What is Amazon Japan Consumption Tax (JCT)? What are the consequences of not registering for JCT?

Amazon Japan has issued new regulations. From October 1, 2023, the reform of the Japanese Consumption Tax (JCT) "Compliant Invoice Retention System" initiated by the National Tax Agency of Japan will take effect. The Compliant Invoice Retention System allows corporate buyers to apply for consumption tax deductions.

1. What is Amazon Japan Consumption Tax (JCT)?

JCT, the full name of which is Japanese Consumption Tax, is a tax that consumers pay when they buy goods. It is not levied regardless of whether the goods are profitable or loss-making.

Also known as turnover tax, it can be understood as the Japanese version of VAT. For corporate buyers, they can deduct the JCT amount from the tax payable to the tax bureau through the JCT invoice provided by the seller, that is, JCT can be deducted from the input tax to reduce their tax amount.

2. What are the consequences of not registering for JCT?

If the seller does not register JCT when selling on Amazon Japan, the following problems will arise!

01 Compliance issues: After the system takes effect on October 1, 2023, Amazon will not be able to issue compliant invoices for the sale of goods. Non-compliant tax reporting may result in account restrictions.

02 Credibility issue: If eligible sellers fail to submit their JCT registration number to Amazon as required, they will no longer be able to issue compliant invoices to buyers, making it impossible for buyers to apply for tax deductions.

03 Sales volume issue: If the seller’s customers have a demand for tax deductions, then customers will no longer purchase products, which will directly lead to negative impacts such as a decline in sales.

3. Common Problems of Japan JCT Registration

Common problems encountered when registering for Japan JCT:

01. What do sellers need to do regarding JCT?

A: 1) Apply for a JCT registration number; 2) Submit your JCT number on the Amazon platform

02. Do all sellers who sell in Japan need to register a JCT number?

A: No, currently only sellers who meet one of the above three conditions need to register for JCT.

03. What happens if I meet the requirements but do not register for a JCT number?

A: It will affect sales; unregistered sellers cannot issue deductible invoices. If a buyer wants to buy a batch of products and needs an invoice, the seller will not be selected by the buyer, and the seller will lose many customers.

04. If I don’t register, do I not have to pay taxes now?

Answer: If the sales amount exceeds the prescribed limit, it must be declared and paid from a compliance perspective. Cross-border platforms may also have requirements in this regard in the future.

05. Do I need to declare sales that occurred before 2020? Will there be any penalties if the declaration year has passed?

A: If you are obliged to pay taxes in 2023, the answer is yes. If the taxable sales three years ago (for example, in 2020) were more than 10 million yen, you are obliged to pay taxes in 2023. There is no penalty tax for late voluntary declaration, but interest (interest rate is 2% per year) will be charged.

06. Which invoice can be used to deduct output consumption tax?

A: Invoices issued by companies with tax numbers can be deducted. Customs duties paid during customs clearance cannot be deducted. Part of the consumption tax prepaid during import can also be deducted. The premise is that the invoice obtained by the seller after registering JCT can be deducted.