For non-resident entities (Company-A) that import and sell goods to customers in Japan, the standard procedure involves three steps:
- Pay import JCT to a customs office, 10% of the import customs value when Company-A imports goods. <PAY TO CUSTOMS OFFICE>
- Obtain JCT from customers in Japan, 10% of the sales price when Company-A sells goods.
- Submit JCT tax return and pay the difference amount (2) – (1) to a tax office periodically <PAY TO TAX OFFICE (different authority from Customs Office)>
Why IMPORTER is important?
It is crucial to note that only the IMPORTER can deduct the import consumption tax at the time of tax filing. (= Deduct above (1) from (2) )
If Company-A uses another company to act IMPORTER, then Company-A can’t do above (3). Company-A has to pay all the amount of (2) to a tax office.
However, if Company-A imports goods using the Attorney for Customs Procedure (ACP), it becomes the Importer and can deduct the import consumption tax when filing the JCT tax return. In this case, Company-A only needs to pay the difference between the JCT collected from customers and the import JCT (2) – (1) paid to the Tax Office.
Appoint a tax accounting firm as Tax Representative / Tax Agent
Apart from utilizing ACP, when filing taxes in Japan (3), Company-A must appoint a Tax Representative. The Tax Representative will handle JCT tax registration and JCT filings with the tax office on behalf of the non-resident entity. SK Advisory can introduce our partner tax accounting company that can act as the Tax Representative.
Determination of JCT obligation (Taxable / Exempt)
Japan has an exempt system for new business entities.
In principle, whether a company is considered a JCT-Taxable company is determined based on the amount of JCT taxable sales during the base period, which typically refers to the fiscal year two years prior to the current fiscal year.
|JCT taxable sales in the Base Period||JCT taxable sales in the Specified Period||Taxable Entity or Exempt Entity|
|Over 10 million JPY||–||Taxable Entity|
|Equivalent or less than 10 million JPY||Over 10 million JPY||Taxable Entity|
|Equivalent or less than 10 million JPY||Exempt Entity|
(*1) The base period generally means the fiscal year 2 years prior to the current fiscal year.
(*2) The specified period generally means the first 6 months of the previous fiscal year.
(Note) Regardless of whether or not a company is a JCT-Taxable company, the company (Importer of products) has to pay import JCT to Japan Customs office when the company imports a product.
Please refer to the Tax Authority’s guideline (page3), you can see what is “BASE PERIOD”. general_00.pdf (nta.go.jp)
Also check this website (No.6 Taxable Person): Basic knowledge｜National Tax Agency (nta.go.jp)
If you’re an Exempted entity
During the exempt term, a new entity is not required to file tax returns. As long as your entity has exempt status, you are only required to:
(1) Pay 10% tax of the import customs value when you import goods.
(2) Collect 10% of the sales price when you sell goods.
That’s all. You can enjoy the difference amount 2) – 1).
Japanese New Invoice System
Recently, many companies register JCT (Japanese Consumption Tax) because the new invoice system for JCT will start in October 2023. The concept of the new invoice system is very similar to the EU’s VAT invoice system.
Your Japanese customer can’t claim input tax credits unless the sellers(suppliers) issue a qualified invoice that is written a JCT number. To issue a qualified invoice, sellers(suppliers) need to be a taxable entity and get a JCT number.
Before the Invoice system is introduced (before Oct 2023):
- A company that paid consideration of goods or services (=Company-B) is able to deduct Input JCT of the consideration regardless of whether the vendor (issuer of invoice, =Company-A) is a JCT-taxable or Non JCT-taxable company.
- There is no way to confirm whether the vendor (=Company-A) is JCT-taxable or Non JCT-taxable company.
After the Invoice system is introduced (after Oct 2023):
- A company that paid consideration of goods or services (=Company-B) is able to deduct Input JCT of the consideration only if the vendor (Company-A) has its invoice registration number.
- Company-B requests Company-A to issue the qualified invoice. If Company-A cannot submit qualified invoice, Company-B will no longer want to buy from Company-A.
**If Company-A only sells to consumers (not business entities), it may not require for Company-A to issuethe qualified invoice since normally consumers would not tend to do tax return.
Once the Comapny-A (Seller/Supplier) obtains the JCT invoice registration number, which means this company becomes a taxable entity that is obligated to file JCT tax returns on a regular basis.
- Professional of Customs and International Trade – The CEO, as a Certified Customs Specialist in Japan – Mr. Sawada has been providing consulting services in the Trade & Customs area for many years. He was in a management position at KPMG, then started with his own company – SK Advisory to continue the customs-related services to the international clients.
- Fully compliance in accordance with Japanese Customs Law – Maintaining the service quality with full compliance with Japanese Customs Law. ACP Japan is capable to manage all the necessary import compliance issues, including the classification of HS code, and setting of the appropriate Customs Valuation of the import goods to Japan.
- Experienced and credible partner – As ACP Japan has been providing ACP services to many clients as demand has increased, you can totally rely on us as a credible partner. We registers 40+ ACP customers every year, the customers from around the world. In this way, all customers successfully became non-resident IOR – Importer of Record in Japan. You can see a list of our customers in here “Experiences”.
- Qualified ACP service provider in Amazon SPN (Service Provider Network) – ACP Japan has officially become a qualified ACP service provider in Amazon’s Service Provider Network (SPN) under the Compliance category.
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)
What is ACP? – Attorney for Customs Procedures
Steps of using ACP, how foreign entity can import into Japan by ACP
What is IOR? – Importer of Record
Customs Valuation System in Japan
Customs Valuation When You Import By ACP
ACP Japan Became Amazon’s SPN Provider as Qualified ACP Service Provider