みなと国際会計事務所 Accounting Intelligence blog by a CPA in Tokyo

みなと国際会計事務所 Accounting Intelligence blog by a CPA in Tokyo, tax tips, accounting, running business

How to get consumption tax refund

time 2017/09/19

If your business is to export goods or services from Japan, it is likely that you are able get consumption tax refund. However, you need to meet the following conditions:

1) you need to register your company business to Japanese Tax Office. 事業開始届 or 会社設立届
2) you are by default exempt of consumption tax if you are a sole proprietor or a company with paid-in capital less than 10 MM yen. It is usually a good thing for a small company because you do not have to pay consumption tax. The Japanese government encourage you to start your own business and give you such incentive to take the consumption tax that you receive as your own income.

But this will not be your choice if your business is to export goods/services. You want to file your consumption tax return and get refund. You have to choose to be a consumption tax filer by submitting an application form to become a tax filer (消費税課税事業者届出書). This has to be filed by the end of the first fiscal year for the first year to make it taxable (refundable) or before your fiscal year starts for the second fiscal year and later years.

3) Documentation. You need to get export permission under your (company) name. Its term has to be “FOB” or “CIF” and the ownership has to be transferred NOT in Japan. If the risk and ownership of your merchandises are transferred in Japan, it will be regarded as a domestic transaction, which is therefore taxable of consumption tax.

The worst is “EX-FACTORY” or “EX-WORK” where, according to wikipedia, the definition is like this:

EXW means that a buyer incurs the risks for bringing the goods to their final destination. Either the seller does not load the goods on collecting vehicles and does not clear them for export, or if the seller does load the goods, he does so at buyer’s risk and cost. If the parties agree that the seller should be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract of sale.

The reason of making export sales consumption tax free of Japanese Consumption Tax is because it will not be sold in Japan and therefore will not be “consumed” domestically. And it is to make the export placed in equal fitting against competitors from other countries.

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