Worldwide Tax Alert (US): Offshore e-Commerce Providers: Changes to Japan’s Consumption Tax Act ‘re going into Effect
Offshore e-commerce providers should make themselves conscious of changes to Japanese law affecting their operations.
Pursuant to some recent amendment from the Consumption Tax Act, a brand new Registration of Foreign Business Operator system has been around effect since This summer 1, 2015. Many affected companies haven’t yet registered under this new system.
Beginning October 1, 2015, offshore e-commerce providers supplying both business-to-business and business-to-consumer (Business to business&B2C) services will need to collect Japanese consumption tax using their Japanese customers and remit it to Japan’s National Tax Agency (NTA). Underneath the amended Act, offshore e-commerce providers who fulfill the criteria established within this alert should register using the NTA.
Since the application review process is anticipated to become extended, the NTA is counseling offshore e-commerce providers to submit the applying documents well ahead of time of October 1, 2015.
Who should register?
Providers who come under the groups of both “Business to business&B2C e-commerce companyInch and “taxed business operator” should register.
Business to business&B2C e-commerce company
“E-commerce services” are understood to be services provided via telecommunications systems. Services just mediating information transmission among subscribers or that just use telecommunication like a communication vehicle (e.g., software development or administration and control over assets outdoors Japan by which providers and customers communicate by email) are excluded underneath the Consumption Tax Act.
“B2B&B2C e-commerce services” are understood to be electronic services which include both business-to-business and business-to-consumer electronic services. Services for example distribution of advertisements online or operation of internet stores for any third party’s downloadable games or software are thought Business to business-only services.
The followings are types of Business to business&B2C e-commerce services:
Distribution of e-books, digital newspapers, music, videos and software (including various applications for example games) on the web
Provision of software and databases using clouds
Provision of space for storage of electronic data using clouds and
Auction or purchase of products or services on the web.
Taxed business operator
Any company with taxed sales exceeding1 JPY10 million within the base tax period2 is considered a taxed business operator and it is susceptible to consumption tax obligations underneath the Act.
Something provider with no office (or, when the company is definitely an individual contractor, any address or domicile) in Japan is needed to appoint a tax agent to deal with tax statements and notification documents and also to request tax payments. The tax agent should be an authorized public tax accountant (zeirishi) or perhaps a tax accountant corporation (zeirishi-houjin), since they’re allowed to take part in representing taxpayers and preparing tax-related documents underneath the Certified Public Tax Accountant Act.
Additionally, only providers who’ve substantial levels of delinquent Japanese tax obligations might not be registered as foreign business operators.
One of the documents needed to accompany the registration form would be the following:
Documents that read the name, offshore address and business information on the company
Acceptable documents include articles of incorporation, corporate registry, the service provider’s pamphlet and document from the service provider’s website.
Documents describing electronic services supplied by the company in Japan
Acceptable documents range from the service provider’s pamphlet and document from the service provider’s website.
Evidence of office address in Japan (when the company comes with an office in Japan that’s supplying Business to business&B2C e-commerce services) or perhaps a certificate evidencing the authority from the tax accountant proxy (when the company doesn’t have any office in Japan that’s supplying Business to business&B2C e-commerce services)
Acceptable documents to demonstrate work address range from the corporate registry and lease agreement.
There’s yet another notification requirement of the appointment of the tax agent in Japan.
When business operators don’t comply
Presently, there aren’t any penalties for just about any non-registered offshore Business to business&B2C e-commerce providers. However, registration of offshore Business to business&B2C e-commerce providers will affect certain tax incentives relevant for their Japanese business customers.
Underneath the purchase tax credit system, Japanese companies can credit the input tax compensated with other providers when reporting their output tax liabilities. Usually, Japanese companies can claim tax credits for that full quantity of consumption tax they pay for their Japanese providers. However, for Japanese companies to assert any tax credits for the quantity of consumption tax they pay to offshore Business to business&B2C providers, the offshore Business to business&B2C e-commerce providers should be registered using the NTA. Consequently, registration can help offshore Business to business&B2C e-commerce providers remain competitive against Japanese providers on the market.
What they are called of registered offshore Business to business&B2C e-commerce providers are now being disclosed towards the public around the NTA’s website.
Learn more about these alterations in Japanese law as well as their impact on your company by contacting the writer.
1 Sales amounts with regards to Business to business-only services should be excluded in the calculation with this assessment purpose.
2 The bottom period is 2 accounting years before the current accounting year. A startup business operator that’s been established for under two accounting years can under your own accord register like a taxed business operator.