Section 3. Taxes in Japan

3.6 Overview of consumption tax

The following domestic and import transactions, except for certain transactions deemed non-taxable, are subject to consumption tax. In principle, the consumption tax rate is 10% (inclusive of local consumption tax rate of 2.2%) . The reduced tax rate of 8% (inclusive of local consumption tax rate of 1.76%) will be applied to sales of food and beverages, except for alcoholic drinks and dining out, and sales of newspapers published more than twice a week (under subscription contracts).

  1. (1)

    Domestic transactions: the transfer or rental/lease of assets or the provision of services as a business in Japan by an enterprise for consideration.

  2. (2)

    Import transactions: foreign cargo retrieved from a bonded zone

Financial transactions, capital transactions and certain transactions in the areas of medical care, welfare and education are deemed non-taxable. Export transactions and export-like transactions such as international communications and international transport are exempt from consumption tax.

3.6.1 Tax exemption for enterprises

Enterprises whose taxable sales*1are 10 million yen or less for the base period*2 are exempt from consumption tax filing/liability (such enterprises are referred to as "tax exempt enterprises"). However, tax exempt enterprises can opt to be taxable by submitting an advance notification.

Tax filing/liability will not be exempt for certain corporations and enterprises, such as a newly established corporation with capital of 10 million yen or more, a newly established corporation whose capital is less than 10 million yen but is established by a group of enterprises whose taxable sales are more than 500 million yen with the group having more than a 50% stake (only for two years after the establishment, for either case), and an enterprise whose taxable sales*3 during the first half of last year or the previous fiscal year are more than 10 million yen.

  1. *1

    In the case where a corporation’s base period is not one year, the taxable sales during the base period are the amount obtained by prorating the balance during the below-mentioned base period in the prescribed manner.

  2. *2

    Base Period: The base period is the full accounting period two years prior to the current accounting year. A corporation may not have a full base period if it was a) newly established or b) changed its accounting period during the two-year prior period. The base period for such corporation is found by combining all accounting periods that commenced during this two-year prior period.

  3. *3

    mount of salary paid can be used instead of taxable sales.

3.6.2 Deduction of purchase tax

Consumption tax on taxable purchases may be deducted from consumption tax on taxable sales when calculating the amount of consumption tax to be paid. In order for the consumption tax on purchase to be deducted, both account ledgers and invoices that describe certain matters have to be retained. The amount of the deduction, however, varies depending on factors such as the proportion of taxable sales to total sales. For certain cross-border supplies of electronic commerce by foreign enterprises, only the consumption tax on purchases that are subject to the reverse charge system (see 3.6.3) and on purchases that are received from registered foreign enterprises can be deducted.

If taxable sales during the base period amounted to 50 million yen or less, the amount calculated by multiplying the consumption tax on taxable sales by a specific percentage given to each industry may be considered the consumption tax on purchases to be deducted and allowed as a deduction if advance notification is submitted (such system is called the “simplified tax system”).

  1. Note

    For the first four years from the introduction of the reduced consumption tax rate, i.e. between October 1, 2019 and September 30, 2023, account ledgers indicating matters necessary for separate accounting and invoices that describe tax rate categories for separate accounting have to be retained (‘categorized invoice retaining system’). From October 1, 2023 onward, instead of the above-mentioned invoices, qualified invoices issued by taxable enterprises authorized by directors of tax offices need to be retained (‘qualified invoice retaining system, also commonly known as ‘invoice system’).

3.6.3 Self-assessment and payment

Enterprises engaged in domestic and/or import transactions are obliged to file and pay consumption tax. (If the amount of consumption tax on purchases to be deducted is more than the amount of consumption tax on taxable sales, the difference can be refunded by filing in a tax return.) The tax return filing and payment deadline is within two months from the day after the taxation period (in principle, the last day of the business year in the case of corporations)

  1. Note

    In the case of certain cross-border supplies of electronic commerce by foreign enterprises, Japanese enterprises who have received the provision of services are responsible for filing and payment (reverse charge system)

  2. Note

    Corporations that are subject to the extension of the filing deadline for their corporate tax returns, taxable periods that include fiscal years ending on or after March 31, 2021, may be eligible for a one-month extension by notification.

