calculations are difficult when issuing the invoice, other reasonable methods may be used, with the condition that they are applied continuously.

Such methods may include using the exchange rate on the invoice issuance date or settlement date.

What will a Qualified Invoice Actually Look Like?

An actual qualified invoice could look something like this (prepared by the author).

You can find the template at the following link which will take you to Google Sheets.

Create a copy of the file on your Google Drive and off you go!

We have a Japanese version of the Qualified Invoice in there too.

(Updated January 17, 2023) Added dollar denominated version (English)

(Updated February 1, 2023) Added bitcoin denominated version (English)

JCT Qualified Invoice Sample Template (Google Sheets)

Who is exempt from issuing Qualified Invoices?

Depending on the nature of the business a Qualified Invoice Issuer is in, it may not be realistic to issue a Qualified Invoice for all transactions.

There are several transaction types that are exempt from issuing Qualified Invoices for each transaction. (Source: Question 1 of the “Q&A on the storage method of eligible invoices etc. under the system for deductible input tax on consumption tax”)

Here they are:

1. Transportation of passengers by public transportation (ships, buses, or trains) that cost less than 30,000 yen.
2. Sale of fresh food and other items by sellers at wholesale markets (limited to sales carried out by commission agents on behalf of sellers).
3. Sale of agricultural, forestry, and marine products by producers, entrusted to agricultural cooperatives, fishery cooperatives, or forestry cooperatives (limited unconditional entrustment methods and joint accounting methods that do not specifically identify producers).
4. Sales of goods and other items through vending machines and automatic service machines that cost less than 30,000 yen.
5. Postal and cargo services where the only form of payment is stamps and related items (limited to items placed in postal boxes).

Note: For businesses that transact with a large number of unspecified people, such as retail, food and beverage, and taxi businesses, the use of a Simplified Qualified Invoice is permitted.

What is a Simplified Qualified Invoice?

A Simplified Qualified Invoice is literally a simplified version of a Qualified Invoice.

It’s really not all that different though…

The difference between a Qualified Invoice and a Simplified Qualified Invoice is the following:

1. A Simplified Qualified Invoice may omit the the name of recipient of the invoice
2. On a Simplified Qualified Invoice, the issuer may choose to display either the consumption tax amount, etc., for each tax rate or the applicable tax rate

Who can use a Simplified Qualified Invoice?

Qualified Invoice issuers in the following businesses (businesses that transact with an unspecified and numerous number of people) may issue a Simplified Qualified Invoice. (Source: Question 24 of the “Q&A on the storage method of eligible invoices etc. under the system for deductible input tax on consumption tax”)

1. Retail business
2. Food and beverage industry
3. Photography business
4. Travel industry
5. Taxi business
6. Parking business (limited to those for unspecified and numerous individuals)
7. Other businesses that are similar to these and that transact with unspecified and numerous individuals.

For businesses 1 to 5, there is no restriction on them being “for unspecified and numerous individuals”, so for example, if you carry out the transfer of taxable assets as a retail business, you can provide a Simplified Qualified Invoice regardless of the way the business is operated.

Also, whether a business is “one that carries out the transfer of assets to unspecified and numerous individuals” will be determined based on the nature of the individual business.

For example, the following types of businesses would be considered to fall under this category:

• A business where the person carrying out the transfer of assets does not confirm the name or name of the other party and presents the terms of the transaction in advance and carries out the transfer of assets to a wide range of individuals as a matter of course
• A business that, due to its nature, carries out the transfer of assets to a wide range of individuals regardless of the identity of the other party, even if the business operator confirms the name of the other party in the transaction (excluding businesses that require the identification of the other party for each transfer of assets and where the transactions are carried out individually for each other party.)

Reach out to us if you need assistance with JCT compliance

We can help you with everything related to JCT and other tax matters.

If you have any questions about what you should be doing in the upcoming tax year, reach out to us using the contact form below.

The post Qualified Invoice Format Under JCT appeared first on Japan Professional Alliance.

Today’s post will be Part 3 of a series on Japanese Consumption Tax (JCT) that we’ve been doing the past few days.

Links to previous JCT related posts:

Introduction to Japanese Consumption Tax (JCT)

Japanese Consumption Tax (JCT) – Scope and Who Pays the Tax

In this post, we’ll be covering transactions that are Non-taxable, or exempt from consumption tax.

Non-taxable (非課税) and Tax-free (不課税)

Before going into the details of non-taxable transactions, it is worthy to understand the concepts of Non-taxable (非課税) and Tax-free (不課税).

非課税 (hikazei) and 不課税 (fukazei) both refer to something that is not subject to taxation.

However, they are written differently in Japanese and have slightly different connotations.

