Japan unsure on B2B e-commerce tax

Sun 22nd Jun 2014

Following the publication of Japanese plans for Consumption Tax on non-resident B2C e-commerce this year or early 2015, it has become clear that the position on B2B transactions is unclear.

The Japanese International Taxation Discussion Group has proposed three methods for capturing Consumption Tax, which include:

  1. Application of VAT reverses charge so that the local Japanese Company reports the acquisition and supply (as an input) in its return. This would eliminate any cash flow implications. This is the methodology applied in the European Union, and simplified the reporting burden for all.
  2. Require the foreign supplier to register with the tax authorities and charge local indirect tax, as with the B2C proposals
  3. Oblige a Consumption Tax registration, but allow companies to use the reverse charge where there is B2B transactions.

There will now be a short public consolation on the B2C and B2B proposals, and it is expected final guidelines will be published in the early Autumn. Realistically, implementation will not come until the start of 2015.