Japanese Consumption Tax (JCT)

The Japanese Consumption Tax (JCT) is a form of indirect tax, similar to the European VAT, being the businesses responsible for the collection of the JCT from customers at the time of sale. It is imposed on “taxable sales” and paid by businesses through a self-assessment system, but the final burden lies with the consumers.

Why Register for JCT?

1. Platform Compliance Requirement: Major Japanese e-commerce platforms (e.g. Amazon Japan, Rakuten) require sellers to register for JCT. Without a valid JCT number, your seller account may face restrictions or suspension.
2. Invoice Issuance Obligation: Only JCT-registered businesses can issue Qualified Invoices (適格請求書). Buyers (especially B2B customers) cannot claim input tax credit unless a Qualified Invoice is provided→ This directly affects sales and buyer confidence.
3. Legal Compliance: If your business exceeds certain thresholds (explained on the next slide), you are legally obligated to register. Voluntary registration is also possible for businesses aiming to build credibility or issue qualified invoices.

Who must register for JCT?

1º Base Year Threshold

Base year refers to the fiscal year two years prior to the current tax year. For JCT liability in 2025, the base year is 2023. If your taxable sales in the Base Period (the second preceding fiscal year) exceed ¥10 million, JCT registration is mandatory.

e.g. Sales in 2023 determine JCT status for 2025

2º Specified Year Threshold

Refers to the first 6 months of the previous year (January–June). For JCT liability in 2025, the specified year is January–June 2024. If your taxable sales or total payroll during the first 6 months of the preceding year exceed ¥10 million, JCT registration is also mandatory.

e.g. Jan–Jun 2024 for 2025

3º Capital Threshold

If your company has a paid-in capital ≥ ¥10 million, either the taxable sales or the total payroll in the specified year, you are automatically considered a taxable person from the beginning.

4º Voluntary Registration

You can choose to register voluntarily by submitting the Report on the Selection of Taxable Proprietor Status for Consumption Tax.
This enables you to issue qualified invoices even if you don’t meet the above thresholds.

Standard JCT Filing (General Taxation Method)

• Full input tax credit is available, provided appropriate records and qualified invoices are retained.
• Requires detailed bookkeeping and compliance with the Qualified Invoice System.
• Suitable for businesses with high input costs or large transaction volumes.
• Required when annual taxable sales exceed ¥50 million, as the simplified method becomes unavailable.

Example: A company has net sales of ¥10,000,000.

Applicable JCT rate = 10%→ Output JCT = ¥10,000,000 × 10% = ¥1,000,000

• Input JCT (based on invoices): ¥500,000
• Final Tax Payable = ¥1,000,000 – ¥500,000 = ¥500,000

Import Tax

You can reclaim input tax paid on imports. However, to do so, your import activities must be properly declared to Japanese Customs. Tocomplete import declarations, non-resident businesses usually need an Attorney for Customs Procedures (ACP) – a local proxy authorized by Japanese Customs to handle import clearance.

Key Takeaways

JCT is mandatory for many foreign sellers doing business in Japan, especially on platforms like Amazon Japan.

Proper registration and filing are essential to remain compliant and maintain platform access.