Understanding the handling of JCT (such as payment of import JCT, collection of sales JCT from customers, and JCT returns) is crucial to avoid significant cost burdens. This is a vital aspect, so please ensure a thorough understanding to determine the most optimal business model.
Basic procedure
When a foreign entity without a physical presence in Japan (a non-resident company) imports goods into Japan and subsequently sells them within Japan, the handling of Japan Consumption Tax (JCT) can be broadly divided into the following three steps:
Step 1: At the Time of Import
- You are required to pay import consumption tax equivalent to 10% of the customs-declared value plus customs duties to Japan Customs.
- Foreign entities without a base in Japan must appoint an Attorney for Customs Procedures (ACP) so that the foreign entities to act as the IOR (Importer of Record) themselves.
Step 2: At the Time of Sale
- When selling goods domestically, you must collect 10% consumption tax from the customer on the sales price.
Step 3: Tax Return Filing (Typically Annually)
You file an annual consumption tax return, paying the difference between:
- the JCT collected from customers (output tax), and
- the JCT paid at the time of import and other business purchases (input tax).
If input tax exceeds output tax, the excess amount may be refunded. A Tax Representative (licensed tax accountant) must be appointed to support this process.
⚠️ Please note: Only entities listed as the Importer of Record (IOR) are eligible to claim input tax credits or obtain a refund for Japan’s import consumption tax (JCT). Therefore, foreign entities must appoint an Attorney for Customs Procedures (ACP) in order to act as the IOR themselves.
If another company is listed as the IOR, you will not be able to deduct the import JCT on your own tax return. In that case, you would be required to remit the full amount of collected JCT to the tax office—resulting in significant additional costs.
If You Qualify as a JCT-Exempt Business
If you meet the requirements to be treated as a JCT-exempt business, you may choose either of the following:
- Operate as a JCT-exempt business; or
- Register as a JCT-taxable business and Qualified Invoice Issuer under the JCT Invoice System.
For details on whether you qualify as a JCT-exempt business, please refer to our guide on “Are we a Tax-Exempt Business?” further down on this page.
[1] Operating as a JCT-Exempt Business
- You pay 10% import JCT to Japan Customs at importation (Step 1)
- You collect 10% sales JCT from customers in Japan (Step 2) → You are not required to file a JCT tax return (Step 3 is not applicable)
However, as you are not filing a JCT return, you cannot claim input tax credits or obtain a refund for the JCT paid at the time of import.
Also, since you are not a Qualified Invoice Issuer, your customers—if they are JCT-registered businesses—cannot deduct 100% of the JCT they pay to you. This may negatively impact your business, as customers may prefer to deal with suppliers who are registered invoice issuers. However, if your customers are individual consumers, who typically do not file JCT returns, not being a Qualified Invoice Issuer is unlikely to have a negative effect. In the end, whether to remain JCT-exempt or register as a taxable business/invoice issuer should be determined based on your business strategy and the nature of your customers.
[2] Operating as a JCT-Taxable Business / Qualified Invoice Issuer
- You pay 10% import JCT to Japan Customs (Step 1)
- You collect 10% sales JCT from customers in Japan (Step 2)
- You file an annual JCT tax return, deducting the input JCT (including import JCT) from the output JCT and paying the net amount to the tax office or claiming a refund if applicable (Step 3)
Issuing qualified invoices enables your customers to fully deduct the JCT they pay to you, enhancing your credibility and facilitating smoother business relationships.
⚠️ Please remember: You must act as the Importer of Record by appointing an ACP to be eligible to claim the import JCT as input tax. If another company is listed as the importer, no JCT credit or refund can be claimed for the import consumption tax.
Are we a Tax-Exempt Business?
Tax Filing Obligations of Nonresidents and Foreign Corporations
First, the consumption tax received from customers in Step 2 above should basically be paid to the national tax office. Consumption tax is imposed on transfers, etc. of assets made in Japan. Therefore, even if a nonresident or foreign corporation transfers assets in Japan, it is subject to consumption tax and is obligated to pay the tax.
In some cases, such as exempt businesses, it may not be necessary to pay the tax to the national tax office.
However, the following are examples where one cannot qualify as an exempt business and must file for consumption tax:
<Examples of Entities Required to File JCT Tax Returns (Non-Exempt Businesses)>
- Qualified Invoice Issuers:
Businesses registered as qualified invoice issuers under Japan’s invoice system. - Businesses with Taxable Sales Exceeding JPY 10 Million During the Base Period:
Entities whose taxable sales in Japan during the base period (generally the fiscal year two years prior) exceed JPY 10 million. - Businesses with Taxable Sales Exceeding JPY 10 Million During the Specific Period:
Entities whose taxable sales in Japan during the specific period (generally the first six months of the previous fiscal year) exceed JPY 10 million. - Newly Established Corporations with Capital of JPY 10 Million or More:
Newly established corporations (including certain newly established corporations) with capital or investment of JPY 10 million or more during a taxable period without a base period. - Foreign Corporations with Capital of JPY 10 Million or More Deemed to Have No Base Period: (Applicable to taxable periods starting on or after October 1, 2024) *
Foreign corporations without a base period and with capital or investment of JPY 10 million or more at the start of the fiscal year are not exempt from consumption tax obligations. - Businesses Opting for Taxable Enterprise Status:
Entities that voluntarily select to be treated as taxable enterprises.
