Tag: custom duties

4. VAT Compliance ⑩ How does VAT affect customs duties on imported goods?

Posted on by KAZUHISA MOCHIZUKI

When importing goods into Japan, VAT and customs duties are both important considerations, but they are distinct charges:

  1. Customs Duties:
    Customs duties are tariffs imposed on imported goods based on their classification and value. The rates vary depending on the type of goods being imported.
  2. Import VAT:
    VAT is applied to the value of imported goods, including the cost, insurance, and freight (CIF) value, plus any applicable customs duties. This ensures that the VAT applies to the total landed cost of the goods.
  3. Calculation Example:
    If you import goods with a CIF value of 1,000,000 yen and customs duties of 50,000 yen, the VAT is calculated on the total value of 1,050,000 yen. At a standard VAT rate of 10%, the import VAT would be 105,000 yen.
  4. Payment at Customs:
    Import VAT and customs duties are usually paid at the time of customs clearance. The importer must settle these charges before the goods can be released.
  5. Reclaiming Import VAT:
    Businesses can reclaim import VAT as input VAT if the imported goods are used for taxable business activities. This is done through the regular VAT return process, effectively reducing the business’s overall VAT liability.
  6. Record-Keeping:
    Accurate records of all import transactions, including customs declarations and VAT payments, are essential for compliance and to support any input VAT claims.

Understanding how VAT interacts with customs duties is crucial for accurately calculating the total cost of imported goods and ensuring compliance with Japanese tax regulations. Consulting a Japanese tax professional can help navigate these processes and optimize VAT and customs duty management.
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. 

4. VAT Compliance ⑤ Are VAT rates different for domestic and imported goods?

Posted on by KAZUHISA MOCHIZUKI

No, VAT rates in Japan are the same for both domestic and imported goods. The standard VAT rate of 10% applies to most goods and services, whether they are produced domestically or imported. However, certain items may qualify for a reduced VAT rate of 8%, such as food and non-alcoholic beverages.
Key Points to Note:

  1. Import VAT:
    When goods are imported into Japan, import VAT is applied at the same rate as domestic goods. This VAT is typically collected by customs authorities at the point of entry.
  2. Customs Duties:
    In addition to VAT, imported goods may also be subject to customs duties. These are separate from VAT and vary depending on the type of goods.
  3. VAT Reclamation:
    Businesses can reclaim import VAT on goods used for taxable business activities, just as they can with VAT on domestic purchases.

Understanding the consistent application of VAT rates ensures accurate pricing and compliance for both domestic and imported goods. Consulting a Japanese tax professional can provide guidance on handling VAT for imports and maximizing input VAT reclamation.
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.