Question:

Can you explain about recent revision on the Consumption Tax Law?

Answer:

Starting October 1, 2015, sales tax treatment for cross-border electronic services has changed significantly. A consumption tax is imposed in Japan when a foreign corporation provides such services to Japanese customers.

In the past, when a foreign corporation provided international electronic services, the transactions were considered to be conducted outside Japan and were not subject to the Japanese consumption tax. However, it was unfair for Japanese companies to not impose a consumption tax on foreign companies that trade in similar sales, even though their sales are taxable as domestic transactions. Therefore, the Consumption Tax Law was revised to eliminate this.

The “Electronic Services” prescribed by the Consumption Tax Act specifically includes the following:.

*Distribution of e-books, e-newspapers, music, video and software via the Internet

*A service that provides customers with a place to store electronic data in the cloud

*Distribution and posting of advertisements via the Internet

*English conversation classes conducted via Indernet, etc.

Under the revised Consumption Tax Law, when providing international services via the Internet, the taxation relationship is determined not by the company but by the country in which the customer is located. For example, if a customer in Japan purchases an e-book on a website operated by U.S. company, the sales of the U.S. company is subject to Japanese consumption tax.