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Consumption tax on online commerce by foreign distributors

Posted on 19/11/2012 by Koji Takahashi

The Japanese Treasury Ministry decided that they would introduce a new rule regarding consumption tax to online commerce such as music distribution from foreign countries. At the moment, the consumption tax is not imposed upon transactions between foreign distributors and Japanese customers, though The Treasury Ministry intends to introduce a registration system to foreign distributors and impose the consumption tax on them. The Treasury Ministry aspires to start the registration system in April 2014, but there are several problems.

Basically, it is said that the existing consumption tax law should be changed regarding online commerce. Primarily, the taxation process for consumption tax is implemented in consuming regions; however, the taxation of online commerce by foreign distributors is based upon the companies’ mailing address. For example, if a foreign company exports music CDs, the consumption tax (called import consumption tax) is imposed when Japanese distributors pick up the CDs. On the contrary, if a foreign company distributes music through the internet no consumption tax is imposed at the moment, so it is said that this consumption tax system is unfair and at a disadvantage to Japanese companies.
The new rule dissolves this unfair situation, though it might be difficult for the Treasury Ministry to make foreign distributors register.

Reference
Staring a business in Japan – Consumption tax

By Certified Public Accountant, Koji Takahashi,
Tokyo & Yokohama