Skip links

Japan Consumption Tax on digital services

Japan has imposed its 10% Consumption Tax on digital or electronic services since October 2015. This includes non-resident providers. However, so far, marketplaces and similar electronic interfaces are not held liable to tax obligations of their third-party sellers.

Japanese Consumption Tax is made up of the following: 7.8% National Tax; and 2.2% Local Tax. There is now a reduced rate of 8% on basic services and foodstuffs. Check VAT Calc’s global VAT and GST on digital services tracker to see which other countries have introduced indirect taxes on electronic services to consumers. This follows the EU 2015 e-services VAT reforms, and also in Norway, New Zealand, Australia and many others since.

What digital services are subject to Consumption Tax?

Japan has a very broad definition for electronic services. The following are all included:

  • Apps
  • E-books
  • Gaming
  • Streaming or download music, video
  • Online journals and newspapers
  • Advertising
  • SaaS or cloud-based software and storage
  • Telecoms

Registering for Consumption Tax

There is non-resident Consumption Tax threshold of JPY 10million which must be reached in the previous two financial years. It is possible to voluntarily register. Foreign providers of digital services will need to appoint a local tax agent.

To determine if there is a taxable supply, providers must track the location of their customers. This can be based on:

  • Payment address details (billing or credit card)
  • IP address of device

There is no formal concept of the tax invoice in Japan. The compliance requirements are set through ledger obligations. A new Qualified Invoice regime is being introduced in October 2023, including a transitional invoice retention system which is now in place until then.

Under the Japanese Consumption Tax regime, consumers report their taxes, and may deduct tax incurred. To facilitate this, foreign providers must register with the National Tax Agency.

A simplified non-resident VAT registration procedure has now been established. There is the scope to deduct any locally incurred Consumption Tax, but the provider must be separately registered with the National Tax Agency, as above.

Marketplaces exempt from Consumption Tax responsibilities

Japan has not included facilitating marketplaces or similar electronic exchanges in the obligations to collect Consumption Tax on the transactions of their merchants. Their ad and listing services provided by non-resident platforms to Japanese sellers are taxable but using the reverse charge.

Japan increased Consumption Tax to 10% in October 2019.

Asia Pacific VAT on digital services

Comments (click for details) Rate Date Threshold Comments
Australia 10% Jul 2017 AUD $75,000
Azerbaijan 12% Jan 2017
Armenia 20% Jan 2022 AMD 115million
Bangladesh 5% - 15% Jul 2019 B2B and B2C
Bhutan 7% Jul 2021 Nu 5million
Cambodia 10% Mar 2022 KHR 250m
China 6%-13% N/a Nil Withholding VAT; B2B and B2C
Fiji 9% TBC FJD 300,000
India 18% Jul 2017 -
Indonesia 11% Aug 2020 IDR600m or 12k customers
Japan 10% Oct 2015 JPY 10 million
Kazakhstan 12% Jan 2022 Nil
Kyrgyzstan 12% Jan 2022 Nil
Laos 7% Feb 2022 LAK 400m
Malaysia 6% Jan 2020 RM500,000
New Zealand 15% Oct 2016 NZD 60,000
Pakistan 2% Sep 2021 Nil Marketplace Withholding VAT
Philippines 12% TBC P 3million
Singapore 7% Jan 2020 S$ 100,000
South Korea 10% Jul 2015 Nil
Taiwan 5% May 2017 NTD 480,000
Tajikistan 18% Jan 2021
Thailand 7% Sep 2021 1.8m Baht
Uzbekistan 15% Jan 2020 Nil
Vietnam 10% Dec 2020

Leave a comment