Understanding the Japan Consumption Tax (JCT) Number – Should you get one?
Navigating Japan’s tax regulations can be daunting, especially with the changes made on October 1, 2023 affecting foreign sellers on platforms like Amazon Japan. Here’s a breakdown to help clarify these updates.
What is the JCT Number?
Japan Consumption Tax (JCT) is similar to a sales or VAT tax. Obtaining a JCT number allows foreign sellers to issue Qualified Invoices, enabling Japanese businesses to claim back sales tax when applicable.
The JCT number is currently used for Business-to-Business (B2B) sales, and is not needed for B2C sales.
Is a JCT Number Required?
Currently, obtaining a JCT number is optional for most foreign sellers. However, if your annual taxable sales are over 10m JPY, you will be required to register for a JCT Number.
If you opt to have one, it means you agree to adhere to all current and future Japanese tax regulations as if you were a Japan-registered company.
Should You Get a JCT Number?
Whether or not you choose to get a JCT number would depend on the type of business you are currently conducting.
Consider registering for a JCT number if:
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You plan to sell to Japanese businesses via your Amazon Japan account.
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A significant portion of your sales is to Japanese businesses.
You are making over 10m JPY in annual taxable sales.
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By holding a JCT number, and being able to offer qualified invoices, your B2B sales channels opens up dramatically. Many businesses in Japan will specifically look to purchase from those who are able to offer qualified invoices, so if your business is predominantly B2B, opting to get a JCT number could be an option for you.
If you prefer not to obtain a JCT number, you can conduct your B2B sales outside of B2B marketplaces that require one, such as Amazon Japan.
COVUE can support these transactions and issue Qualified Invoices on your behalf. Please note that this only applies to B2B sales, and will not impact your B2C sales on marketplaces.
Reporting Obligations
Once you obtain a JCT number, you are required to regularly report your sales and financials to the Japan National Tax Agency. This reporting must be handled by a certified accountant, which can be costly.
While currently not required, foreign sellers with a JCT number might, in the future, be expected to prepay consumption tax similarly to Japanese registered companies.
Note that having a JCT number does not exempt you from paying consumption tax at Japan Customs. This tax is due upon entry into Japan.
As your IOR/ACP, COVUE can manage these filings on your behalf.
Adapting to these changes can position your business for success in the Japanese market. At COVUE, we offer comprehensive support to navigate these complexities, ensuring compliance and seamless operations.
For personalized assistance and more detailed guidance, contact us. We’re here to help you every step of the way in your Japanese market journey.