In the previous article, we introduced cases related to the provision of services among transactions for which a foreign corporation may become a taxable person for consumption tax purposes in Japan.

In this article, we introduce some common cases regarding sales of goods among the transactions in which a foreign corporation may become a taxable person for consumption tax purposes in Japan, and consider the impact on the invoice system.

Form of Transaction

There are cases where a foreign corporation that does not have a Permanent Establishment (PE) in Japan is a seller on an e-commerce platform such as Amazon. The foreign corporation exports goods to Japan, becomes an importer in Japan, and then sells them on platforms such as Amazon.

The transaction is as follows from the perspective of Japanese consumption tax.

1. Export transactions to Japan are tax exempt.
2. Imports into Japan are subject to import consumption tax.
3. Sales to domestic consumers on Amazon, etc. in Japan are subject to consumption tax as domestic transactions.

Alternatively, there may be a case where a foreign corporation buys goods in Japan from another Japanese vendor without importing them into Japan, and then sells them directly on Amazon, etc. in Japan. In this case, both the purchase and the sale are domestic transactions in Japan for consumption tax purposes and are subject to consumption tax.

Obligation to Declare Tax Payment

If the consideration for the transfer of taxable assets in Japan during the base period exceeds 10 million yen, the corporation is considered to be liable to pay consumption tax. The base period is determined based on the foreign corporation’s fiscal year end.

As in the case of providing services, a tax agent must be appointed for a foreign business that has no domicile in Japan to handle matters related to national tax, such as the submission of tax returns/notifications and payment of taxes.

Impact of the invoice system

If the platform takes the form of requiring stores to disclose whether they are qualified invoicing businesses or not, it is expected that more foreign businesses that are originally determined as tax-exempt businesses will register as qualified invoicing businesses in order to respond to requests from consumers to issue qualified invoices.