The Ministry of Finance recently submitted a concrete
proposal to the International Taxation Discussion Group of the Government Tax
Commission on the possibility of levying Japanese Consumption Tax (JCT) on
electronic supplies by foreign corporations. The new rules would affect
supplies of electronic books, music, software, applications etc. and could take
effect from 1 October 2015.
As a result of the proposal, from 1 October 2015 or later,
the JCT Law may be amended to subject electronic supplies by foreign
corporations to JCT.
Japan will begin collecting taxes on the sale of downloaded
content such as music and eBooks from distributors such as Amazon as early as
the fiscal year 2015. Japanese firms buying foreign e-content will have to pay
the tax, while domestic firms will have to register with the local tax authority
and pay the tax.
Japanese domestic firms will be at a disadvantage as they
pay taxes levied on domestic servers while foreign companies currently don’t
have to pay the tax. Companies like Microsoft, Apple and Amazon will be able to
sell music and eBooks at the same price as domestic firms but avoid the tax.
In order to compete with foreign distributors, a few
Japanese vendors have acquired overseas distributors, to avoid the consumption
tax.
The
government hopes to put the tax on foreign downloads into effect by October
2015 when the Japanese sales tax rises to 10%. Lawmakers initially tried to
enact the change by the spring when the tax rose from 5% to 8%, but this was
put on hold to sort out the details of the change.