Many sellers operating in Japan's marketplace have questioned why they must pay the Japanese Consumption Tax (JCT) twice - once during customs clearance and again after JCT registration. This apparent double taxation actually stems from a misunderstanding of Japan's tax mechanism. With the impending implementation of Japan's "Qualified Invoice System," sellers must thoroughly comprehend JCT requirements to ensure compliance and maintain competitive advantage.
1. JCT Explained
Japanese Consumption Tax (JCT), similar to Europe's VAT, is a consumption levy ultimately borne by end consumers. Sellers collect this tax from buyers during transactions and subsequently remit it to Japanese tax authorities.
2. JCT Registration Requirements
Sellers must register for JCT if they meet any of these conditions:
- Taxable sales exceed ¥10 million during the base period
- Taxable sales exceeded ¥10 million in the preceding base year
- Company capital exceeds ¥10 million
3. Checking Taxable Sales
Amazon provides a straightforward method to check taxable sales:
Path: Seller Central > [Reports] > [Payments] > All Statements
Note that both B2C and B2B sales qualify as taxable, including sales generated through non-Amazon channels within Japan.
4. Customs Payments vs. JCT: Avoiding Double Taxation
The confusion arises from misunderstanding "input" and "output" JCT:
- Customs-paid JCT: Considered input tax paid during import
- Sales-collected JCT: Output tax collected from customers
After registration, sellers only pay the difference between output and input JCT. Customs-paid JCT isn't duplicate payment but can be credited against future liabilities - provided the seller uses their own JCT number during customs clearance.
5. Amazon's Role in JCT Collection
Amazon doesn't deduct or remit JCT on sellers' behalf. The platform merely facilitates transactions, while sellers remain responsible for collecting, declaring, and paying the tax difference (or claiming refunds where applicable).
6. Optimal Timing for JCT Registration
Japan's National Tax Agency began accepting JCT applications from October 1, 2021. While official processing times suggest two weeks each for corporate numbers and JCT IDs, international businesses often experience longer delays.
To ensure compliance before the October 1, 2023 deadline, authorities recommend submitting applications by March 31, 2023. Late applications risk processing bottlenecks that could disrupt operations.
7. JCT Compliance: An Inevitable Requirement
As Amazon's compliance standards tighten, JCT registration becomes increasingly essential. The growing demand for qualified invoices among Japanese buyers makes early adoption strategically prudent.
8. JCT Registration Process
The registration involves these key steps:
- Prepare and notarize required documents (business license, corporate documents, etc.)
- Apply for a corporate number from Japan's National Tax Agency
- Submit JCT registration upon receiving the corporate number
- Await approval (processing times vary)
- Receive JCT identification number
9. JCT Filing and Payment
After registration, sellers must file periodic returns (quarterly or annually based on sales volume):
- Compile sales, purchase, and import data
- Complete JCT return forms
- Submit declarations to tax authorities
- Remit any balance due
10. The Strategic Value of JCT Compliance
Beyond meeting legal obligations, JCT compliance offers long-term benefits:
- Enhanced marketplace credibility with Japanese consumers
- Access to B2B markets requiring qualified invoices
- Reduced exposure to tax penalties and operational risks
- Potential eligibility for future government incentives targeting compliant businesses