Taxation on Non-Resident Importers
Imagine what taxes Japanese importers pay when they import goods and sell them in Japan. They pay customs duty and VAT, which is called Consumption Tax in Japan at the time of import. When they sell goods, they receive VAT from their customers and file the same to the tax office as annual tax return.
These obligations apply to non-resident importers as well. In this section, we will look at these two phases of taxation to help you become ready for your business expansion in Japan.
Whether resident or non-resident in Japan, any importer importing their goods to Japan has to pay import taxes. Import taxes consist of customs duties and VAT, which is called consumption tax in Japan.
Customs duty rates vary by the products, and taxes are approximately calculated as follows:
Duty = CIF x Tariff Rate
VAT = (CIF + Duty) x 10 %
Imagine you’re importing the following products to Japan
CIF value = 100,000 JPY
HS Code 6404.11(sports shoes), Made in China. WTO rate = 8%
Duty = CIF x Tariff Rate = 100,000 JPY x 8% = 8,000 JPY
VAT = (CIF + Duty) x 10 % = (100,000 + 8,000) x 10% = 10,800 JPY
Total Tax = 18,800 JPY
Import taxes shall be basically calculated on the CIF values.
When exporters act as their own importers(consignee), they do not have any specific import values, because they do not actually sell or purchase their own goods. In those cases, customs apply other calculation methods to make quasi CIF value subject to Article 4-3 of the Customs Tariff Act. ACPs are obliged to consult with the customs office to instruct the non-resident importers the most appropriate calculation. Thus, it is important to choose a professional ACP with sufficient knowledge and experience about customs tax.
When you import goods in Japan, you have one more tax obligation in addition to the import tax, which is the VAT (consumption tax) on your sales in Japan.
When you sell goods in Japan, you top up 10% VAT(consumption tax) on your prices. Thus, you receive 10% tax, in addition to their own prices. On the other hand, you pay VAT at the time of import, and any other service that you receive in Japan(logistics, warehouse, promotional fees, etc.). Therefore, you file and pay the balance between the VAT you have received, and the VAT you have paid.
This starts at least 2 years after you start selling in Japan. Any newcomers are given allowance of the first 2 years and until their sales exceeds 10,000,000 JPY. Thus, VAT on sales does not have to be filed or paid for at least 2 years. Also, small businesses with annual sales of less than 10,000,000 JPY can keep and take the VAT as tax benefit that they receive, and do not need to file or pay the VAT to the tax office.
Don’t forget to keep the accounting record. Once your business grows and your sales goes over 10,000,000 JPY, you are required to submit annual report to Japan Tax Office.
When you file the VAT, you need to appoint a tax manager in addition to the ACP. This role is often provided by international tax accounts in Japan.
You can learn what specific documents Japan Tax Office requires you to keep at Point 5 of the section Non-Resident Importers' Responsibilities of our website.
Importers can use the benefit of the tax refund mentioned in Point 3 above, which is to pay the balance between the VAT they have received and VAT they have paid.
There is basically no other refund of the import duty and tax that you paid.
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