Content
◆ ONE.Basic knowledge of Japanese JCT
☞What is Japan JCT?
☞Japanese JCT compliant invoice system
☞What is the impact of the reform of the compliant invoice retention system on sellers?
☞How to determine if you have a Japanese JCT registration obligation?
☞What if the seller cannot obtain the JCT registration number before the new policy takes effect on October 1, 2023?
◆TWO: Declaration
☞Simplified declaration
☞Å Standard declaration
◆ THREE:Customs clearance and tax refund
☞What is customs clearance inverse operation?
☞Japanese JCT customs clearance method
☞How to apply for JCT tax refund
According to official data from the National Taxation Agency (NTA) of Japan, as of the end of March 2023, more than 2.68 million people have registered as tax paying entities, and NTA has received 3.2 million applications for JCT registration numbers.
This indicates that more and more sellers have completed or are currently completing JCT compliance matters, and Japanese tax compliance has become a trend! Sellers must pay attention to Japanese JCT compliance issues.
ONE. Basic knowledge about JCT
1.1 What is Japan JCT?
The full English name of JCT is Japanese Consumption Tax, which is a type of tax generated by Japanese consumers when purchasing goods and belongs to the nature of value-added tax.
According to the relevant consumption tax regulations issued by the Japan Tax Agency, the scope of taxation includes almost all goods transactions and services, with natural and legal persons engaged in goods transactions or providing services as taxpayers, and a multi stage and multiple taxation system is implemented.
1.2 JCT compliant invoice system in Japan
Starting from October 1, 2023, the new policy "Compliant Invoice Retention System" implemented by the Japan Internal Revenue Agency for Japan's Consumption Tax (JCT) will officially come into effect.
After the implementation of the policy, consumers with tax deduction needs (such as corporate purchasers) need to provide compliant invoices with the seller's JCT registration number in order to apply for tax input deduction.
1.3 What is the impact of the reform of the compliant invoice retention system on sellers?
▷For individual consumers:
If the purpose of enterprise procurement is not included, there is no change.
▷For enterprise purchasers:
Before October 1, 2023, buyers with tax deduction needs can still enjoy JCT input deduction even if the JCT registration number is not displayed on the invoice.
Starting from October 1, 2023, buyers with tax deduction needs to provide a compliant invoice with the seller's JCT registration number in order to apply for JCT input deduction. If the invoice does not comply with the new system requirements, the buyer's tax amount will not be deductible.
That is to say, enterprises with tax deduction needs may choose sellers who have applied for JCT registration numbers and can issue compliant invoices for enterprise procurement, and apply for JCT input deduction.
At the same time, according to the requirements of the Japan Internal Revenue Agency, Amazon will verify from Q4 2022 whether the JCT registration number entered by the seller matches the registration number officially published by the Japan Internal Revenue Agency on this website. If inconsistent, the registration number will be set to an "invalid" state!
1.4 How to determine if you have a Japanese JCT registration obligation?
If your company meets any of the following conditions, you are obligated to become a JCT tax entity:
✅ Your taxable sales within 'base year 2' exceeded 10 million yen;
✅ Your taxable sales within 'base year 2' do not exceed 10 million yen, but your taxable sales in the first half of 'base year 1' exceed 10 million yen;
✅ Your company has a registered capital of over 10 million yen.
For example, "Base Year 2" refers to 2020 and "Base Year 1" refers to 2021. If the seller's account sales exceed the threshold in 2020 or the first six months of 2021, then the tax year is 2022 and the company needs to become a tax entity for tax registration, declaration, and payment.
1.5 What if the seller cannot obtain a JCT registration number before the new policy takes effect?
If the Japanese JCT registration number cannot be obtained as scheduled, then compare the sellers who have already obtained the JCT registration number:
1.5.1 Sales and store competitiveness will be negatively affected to a certain extent:
According to the Japanese JCT invoice retention system and the JCT compliance requirements provided by the Amazon platform, if the Japanese JCT registration number cannot be provided before October 1, 2023, then the Japanese JCT consumption tax compliance invoice will not be issued.
The competitiveness of orders is declining, and enterprise orders may be lost (Amazon has launched JCT screening function and JCT logo to distinguish ASIN products that meet JCT compliance requirements). Additionally, if JCT is not registered as a tax entity, it may not be possible to apply for tax deduction.
