Japan Invoice Template

You must obey Japanese VAT requirements if you have consumers in Japan, regardless of where you live or where your internet business is headquartered. That is the purpose of this guide. This tutorial covers all you need to know about Japan’s tax legislation.

Find out if you need to register for VAT in Japan and how to build a compliant tax invoice. As a business supplying goods or services to Japan, ensure that you are issuing tax invoices with all of the necessary information included. Simplify your VAT compliance in Japan with free invoice templates.

Invoicing in Japan

The Japanese consumption tax (JCT) is equivalent to a value-added tax (VAT) or sales tax. JCT will implement a new registration-based qualified invoice system on October 1, 2023. This shift will significantly influence domestic and international businesses that provide digital services to Japanese clients. The new qualified invoice system will offer new procedures for computing JCT and unique requirements, including invoice-specific requirements.

Aside from the changes in how JCT will be computed on future tax returns, taxpayers must be mindful of the implications for their internal systems, particularly the processes for sending and receiving invoices. This could require the creation of new procedures or the revision of old ones.
Taxpayers must now evaluate how these changes will affect their tax compliance and planning operations.

Japanese Consumption Tax registered businesses must produce compliant tax invoices, including all required details, as stipulated by NTA. Invoices must be delivered with every transaction and all records kept by the supplier.

Japan VAT Information for Invoicing

VAT is an indirect consumption tax that applies to the production and distribution of goods and services, and that is collected at each stage of the supply chain. VAT is collected from the end customer by the supplier and transferred by the supplier to the relevant tax authorities. In Japan, the indirect consumption tax applied to the supply of goods and services is called the Japan Consumption Tax (JCT).

JCT is collected on the supply of all taxable goods and services to Japan, including digital services, E-Commerce, and imports. The tax authority responsible for setting guidelines and enforcing JCT compliance is the National Tax Agency (NTA).

VAT/JCT Rates

The Japanese Consumption Tax carries a range of rates, depending on the type of supply:

Once you have met the threshold for VAT/JCT registration, you will be required to comply with yearly tax returns to the NTA. Payment is due at the time of filing via an authorized bank or post office. Failing to submit returns on time can result in hefty fines and penalties, including high interest on outstanding JCT balances.

While foreign individuals and entities operating in Japan are liable for JCT, they are not generally eligible for consumption tax reclaim and refund. Furthermore, non-Japanese businesses must appoint a local tax agent to act on the entity’s behalf with regard to taxation.

If you are supplying goods and services to another VAT/JCT-registered business, you will be exempt from collecting tax. Rather, under the reverse-charge mechanism, the recipient of the supplies will assume liability for JCT.

Who Needs to Register for VAT/JCT in Japan?

The threshold for JCT registration is the same for local and foreign companies supplying goods or services in Japan or importing goods into Japan. Some taxable services include consultancy or marketing services, as well as charging entry to events or conferences. Foreign businesses storing inventory or distributing goods in Japan may also be liable for VAT. Once you are obligated to register, you will also be required to comply with on-going requirements, for example, maintaining records and filing tax returns.

The JCT threshold is JPY 10,000,000 of sales during any 12-month period, whether for foreign or local entities. In addition, start-ups that raise JPY 10,000,000 or more in capital will be immediately liable for JCT. If your business has sold less than or is expected to sell less than the threshold amount, you are not required to register.

Voluntary registration for companies that do not meet this threshold is possible. This is beneficial insofar as registered businesses may reclaim VAT/JCT. However, since foreign entities or individuals conducting business in Japan are not entitled to reclaim JCT, voluntary registration is inadvisable.