Japanese tax authorities intensify audits of foreign digital service providers

Japan Inbound Tax & Legal Alert November 2019, No. 47

More than four years have passed since foreign digital service providers (FDSPs) became subject to Japanese consumption tax (JCT) on 1 October 2015. Recently, the Japanese tax authorities (NTA) have intensified their audits of FDSPs to maximize collection of JCT due.

The NTA initially sends a questionnaire to the FDSP requesting basic information, such as the amount of the FDSP’s paid-in capital, registered address, amount of sales to Japanese consumers, etc. According to media reports, if an FDSP that is determined to be a JCT taxpayer does not respond to the questionnaire or does not pay the JCT due as established by a subsequent audit, the NTA is requesting the attachment of certain assets of the FDSP (such as receivables from the Japanese customer debtors) in settlement of the JCT due.

This newsletter explains the following topics;

1. Determination of JCT status and obligations of JCT taxpayers
2. Digital services subject to JCT
3. Classification as B2B or B2C services
4. Audits
(170KB, PDF)

* This Article is based on the relevant Japanese or specific country’s tax law and other authorities in effect on the date of this Article. This Article would not be guaranteed updating if there are any changes in Japanese tax law, any other law, or interpretations by the courts or tax authorities thereof after the date of this Article.

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