Yes, foreign e-commerce companies that sell digital goods to consumers in Japan are generally required to register for VAT. Here’s how this process typically unfolds:
- Mandatory Registration:
Foreign companies providing digital goods and services (such as software, streaming services, ebooks, and online games) directly to Japanese consumers must register for VAT in Japan, regardless of where the company is based. - No Threshold:
Even though foreign companies with sales not exceeding the specified threshold (typically 10 million yen in the base period) are exempt from VAT obligations, if they need to meet the requirements from their consumers to issue the qualified VAT invoices, they must register and comply with VAT obligations. - Collection of VAT:
Once registered, these companies are required to collect VAT at the standard rate of 10% on all sales to Japanese consumers. The VAT must be included in the price advertised and charged to the consumer. - Filing VAT Returns:
Registered foreign e-commerce companies must file VAT returns and remit the collected VAT to the Japanese tax authorities. This is typically done quarterly. - Compliance Considerations:
It’s important for foreign e-commerce businesses to ensure compliance with Japanese VAT laws, including accurate pricing, VAT collection, and regular filings. Mistakes or non-compliance can lead to penalties and fines.
Foreign e-commerce companies should consider seeking advice from tax professionals who specialize in Japanese VAT to navigate the registration process and ongoing compliance requirements effectively. This ensures that all legal obligations are met and that the business operates smoothly within the Japanese market.
The information provided here is based on legislation as it stands on the date of publication and may not reflect subsequent changes. We advise clients to seek tailored professional advice before making any decisions based on this information.