Tag: foreign businesses

2. Registration for VAT ⑦ Are there any exceptions or exemptions to VAT registration for foreign businesses?

Posted on by KAZUHISA MOCHIZUKI

Yes, there are exceptions and exemptions to VAT registration for foreign businesses in Japan:

  1. Low Turnover Threshold:
    Foreign businesses with taxable sales below 10 million yen over the base period generally don’t need to register for VAT unless they anticipate exceeding this threshold soon.
  2. Specific Exempt Services:
    Certain services, such as medical care, education, and specific financial transactions, are exempt from VAT, which could exempt the business from registration requirements.
  3. Reverse Charge Mechanism:
    In some cases, the reverse charge mechanism applies. Instead of the foreign business needing to register and collect VAT, the Japanese customer is responsible for accounting for VAT directly.
  4. Digital Services Simplification:
    Some digital services may qualify for simplified procedures, which can affect VAT registration requirements.

It’s essential for foreign businesses to analyze their activities in Japan to understand their specific VAT obligations and exemptions. A Japanese tax professional can provide tailored advice, helping companies avoid unnecessary registration while ensuring compliance.
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. 

2. Registration for VAT ③ Is it possible for a non-Japanese company to register for VAT voluntarily?

Posted on by KAZUHISA MOCHIZUKI

Yes, non-Japanese companies can voluntarily register for VAT in Japan even if they don’t meet the mandatory registration thresholds. Here’s why this might be beneficial:

  1. Reclaim Input VAT:
    Voluntary registration allows a business to reclaim VAT paid on its own purchases of goods and services in Japan, reducing overall tax liability.
  2. Compliance and Transparency:
    Voluntarily registering demonstrates a commitment to compliance and can strengthen business relationships by ensuring that customers receive proper tax invoices.
  3. Future Growth Planning:
    If a business anticipates reaching the mandatory registration threshold soon, voluntary registration can streamline the transition and ensure readiness.

Consulting a Japanese tax professional will help assess the benefits of voluntary VAT registration and guide non-Japanese companies through the application process.
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.