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Japan

Explore the requirements and rules that apply to electronically supplied services in Japan.

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Supplies of e-services to consumers (B2C)

Is a non-resident supplier of e-services to consumers located in this country obliged to register and/or account for local VAT/GST on such supplies in this country?

Yes

It is important to note that Japan Consumption Tax (JCT) law does not provide a precise definition of a Business and a Consumer. Rather, JCT law firstly tries to recognize a business recipient based on the characteristics of the services or the terms and conditions of the service agreement. Specifically, B2B digital services refer to the services that are normally consumed by business customers, and then B2C digital services are recognized as the digital services other than the B2B digital services.

If there is no current requirement, is there any anticipated change to that position?

Not applicable, requirement is already in place.

Is an invoice compliant with the VAT/GST law in the customer's country required?

Yes, although currently there is not yet a formal tax invoicing regime in the context of JCT, a registered foreign supplier is required to issue invoices including relevant information (e.g. the registration number) upon the customers’ request.

Supplies of e-services to businesses (B2B)

Is a non-resident supplier of e-services to business customers located in this country obliged to register and/or account for local VAT/GST on such supplies in this country?

No, reverse charge applies. It is important to note that JCT law does not provide a precise definition of a Business and a Consumer. Rather, JCT law firstly tries to recognize a business recipient based on the characteristics of the services or the terms and conditions of the service agreement. Specifically, B2B digital services refer to the services that are normally consumed by business customers, and then B2C digital services are recognized as the digital services other than the B2B digital services. 

If there is no current requirement, is there any anticipated change to that position?

No

If there is not a requirement for the non-resident supplier to register for VAT/GST, are the services subject to VAT/GST withholding by the customer?

No, the customer pays the full price to the supplier, and self-assesses for JCT on this price in its JCT return.

Where there is a current or future requirement for non-resident suppliers to register and/or account for local VAT/GST or a customer VAT withholding requirement:

When did/will that requirement come into effect?

1 October 2015

What is the applicable annual turnover threshold (in local currency) for that requirement to apply?

10 million Japanese yen (JPY) - the foreign supplier who does not have a permanent establishment in Japan is required to register if their taxable sales excluding the turnover of the B2B digital services in the base period (generally referring to the 2 fiscal years prior to the current fiscal year) exceeds JPY10 million. In the case of newly established companies, a foreign supplier may also be required to file a JCT return and pay JCT to the Japanese government if its share capital or the turnover of the controlling party of the supplier exceeds a certain prescribed threshold.

Is simplified or standard registration required?

Standard, JCT law does not provide for simplified registration.

Does the requirement apply to all e-services?

No, only digital services which is defined as ‘services supplied through telecommunications lines such as supplies of copyrighted works through telecommunications lines’.

Examples of digital services indicated by the Japanese tax authorities are as follows:

  • provision of e-books, digital newspapers, music, videos, and software (including various applications such as games) via the internet; 
  • services that allow customers to use software and databases in the cloud; 
  • services that provide customers with storage space to save their electronic data in the cloud; 
  • distribution of advertisements via the internet; 
  • Services that allow customers to access shopping and auction sites on the internet (e.g., charges for posting goods for sale, etc.); 
  • services that allow customers to access places to sell game software and other products on the internet;
  • provision via the internet of reservation websites for accommodation and restaurants (those who charge for posting on the website from the businesses that provide accommodation and operate restaurants); 
  • English lessons provided via the internet; 
  • consulting services provided continuously via telephone and emails.

Contact

For further information please contact:

Masaharu Umetsuji
Partner
T +813 622 98070
E Masaharu.Umetsuji@jp.kpmg.com

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