Japan: Platforms To Become Liable For Sales Tax On Digital Services

The Japanese Government is to consider introducing a new requirement that would make digital platforms responsible for accounting for any Japanese Consumption Tax (JCT) due on provisions of electronic services to consumer clients by overseas businesses.

This would typically be online streaming services, e-books and any other digital service with minimal or no human interaction.

Draft legislation is being discussed in Parliament and in the current version it is envisaged that only platforms that exceed 5 billion yen (£26 million) in consideration per taxable year would be subject to
this requirement. If the legislation is approved it is expected that the Japanese Tax Authorities will publish a list of the platforms that will become liable for the JCT on electronic services.

The platforms in question will be required to notify non-Japanese vendors on the platform of this new requirement. If the legislation is approved then businesses selling electronic services to Japanese consumers via third party platforms would no longer have JCT obligations and should ensure they are not charging sales tax to their consumer clients in Japan.