Hello friends, I could really use some help!
I’m an employee of an aftermarket automotive parts distributor exporting parts from Japan (currently residing in Kanagawa) to the states. The distributor I work for usually doesn’t sell internationally, but they want to expand, so I’m building out the supply chain and crossing that frontier.
Our payment is coming from our US business partner (not end customer) so the parts (in the states, at least) are sales tax exempt because they’re B2B sales, with the merchandise being purely for resale.
I’ve read a number of articles regarding how taxes might work on the Japan side of things.
[This site,](https://taxsummaries.pwc.com/japan/corporate/other-taxes) for example, says:
>Exports and certain services to non-residents are taxed at a zero rate. Specified transactions, such as sales or lease of land, sales of securities, and provision of public services, are not subject to taxation.
But then goes on to say,
>Consumption tax paid by the business enterprise attributable to taxable revenue shall be creditable/refundable by filing the consumption tax return to the extent that such transaction is recorded in the accounting book and relevant invoices are kept.
Does that mean:
* Consumption tax **is collected** when a product is sold (considered taxable revenue), so we have to fill out the consumption tax return, recording the sale?
OR
* Consumption tax **is not collected** when the product is sold, because it’s “taxed at a zero rate”, and thus not considered “taxable revenue” in the first place?
Any and all help is appreciated! Who can I talk to about this if nobody here has a straight answer?
Thanks so much!
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2 comments
Consumption tax is a value added tax (VAT).
Very (very!) simply, when a company purchases a product they pay some VAT on it and when they sell said product they charge some VAT on it. At the end of the (tax) year, all the VAT paid is subtracted from all the tax collected. The company has to pay that difference to the tax office. (VAT Collected – VAT Paid = Positive number)
If a product is purchased in japan (VAT paid) and sold overseas, the VAT paid can be claimed back (VAT not collected – VAT paid = negative number).
Does that make sense?
1. Stated simply, when you export a product to a customer overseas you will later get the consumption tax you paid to your supplier refunded from the tax office.
2. You must keep not only your sales records but also the record showing you exported the product. That means your copy of the invoice/delivery note (showing the shipping address being outside Japan), plus if available your copy of the shipping company documents.
3. You should speak to the company’s tax accountant about this as they will be the ones dealing with the tax office about consumption tax. They should be familiar with what needs to be done, but you may need to prompt them a bit if they’re an ancient geezer with zero clue about exporting.
4. The tax office does **not** like refunding people money. You are more likely to have a consumption tax audit once your export volumes go up. It’s not a big deal as long as you have all your documents in order.