One of the frequently asked questions by independent contractors is whether they can charge consumption tax to their clients.
It is a well known fact that a business entity with sales below 10 million yen is exempt of paying Japanese consumption tax to the government. It means that there are temptation for corporate clients to ask independent contractors for discount of consumption tax from their fees.
Many freelances, by their ignorance or weak position towards their clients, accepts such requests and reduce their bills. Some are convinced to believe that they are not allowed to charge consumption tax because they do not pay to the government.
It may sound strange to some, but small business owners and freelancers, whose sales in two years back is less than 10 million yen, can charge consumption tax on top of his service charge and take it for themselves as profit.
The consumption tax was introduced to Japan back in 1989 when computers were not very common. At the time, it was presumably extremely difficult for freelancers or small business owners to compute consumption tax to be paid after their fiscal year.
Because the Japanese government wanted to avoid the confusion and lighten the burden, they were allowed not to pay the consumption tax, which was 3% at the time.
The rule is still valid even the rate was raised to 8%. And it is not their business of corporate clients to know how much their freelance suppliers/service providers are making. Corporate clients will get refund of the consumption tax they pay to suppliers anyway. Even after they get discount.
So, my conclusion is, let us do not give in by big corporate clients and charge consumption tax, as they are our right and take them as profit.