Question:

For domestic businesses that receive “B2C (business to customer) electronic service”  from foreign companies, is it affected by whether the foreign corporation(Registered Overseas Business Operators) is registered at National Tax Agency (NTA) or not?

Answer:

Yes, there is a difference in treatment of purchase tax credits for sales tax.

Since October 2015, consumption tax has been levied on foreign companies providing telecommunications services to domestic operators.

Regarding the “B2C electronic services” under “electronic service provided by the foreign corporation”, only services provided by the registered foreign business can be applied to a purchase tax credit for Japanese corporations. On the other hand, if the foreign corporation is not a registered foreign business, a purchase tax credit is not allowed to Japanese corporations. Therefore, it can be said that it will be disadvantageous for Japanese business customers. The foreign corporation is required to be registered at NTA and file annual C-tax return for Japanese corporations to claim a purchase tax credit.

As of April 2017, there are 71 foreign corporations registered. You can see the list on NTA’s website. The registered foreign business is required to include specific information, such as “its registration number” and “indication that the registered foreign business is liable for consumption tax”, etc. on an invoice. Otherwise, Japanese corporations are not allowed to claim a purchase tax credit.