As mentioned in 3.3.10 above, with respect to consumption tax, corporations (excluding foreign corporations) with share capital or contributed capital exceeding 100 million yen are also required to submit final returns and interim returns via electronic filing from fiscal years beginning on or after April 1, 2020.

Section3: Table of Contents


Section3:Documents businesses are required to submit to authorities

Section3
(Section1)
Documents Where documents are listed within the URL Reference The competent authorities
relating to the document
3.3.1
(1.6)
Notification of Incorporation of a CompanyExternal site: a new window will open See National Tax Agency
Guidelines 1. Notification of corporation establishment
National Tax AgencyExternal site: a new window will open
3.3.1
(1.6)
Notification of Incorporation / Establishment of corporation
(for submission to Tokyo Metropolitan when establishing an office in Tokyo)
ReferencePDF File(364KB) Tokyo Metropolitan Government
Bureau of taxationExternal site: a new window will open
3.3.1
(1.6)
Notification of Incorporation of a Company (for submission to municipalities) ReferencePDF File(401KB) Local municipality offices
3.3.1
(1.6)
Notification of a foreign companyExternal site: a new window will open See National Tax Agency
Guidelines 2. Notification about Becoming Foreign Ordinary Corporation
National Tax AgencyExternal site: a new window will open
3.3.10(3)
(1.6)
Application for Blue Form ReturnExternal site: a new window will open National Tax Agency
Guidelines 6. Application form for Approval of Filing Blue Return
National Tax AgencyExternal site: a new window will open
3.4.2
(1.6)
Notification of Establishment / Relocation / Discontinuance of Salary Paying Office etc.External site: a new window will open See National Tax Agency
10. Notification of Establishment/
Relocation/Closure of a Salary-paying office
National Tax AgencyExternal site: a new window will open
3.3.10(1)
(1.6)
Application for Special Provision for Extension of the Due Date for Filing a Final Tax ReturnExternal site: a new window will open See National Tax Agency
5. Application for Special Provision for Extension of the Due Date for Filing a Final Return Form
National Tax AgencyExternal site: a new window will open
3.3.1(1)
(1.6)
Application for Approval Made in Relation to the Special Provision for Due Dates for Withholding Income TaxExternal site: a new window will open See National Tax Agency
11. Application for Approval Made in Relation to the Special Provision for Due Dates for Withholding Income Tax
National Tax AgencyExternal site: a new window will open
3.3.10(1)
(1.6)
Notification of a Disposition of/Application for Approval of Extension of the Due Date for Filing a Final Tax Form
(for submission to Tokyo Metropolitan)
ReferencePDF File(925KB) Tokyo Metropolitan Government
Bureau of taxationExternal site: a new window will open
3.3.10(1)
(1.6)
Notification of a Disposition of/Application for Approval of Extension of the Due Date for Filing a Final Tax Return
(for submission to municipalities)
ReferencePDF File(775KB) Local municipality offices

Materials listed as ‘Reference’ contain samples of documents regarding registration, visa, taxation, personnel and labor matters that are necessary when a foreign company establishes a corporation or other entity in Japan. These documents are not published by competent authorities and therefore are not official. For those who are going through the official procedures, please obtain the latest official documents from the competent authorities and related bodies or consult a person who specializes in advising on such information and procedures.

The information contained in this documents should be used at the reader’s independent discretion. While JETRO makes every effort to ensure the accuracy of the information it provides, no responsibility is accepted by JETRO for any loss or damage incurred as a result of actions based on the information provided in these documents or provided by the external links listed on these pages.

Contact Us

Investing in Japan

JETRO Worldwide

Was this information useful?

Send