Revision of Consumption Taxation on Cross-border Supplies of Services In accordance with the Act for Partial Revision of the Income Tax Act and Other Acts (Act No. 9 of 2015), the Consumption Tax Act was partially amended with the revision of consumption taxation on cross-border supplies of services such as digital content distribution. The key changes in this reform are as follows:

I. Revision of a criterion for determining either domestic or foreign transactions with regard to provision of electronic services

Japanese goverment regard services provided via electronic and telecommunication networks (e.g., internet) such as the provision of e-books, music, and advertisements as “provision of electronic services.” A criterion for determining whether the place of supply in a transaction is conducted in Japan, whereby consumption tax is to be imposed (criterion for determining either domestic or foreign transactions) has been revised from the location of the office of the service provider associated with providing such services to “address of the service recipients.”

II. Revision of taxation scheme (introduction of a “reverse charge mechanism”)

Provision of electronic services became classified as either “provision of B2B (business-to-business) electronic services” or others. Under Consumption Tax Act, when a business transfers or leases taxable assets and provides services (“transfers taxable assets etc”), the business is responsible for filing and paying tax on the transaction. However, as for provision of B2B electronic services among all electronic services, what is called a “reverse charge mechanism” has been introduced, where a Japanese business files and pays tax who receives electronic services from a foreign business.

III. Eligibility for purchase tax credit associated with B2C electronic services provided by foreign businesses

As for provision of any electronic services other than provision of B2B electronic services (to be called “provision of B2C (business-to-consumer) electronic services” for convenience in this brochure) a service provider is responsible for filing and paying tax. However, when a Japanese business receives the B2C electronic services provided by foreign businesses, the Japanese business will not, for the time being, be eligible for purchase tax credit associated with the services provided.

Start date of application

The reform in I to III above will be applied to on or after October 1, 2015.

IV. Establishment of a system for registered foreign businesses

As stated in III, the Japanese businesses receiving B2C electronic services provided by foreign businesses will not be eligible for purchase tax credit associated with the services provided. However, if foreign businesses are registered with the Commissioner of National Tax Agency (NTA) and provide B2C electronic services, a purchase tax credit can be claimed.

It's meens that registered foreign business will be good to the Japanese business receiving B2C.

Please contact us. We will on behalf of the declaration.

Brochures of revision of consumption tax