1.5.2 Unable to enjoy the competitive advantage brought by JCT registration number:
✅ Complete tax compliance and ensure account security;
✅ Issue compliant invoices to ensure the competitiveness of enterprise orders;
✅ Compliant customs clearance and tax refund to reduce cash flow pressure on enterprises;
✅ Apply for exclusive support and exposure pages for Amazon enterprise purchases;
TWO:Simple declaration and Standard declaration
2.1 Simple declaration
The main purpose of simple declaration is to reduce the tax burden on small and medium-sized companies, and not to offset the actual input consumption tax, but to offset the input consumption tax calculated by multiplying the output consumption tax by the recognized procurement rate.
The application of a simple taxation system requires the following two conditions:
- Taxable sales within the benchmark period are below 50 million yuan
- It is necessary to submit a "Record Form for the Selection of Simple Consumption Tax Collection System" to the relevant tax bureau.Once you choose simple declaration, you cannot change the declaration method within 2 years, and you can choose standard declaration again after 2 years.
For example, for a company with a tax period starting from January 1, 2023, if the sales revenue is less than 50 million yen from January 1, 2021 to December 31, 2021, the company can entrust a tax agent to submit a simple declaration form to the Japan National Taxation Bureau before December 31, 2022, and use the simple declaration to calculate consumption tax starting from 2023.
Formula for calculating the taxable amount of simple declaration:
Actual tax payable=taxable sales * 10% - tax payable * purchase deduction coefficient
2.2 Standard declaration
By default, the tax bureau selects the standard declaration method for sellers, and sellers who meet the conditions for simple declaration can apply for simple declaration to the tax bureau through a tax representative in advance.
The import consumption tax bills collected by customs through reverse calculation, consumption tax bills purchased locally in Japan, and Amazon's FBA expense consumption tax input bills can be deducted, so the actual tax burden of JCT will not increase too much.
In summary, Amber Global suggests that enterprises with a single business category can choose simple declaration, which can effectively simplify the financial processing process and reduce the administrative burden on enterprises.
But if the enterprise itself has a high input tax and exceeds 80% of its own revenue, it is recommended that sellers choose the standard declaration mode. For enterprises with more experience categories, simple declaration needs to distinguish each type of business category and sum up according to different procurement coefficients. For such enterprises, simple declaration not only does not simplify the financial process, but also increases the financial work of the enterprise.
THREE:Customs clearance and Tax refund
3.1 What is customs clearance inverse operation?
When goods enter the Japanese market for sale, the selling price and domestic cost (including transportation and insurance fees incurred domestically, customs duties and import consumption taxes paid upon importation, etc.) of the goods on the Japanese e-commerce platform can be determined, and the dutiable price of the goods can be calculated through inverse calculation.
3.2 Japanese JCT customs clearance method
Generally, the legal representative number is used for customs clearance when importing from Japan. During customs clearance, the freight forwarder will choose the ACP mode, which can be used for subsequent declaration and deduction after obtaining a compliant tax receipt.
◆ IOR customs clearance
The importer of record is abbreviated as IOR. When the goods are imported to the Japanese customs, the importer needs to be registered locally in Japan, and the importer is obliged to pay import excise tax and customs duties at the time of import.
In addition, importers are responsible for the corresponding compliance laws and regulations of goods imported into the Japanese market. Meanwhile, non Japanese resident entities are unable to apply for IOR.
◆ ACP customs clearance
Customs Procedures Agent (ACP). ACP is a Japanese resident entity registered in the Japanese customs. Its main responsibility is to handle the import and export procedures of Japanese customs on behalf of non resident importers. It is also the most commonly used customs clearance method for cross-border e-commerce enterprises outside Japan.
The difference between IOR and ACP
IOR serves as an importer for overseas sellers, replacing the services imported by the seller, while also subject to obligations such as customs duties and consumption taxes.
ACP, on the other hand, acts as the agent importer for overseas sellers, and bears the obligation to pay import consumption tax and import duties on behalf of the seller themselves. As an agent, ACP does not have to bear any joint and several liability.
TIPS: Currently, there are so-called "double clearing and tax inclusive" channels in the market that use IOR customs clearance, which carries certain risks.
3.3 How to apply for JCT tax refund?
① Register JCT tax number as a tax paying entity
The prerequisite for applying for JCT tax refund is to become a tax paying entity and declare taxes. When choosing the general declaration method for taxable sales declaration, the input JCT receipts generated during the taxable period can be used for deduction of taxable consumption tax. If there is any remaining amount after deduction, JCT tax refund will be applied.
② Which projects can be applied for input deduction?
The import consumption tax collected by customs through reverse calculation, local procurement in Japan, and Amazon's FBA expense consumption tax input receipts (FBA expense input receipts can be downloaded by sellers from Amazon's tax repository file) can all apply for input deduction.
Q&A
Q：Can Japan's JCT be withheld and paid on behalf of others?
A: JCT in Japan does not have a platform withholding and payment policy