JCT Reform Proposals – Introduction
On March 28, 2024, the Diet passed the bill implementing the 2024 tax reform proposals, ushering in changes that broaden the scope of foreign business operators subject to Japanese consumption tax (JCT).
Major Changes
General
The 2024 Tax Reform introduces significant amendments to the Japanese consumption tax regime:
Expansion of Taxable Business Operators
Previously, a business operator became taxable if their taxable transactions exceeded JPY 10 million in the base period. Under the reform, foreign business operators established for more than two years are deemed taxable if their share capital is at least JPY 10 million (or equivalent) upon commencing operations in Japan.
Digital Content Transactions
While offshore developers of digital content were already required to collect JCT from Japanese users, the reform imposes new collection rules. Digital platforms with transaction volumes of JPY 5 billion or more between offshore developers and Japanese users are now responsible for collecting and remitting JCT on behalf of these developers.
Key Takeaway
The 2024 Tax Reform expands the JCT obligations for foreign business operators, including those not previously subject to such taxation.
Foreign companies planning to enter the Japanese market and digital platforms serving Japanese users must evaluate how these changes will affect their operations.
JCT Reform Proposals – Conclusion
These reforms reflect Japan’s efforts to adapt its tax framework to the evolving digital economy and ensure fair taxation across borders.
Businesses should proactively assess their compliance obligations to mitigate potential risks and ensure continued success in the Japanese market.
Final thoughts
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