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[Japan] Tax filing with reverse charge mechanism

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Now a days, there are thousands of digital contents or services selling through the internet, and its related tax mechanism is, too, revised.

When a foreign business provides “provision of business-to-business(B2B) electronic services” and “provision of specific services”, a Japanese business receiving said services from the foreign business is liable to file returns and pay taxes.( so called a “Reverse charge mechanism”)

“Provision of B2B electronic services” and “provision of specific services” by foreign businesses in Japan is regarded as “specific taxable purchase,” which should be subject to tax filing using the Reverse charge mechanism.

1. Business required to file tax returns using the Reverse charge mechanism A business to meet all the following three conditions is required to use the mechanism: (1) it has received “provision of B2B electronic services” “provision of specific services” for the taxable period for filing; (2) it files its tax return for the taxable period within the general tax system; and (3) its taxable sales ratio is less than 95%.

2. Filing method, etc. using the Reverse charge mechanism The amount of tax base, etc. for tax filing using the Reverse charge mechanism are stated as below.

(1) The amount of tax base for the taxable period The total of: the amount of transfer value of taxable assets, etc. transferred by the Japanese business itself; and the amount of payment value of specific taxable purchases. This total amount shall be the tax base amount for the taxable period. (Round down the amount to the nearest ¥1,000.)

(2) The amount of consumption tax subject to deductible tax on purchase The total of: the amount of payment value of taxable purchases excluding specific taxable purchases multiplied by 6.3/108; and the amount of specific taxable purchases multiplied by 6.3/100. This total amount shall be the amount of consumption tax subject to deductible tax on purchases.

To familiar with the tax mechanism, applying effective tax deductions!!
for more details, please refer to National Tax Agency

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