Question:

Do foreign carriers providing telecommunications services to Japanese consumers have an obligation to file consumption tax?

Answer:

As a general rule, foreign carriers providing B2C (business-to-consumer) electronic services must file consumption tax.

the foreign business who provides B2B (business-to-business) electronic services don’t have to file C-tax return since “Reverse Charge Mechanism” basically requires customers to file the tax return instead of service providers.

On the other hand, B2C electronic service providers are liable to file tax return, regardless of the actual recipients of the services, i.e. consumers or businesses, in principle. The foreign business without an office in Japan is required to designate a Tax Agent to deal with submission of tax return, notification documents and tax payment.

From the viewpoint of the Japanese businesses receiving B2C electronic services from the foreign business, the purchase tax credit is not allowed for the time being, with a transitional measure. Therefore, even if the foreign business charges C-tax to customers for B2C electronic services, customers cannot claim the purchase tax credit when they file tax return.

However, there is an exception that the purchase tax credit can be claimed if the foreign service provider is a registered foreign business. The registered foreign business must be a taxable business of C-tax who has an office in Japan or has a Tax Agent. The point is that National Tax Agency admit the purchase tax credit for recipient of only service provided by foreign businesses who declare their sales C-tax properly.

< Reference – Exemption threshold for business >

In principle, a business with taxable sales not exceeding 10 million yen in the base period, i.e. the second preceding business year before the Taxable Period, is not required to file C