非課税 (hikazei) is a term that is commonly used to describe items or activities that are exempt from taxation, such as certain types of income or goods that are considered necessities.

It is written with the characters 非 (hi), which means “not”, and 課税 (kazei), which means “taxation”.

不課税 (fukazei) is a term that is also used to describe items or activities that are not subject to taxation.

It is written with the characters 不 (fu), which means “not,” and 課税 (kazei), which means “taxation”.

Unlike 非課税, 不課税 is more commonly used to describe items or activities that are exempt from taxation due to their nature or purpose, rather than because they are considered necessities.

Both 非課税 and 不課税 can be translated as “tax-exempt” in English.

However, 非課税 may be more accurately translated as “non-taxable,” while 不課税 may be more accurately translated as “tax-free”.

Non-taxable (非課税) Goods & Services

According to Consumption Tax Law Article 6, some domestic transactions are excluded from the scope of the tax (transfer of taxable assets, etc.):

• considering the nature of the transactions that do not suit the purpose of the taxation
  transactions on which taxation is not appropriate due to policy considerations
• transactions that are non-taxable (and those that are similar but aren’t) are:

Tax Exemption for Exports

Transfer of taxable assets etc., which are done as exports from Japan are exempt from consumption tax (Consumption Tax Law Article 7).

Judgment is required in determining whether a transaction is an export transaction, especially in the case of services.

Tax Exemption at Duty Free Shops

There is a special exemption for businesses that sell goods to non-residents (ex. foreign tourists) at Duty Free Shops (Consumption Tax Law Article 8).

When businesses sell certain goods designated in the cabinet order in a manner designated in the cabinet order, such sales are entitled to the exemption.

Goods that are consumed in Japan or the goods sold without any verification of non-residency (presenting passport, etc.) are not exempt.

The operation of Duty Shops requires approval by the district director of the tax office.

The district director of the tax office can revoke approvals if the shops are not operated in compliance with the laws and cabinet order.

Summary

Here is a visualization that summarizes the relationship between Taxable, Non-taxable, Tax-exempt, and Tax-free transactions.

The post Japanese Consumption Tax (JCT) – Non-taxable Good & Services appeared first on Japan Professional Alliance.

In a previous post, we introduced some basic characteristics of JCT.

Introduction to Japanese Consumption Tax (JCT)

In this post, we’ll be looking at the scope of JCT and who actually pays the tax.

Scope of JCT and Who Pays the Tax

According to the Consumption Tax Law, JCT is applicable to the following :

“Transfer of assets etc.” is defined as follows:

Transfer or lending of assets and the provision of services in exchange for consideration as a business (Consumption Tax Law Article 2, paragraph 8).

“The transfer of specific assets, etc.” is excluded from “the transfer of assets, etc.”

This is because the recipient of the service becomes the taxpayer in the case of “the transfer of specific assets, etc.” as we will see in next.

“Specific purchases” is defined as follows:

Transfer of specific assets, etc. received from another as a business (Consumption Tax Law Article 4, paragraph 1 in parentheses).

“The transfer of specific assets, etc.” is defined as follows:

“Provision of Digital Services” for businesses and “Provision of specific services” (Consumption Tax Law Article 2, paragraph 8, item 2).

“Provision of Digital Services” is defined as follows:

Provision of works and services is a kind of transfer of assets, etc., which are provided through a telecommunication line (Consumption Tax Law Article 2, paragraph 8, item 3).

Typical examples include data distribution services and cloud services provided through the internet.

“Provision of Digital Services” for businesses is defined as follows:

“Provision of Digital Services” for businesses, conducted by a foreign business (Consumption Tax Law Article 2 item 8-4).

“Provision of specific services” is defined as follows:

Provision of services such as theater performances by foreign businesses which is a kind of transfer of assets, etc. (Consumption Tax Law Article 2, paragraph 8, item 5).

This includes performances in Japan by foreign musicians, participation in tournaments in Japan by sports players, etc.

Summary

In a nutshell, JCT is applicable to all sales of goods and services that occur within the country as a business.

And the party that is responsible for paying the JCT is usually the business that is selling the goods or services.

The exception is for specific purchases, which are Digital Services for businesses and certain theatrical services provided by foreign businesses.

In such cases, the party responsible for paying the JCT is the purchaser.

The post Japanese Consumption Tax (JCT) – Scope and Who Pays the Tax appeared first on Japan Professional Alliance.

Japan’s consumption tax (JCT) is a tax on the consumption of goods and services in Japan.

The tax consists of national tax and local tax and are both referred to as consumption tax.

JCT is similar to a value-added tax (VAT) in other countries.

JCT is applied to the final price of goods and services, including any taxes or duties that have already been applied.

One characteristic of JCT is that it is applied at a flat rate across a wide range of goods and services.

