Hello. I am Soga, a Certified Public Tax Accountant of Japan providing international tax services in Nagoya.
Even if supply of goods (merchandise or products) or services takes place in Japan, it is exempt from Japanese consumption tax (“JCT“) if it constitutes an export transaction (export exemption).
In this article, we will explain JCT treatments on exports of goods from Japan to overseas as a typical export transaction for JCT purposes.
Tax neutrality at destination
If JCT were imposed in Japan on goods to be exported, the JCT would be passed on to the price, and the goods would not be able to compete on the same conditions as goods from countries other than Japan.
Export exemptions have been established to avoid such unequal conditions due to taxation. On the other hand, the destination country (importer) is subject to taxes similar to consumption tax (VAT, etc.) based on the tax rules of that country.
Input tax deduction corresponding to exported goods
The input tax amount of JCT included in the purchase of goods eligible for export exemption should be deducted or refunded (input tax deduction) through a JTC return, so that the total JCT burden should not be incurred.
Export declaration must be preserved
In order to enjoy export exemption, documents proving that the transaction is an export transaction, such as an export declaration, must be preserved for seven years.
In principle exporter enjoy export exemption
In principle, export exemption can be applied by the exporter, a nominee of the export declaration.
Exceptionally, in cases where a trading company or an agent becomes the nominee of the export declaration, the National Tax Agency allows the actual exporter to apply for export exemption (the nominee is not eligible for export exemption) by certain procedures.
Conclusion
Export exemption is an exception to transactions that are basically taxable, so it is important to ensure that a transaction is applicable and that the necessary documentation requirements are met.