*Important Notes on the 2024 JCT Tax Law Amendment
Under the 2024 amendment of Japan’s Consumption Tax Law, the exemption for foreign corporations initiating business in Japan has been significantly tightened.
Foreign corporations with no base period and capital of JPY 10 million or more at the beginning of the fiscal year are no longer exempt from consumption tax obligations during that fiscal year.
Starting from taxable periods beginning on or after October 1, 2024, a foreign corporation that has an existing base period but was primarily conducting business outside Japan and subsequently starts taxable business activities in Japan after the day following the end of its base period will be deemed as having no base period.
Being “deemed to have no base period” means that if the corporation’s capital or investment is JPY 10 million or more, it will incur consumption tax obligations from the deemed base period fiscal year onward.
As a result of this amendment, many foreign corporations will be required to file consumption tax in Japan from their first year of business operations in the country.
Our JCT Representative Service
At ACP JAPAN, we provide a comprehensive one-stop service covering both:
- Attorney for Customs Procedures (ACP)
- Japan Consumption Tax (JCT) Tax Representative
For the JCT portion of the service, we subcontract with a certified tax accountant (our trusted partner). As the primary contractor, ACP JAPAN oversees the entire process and ensures quality and consistency across all deliverables. Thanks to our deep expertise in customs procedures and JCT treatment, our clients are able to efficiently deduct or reclaim paid import JCT through proper tax filings.
Contract Structure of Comprehensive One-Stop Service for ACP and JCT Representative
Standard Scope of Works
In collaboration with our partner certified tax accountant, we provide:
- JCT Registration Setup including Obtaining a Qualified Invoice Issuer Number.
- Support notification of tax representative appointment.
- Support preparation/submission of the JCT return.
- Communication with stakeholders including National Tax Office.
- Cash handling support (e.g. Payment of the JCT to National Tax Office)
Flexibility in Tax Accountant Introduction
Our service structure is flexible and tailored to the client’s business needs. If we determine that the client’s business involves complex international tax issues, we may introduce another trusted tax advisory firm to provide advanced tax consultation in coordination with our services.
Our Customers – Attorney for Customs Procedures (ACP) Service
All our clients have successfully become Japan Importer of Record (IOR) and/or Exporter of Record (EOR) under our guidance.
Logistics Companies with Collaboration Experience
Here is a list of our partner logistics and forwarding companies with whom we have had successful collaborations. Please note that this list is not exhaustive, as we are open to working with any logistics or forwarding companies. For clients, we(SK Advisory) work as an Attorney for Customs Procedures (ACP), while the logistics companies manage forwarding, logistics, customs clearance and warehousing operations.
Why choose us?
- Customs and International Trade Professionals – Our CEO, Mr. Sawada, is a Certified Customs Specialist in Japan. With years of experience providing services in the Trade & Customs field, his leadership at KPMG and the establishment of his own company, SK Advisory, ensures our commitment to excellence and high-quality service.
- Full Adherence to Japanese Customs Law – Our top priority is to maintain full compliance with Japanese Customs Law and safely import / export our clients’ goods into / from Japan. We meticulously manage all import compliance aspects, including Japan Importer of Record (IOR) matter, HS code classification and the correct Customs Valuation of goods entering Japan. We support to complete all the necessary shipping documents, such as Invoice, Packing List and BL, on behald of non-resident / foreign Japan IOR.
- Communication in English, Chinese, and Japanese – Our team, with extensive international experience, excels in communication in English, including facilitating English-language meetings, and has earned considerable trust from clients. We also have staff capable of communicating in Chinese, making us equipped to handle Chinese-language support as well. Naturally, as a Japan-based team, we’re totally fluent in Japanese, ensuring seamless communication across these three key languages.
- Reputable and Reliable Partner -The growing demand for our Attorney for Customs Procedures (ACP) services is testament to our quality. We proudly serve clients globally, registering over 80 ACP customers annually. Our consistent track record underscores our reliability and credibility. Our unwavering commitment ensures all our clients successfully acquire Japan IOR status and import goods seamlessly into Japan.
- Handling Regulated Products – Our ACP/IOR partnership system can manage regulated items, including cosmetics, PSE-products, foodstuffs, and tableware.
- Recognized ACP Service Provider on Amazon SPN (Service Provider Network) – We are a certified ACP service provider within Amazon’s Service Provider Network (SPN), listed under the Trade Compliance category. Many international Amazon Sellers have successfully become Japan Importers of Record (IOR) through our ACP services.
We’re a reliable ACP service provider for Amazon FBA’s seller
In recent, we’ve been supporting many import projects of goods related to the Amazon-FBA program. If you are looking for a reliable ACP service provider, please let us know.
Guidance by Amazon
According to the seller central website in Amazon, there is guidance by Amazon that a non-resident entity needs to appoint an ACP or IOR. You may check on this “Non-resident requirements”.
Also, you can check the document developed by Amazon “Understand ACP and IOR guidance”.
Our ACP Service (Attorney for Customs Procedures)