This means that the tax is applied at the same rate to all goods and services, regardless of their price or the type of business that provides them.

Overview – Tax Rate

JCT in Japan is currently set at 10% for most goods and services.

There are some exceptions for certain items such as food and newspapers, which are taxed at a lower rate of 8%.

JCT was increased from 8% to 10% in two stages.

The first increase took place on October 1, 2019, when the tax rate was raised to 10% for most goods and services.

The second increase was originally scheduled to take place on October 1, 2021.

However, it was postponed due to the economic impact of the COVID-19 pandemic.

JCT is a relatively new tax in Japan, first implemented at 3% in 1989.

We’ll go over the history of consecutive rate hikes in a different section.

Overview – Collection and Payment of JCT

The consumption tax is collected by businesses when they sell goods and services to consumers.

In general, businesses are required to file consumption tax returns and to pay the tax to the government.

There are several exceptions to this rule, exempting certain transactions from the tax and certain businesses from having to submit consumption tax returns.

The scope of JCT will be covered in more detail in following sections.

Overview – Issues and Controversy with JCT

One issue that is cited concerning JCT is that it is a regressive tax, meaning that it takes up a larger proportion of income for low-income individuals compared to high-income individuals.

This can make the consumption tax burdensome for lower-income households, discouraging consumption.

Summary

In this post, we covered the basics of JCT.

We’ll be diving into the nook and cranny of JCT in future articles.

In the meantime, reach out to us if you need assistance with your JCT challenges!

The post Introduction to Japanese Consumption Tax (JCT) appeared first on Japan Professional Alliance.

If you have any business relationships with customers in Japan, you may have heard that Japanese Consumption Tax (JCT) will be going through significant changes in 2023.

The TLDR (Too Long, Didn’t Read);

1. Japanese Tax Authorities will be introducing the JCT Qualified Invoice System in 2023.
2. Only Qualified Invoices can be deducted when your customer files a consumption tax return
3. Only Qualified Invoice Issuers can issue qualified invoices
4. In order to become a qualified invoice issuer, you need to register as such with the tax authorities by March 31, 2023

We’ll be covering the basics of JCT in future articles but in this article, we will focus on what these changes mean to you and what you should be doing.

March 31, 2023 is right around the corner and as you will see, this requires your immediate attention!

Let’s dive in.

Who Does This Concern?

If you currently issue invoices to customers in Japan, this concerns you.

If the transaction between you and the Japanese customer is taxable, you have to act now.

Under JCT rules, some transactions are taxable while some aren’t.

That distinction will have to be made on a case by case basis and we’ll be covering the basics in future articles.

What is the issue?

Your Japanese customers won’t be able to claim consumption tax credits from purchases made from you.

From October 1, 2023 and onward, a “Qualified Invoice” will be required for Japanese businesses to claim a credit for consumption taxes that were paid.

A “Qualified Invoice” can only be issued by businesses that have registered with the Japanese Tax Authorities as a “Qualified Invoice Issuer”.

What Should I Be Doing?

Register as “Qualified Invoice Issuer”

Here is a simple to do list for you (items in bold letters are urgent):

• Asses whether transactions with your Japanese customer is subject to JCT
• If yes, register as a “Qualified Invoice Issuer” with the Japanese Tax Authorities
• Appoint a tax agent in Japan if you don’t have an office (physical establishment) in Japan
• Provide Japanese customers invoices that meet the requirements of a “Qualified Invoice” starting October 1, 2023
• Submit Japanese consumption tax returns

When is the deadline?

March 31, 2023

The Japanese Tax Authorities are requiring applications of “Qualified Invoice Issuer” to be submitted by March 31, 2023.

Invoices that meet the requirements of a “Qualified Invoice” will need to be sent to customers starting on October 1, 2023.

Who in Japan Can Help Me With This and Other JCT challenges?

Japan Professional Alliance can offer immediate assistance in complying with the new “Qualified Invoice System” and other Japanese Tax requirements that you may have.

We offer a comprehensive JCT solution that will help you meet the minimum requirements of JCT at an affordable price.

All work will be led by bilingual CPAs fluent in English and Japanese.

• Assess whether the transaction with your Japanese customer is subject to JCT
• Complete your registration as a “Qualified Invoice Issuer” with the Japanese Tax Authorities
• Provide you with an invoice template that meets the requirements of a “Qualified Invoice”
• Act as your tax agent in Japan
• Prepare and submit Japanese consumption tax returns
• Make tax payments to the tax authorities on your behalf

Reach Out To Us!

Reach out to us using the contact form below and let’s schedule a call to discuss next steps!

The post Upcoming Changes to Japanese Consumption Tax in 2023 appeared first on Japan Professional Alliance.