Explanation | A detailed article to help you understand the Japanese Consumption Tax (JCT)

An article on understanding the Japanese Consumption Tax (JCT)

Recently, the registration on Japan’s JCT has exceeded three million. However, many sellers still do not understand JCT in Japan and are confused about whether or not to register. Here, we have collected some detailed information about JCT in Japan to help everyone understand the consumption tax in Japan.

、What is Japan’s consumption tax (JCT) and the “compliant invoice retention system”?

“Japan’s consumption tax (JCT)”

is a tax paid by consumers when purchasing goods. At each stage of production and circulation, the tax is added to the selling price of the goods, and the consumer ultimately bears the tax.

The “compliant invoice retention system”

is a new JCT system that will take effect from October 1, 2023 (i.e., the invoice provided by the seller must include its JCT registration number).

For consumers who need tax deduction, they need to provide a compliant invoice with a JCT registration number to obtain tax declaration deduction.

Recently, the Japan National Tax Agency has flexibly handled the time for submitting JCT invoice number applications. Under the new regulations, sellers only need to submit a registration application before September 30, 2023, and they can become compliant invoicing merchants on October 1, 2023.

、Amazon’s subsidy rewards?

In order to help sellers better comply with Japan’s tax regulations, Amazon has launched a JCT (Japan consumption tax) registration incentive: before May 30, reply to Amazon’s official JCT incentive log, attach the registration certificate (signed contract/registration certificate screenshot) and provide it to the account manager; before August 1, verify the Japanese station sellers who submit JCT registration numbers, and those who pass the verification can receive subsidies. The earlier you register, the higher the chance of receiving subsidies.

3. What materials are needed to register JCT?

1. Scanned copy of the legal representative’s ID card;

2. Scanned copy of the business license;

3. Store link or screenshot;

4. Application form;

5. Other relevant materials required during the application process.

Registration time: 2-3 months, mainly depending on the current workload of the tax agency;

Reporting cycle: generally annual reporting, once a year;

Reporting deadline: within 2 months after the end of the taxable period.

4. The process of registering JCT tax number?

Seller submits materials to the tax agent for registration -> Japanese tax bureau conducts registration -> wait for the tax bureau to process -> issue the legal representative number -> submit the authorization agent application -> activate the JCT registration number -> upload to the platform.

5. How to determine the obligation to register JCT?

1. Voluntary registration:

To become a qualified invoice issuer, please submit the “Qualified Invoice Issuer Registration Application Form” to the tax bureau for registration. Once a company becomes an invoice issuer, regardless of whether the company was previously a tax-exempt enterprise, it will become a taxpayer (that is, tax-exempt enterprises that do not meet the sales threshold required by the tax bureau can also voluntarily register for JCT).

2. Mandatory registration:

If the sales threshold in the base period reaches 10 million yen (that is, exceeds the sales threshold for tax-exempt enterprises), it is necessary to mandatorily register for JCT and report consumption tax.

Base year: (using 2022 as an example)

As of 2022, the tax year that the company needs to calculate is 2021. Sellers need to refer to the sales threshold of two base years (i.e. 2019 or 2020) to determine whether they have tax obligations.

If the seller’s account sales in the first 6 months of 2019 or 2020 exceed the threshold (sales exceeding 10 million yen), they will need to become a tax entity in the 2021 tax year and register, declare, and pay taxes.

The starting month of the benchmark year depends on your company type:① sole proprietorship/solo company; ② joint venture company.

1. Sole proprietorship (individual business): The benchmark year is from January to December.

2. Chinese companies: The benchmark year is also from January to December.

3. Japanese companies: The benchmark year is from April to March of the following year.

Benchmark period sales judgment:

Meeting any of the following conditions is considered a JCT taxpayer and has the obligation to pay taxes in accordance with regulations:

1. The taxable sales in the seller’s benchmark year 2 exceed 10 million yen;

2. The taxable sales in the seller’s benchmark year 2 do not exceed 10 million yen, but the taxable sales in the first half of the benchmark year 1 exceed 10 million yen;

3. The registered capital of the company is more than 10 million yen.

Six, what are the advantages of registering JCT?

1. Currently there is no registration obligation, but there is a registration requirement:

If there is no registration obligation, the seller wants to become a qualified invoice registration merchant, then JCT registration is required.

Advantage one

Applying for a JCT registration number to become an invoice issuer that can issue compliant invoices to attract more corporate orders. As of November 2021, more than 90% of Amazon China sellers have received orders from overseas companies.

Advantage two

After the predictable invoice retention system takes effect, companies with tax deduction requirements may pay more attention when purchasing goods and choose to purchase products sold by sellers with JCT registration number compliant invoices.

2. Existing registration obligations:

Advantage 1

To attract more businesses with tax deduction needs to purchase orders: Once the compliant invoice retention system comes into effect, Amazon.co.jp will display the JCT registration number submitted by the seller in advance on the invoice to ensure that your buyers receive invoices that can deduct taxes. Businesses with anticipated tax deduction needs may pay more attention when purchasing goods and choose sellers who can issue compliant invoices with JCT registration numbers.

Advantage 2

You can apply for JCT input tax deduction in compliance: after the seller is compliant, if the seller can provide compliant invoices for tax deduction, then when the tax agent declares JCT on your behalf, it can synchronize output declaration and input tax deduction.

Note: If you have not submitted your JCT registration number to Amazon, buyers who need compliant invoices may no longer purchase your goods after the reform is implemented, because they will not be able to obtain compliant invoices for tax deduction. Sellers may face situations such as return orders, loss of buyers, and negative effects.

7. What are the consequences of not registering for JCT?

1. Sellers without a JCT number cannot issue compliant invoices for sales and will receive consumer complaints, affecting store performance;

2. From October 1, 2023, if the invoice received by the seller does not include the seller’s JCT registration number, the buyer will not be eligible for JCT input tax deduction, resulting in an increase in the amount of tax the buyer needs to pay. Buyers may avoid purchasing goods from such sellers, thereby affecting store sales.

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