Japan proposes new reduced Consumption Tax (VAT) rate
The ruling Japanese Liberal Democratic party has indicated that it will introduce a new reduced Consumption Tax rate for basic goods to help alleviate the impact of the planned doubling of Consumption tax to 10%.
Consumption Tax rise to 10%
It was announced in 2012 that Japan would double its VAT tax – Consumption Tax – from 5% to 10%. This would be done in two stages:
- Increased to 8% from 1 April 2014
- Increased to 10% from 1 October 2015.
At present, there is no information on the potential new reduced Consumption Tax rate. It is expected to be 5%.
In the EU, where the average EU VAT rate is over 21%, most countries offer a reduced VAT rate of between 5% and 10% on foodstuffs, medicines and public transport.
The discussion around a reduced Consumption Tax will be finalised early next year, and this will include whether it will come into force in time for the first rise in April.
In addition, discussions are undergoing on adopting an EU-based system for VAT invoice compliance rules. Also, the level of VAT on invoices that may by deducted, including entertainment expenses. Currently, a limit of Yen5,000 per person is set as deductible.