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Japan VAT Refund

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Vat refund in Japan
How to calculate amount of refund of VAT of Japan
In case of exporting, business operator does not need to pay VAT
How to apply for VAT refund in Japan
You need to keep an accounting book in order to receive your VAT refund in Japan
Refund of consumption tax in the case of domestic company
  In the case of Newly Established Domestic Company 
Structure of consumption tax of Japan
Simplified Consumption Tax System

 

Vat Refund in Japan

Let’s assume that you are non-resident of Japan and purchase a vehicle in Japan and export it to India.

In this case, as long as you can satisfy some requirements, you can receive a consumption tax refund.

Japanese consumption Tax — 消費税 (shōhizei) is the country’s equivalent of the VAT/GST/Sales taxes that can be found in other countries. Japanese shōhizei is levied on the sales amount that is generated in Japan.

This is important. If you buy a vehicle in Japan and sell it in India, the sales is not generated in Japan but in India. Therefore you can receive a tax refund from the Japanese tax authorities.

How to calculate amount of Refunded VAT in Japan

At first, I would like to explain system of VAT of Japan. As I mentioned above, in Japan, VAT is correspond with Consumption tax — 消費税 (shōhizei).

Assumed that you purchases a pencil at 110 yen in Japan and sell it at 200 yen in Japan. When you purchase it, VAT is included.

¥100 × ¥1.1 (VAT) = ¥110″

VAT Rate is 10%.

You paid VAT of ¥10.

Then when you sell the Pencil at ¥200 to customer in Japan, amount of VAT is ¥20.

¥200 × ¥1.1 (VAT) = ¥120″

So you receive VAT of ¥20 from customer.

And you need to pay Received VAT of ¥10 to the tax office on behalf of customer.

¥20 – ¥10 = ¥10

This is called “Indirect taxation”.

In case of exporting, you (business operator) do not need to pay VAT

Assumed that you purchases a pencil at 110 yen in Japan and EXPORT it and sell it at 200 yen in India.

When you purchase it, VAT is included.

“100 yen × 10% =10 yen.”

You paid VAT of 10 yen.

But you do not sell the pencil in Japan.

In the case you do not sell it in Japan, you can apply for refund of VAT of Japan.

How to apply for VAT refund in Japan

Assumed that you do not have office in Japan. You just come to Japan and stay in Hotel and purchase a vehicle.

In this case you need to appoint Tax Agent (Nozei Kanrinin) who has a legal address in Japan and notify his contact information to tax office.

Because tax office needs to contact your tax agent in Japan to confirm details.

And You need to be a Taxable person (Kazei Jigyosha) of VAT of Japan.

If the amount of taxable sales amount (of Reference period) is more than 10 million yen, you can be taxable person of VAT of Japan automatically.

Or if capital amount of your company is 10 million yen, your company can be taxable person of VAT of Japan automatically.

But you (Vehicle Exporter) will not have sales amount of 10 million yen or more in Japan.

So you need to be a Taxable person (Kazei Jigyosha) to receive Refund of VAT of Japan.

When you become a taxable person of VAT and if the amount of received VAT is more than the amount of paid VAT, you need to pay VAT to Tax Office of Japan.

For instance.

You purchased a pencil (100 yen Pre-tax price) + 10 yen (VAT).(Transaction 1)

You sell it at 200 yen in Japan.(200 yen Pre-tax price) + 20 yen (VAT).(Transaction 2)

In this case you need to pay 10 yen to tax office of Japan.

However if there is not Transaction 2, you do not have taxable sales amount in Japan. So you do not need to pay 10 yen to tax office of Japan.

On the contrary, you can receive refund of 10 yen from tax office of Japan.

So you can submit a paper to tax office to become a taxable person by due date.

Otherwise, you can not receive refund of VAT.

You can submit this paper to tax office.

If you (a person) purchase a vehicle in 10th, June, 2020, you need to submit this paper by end of 2020.

vat refund Japan taxable person declaration

You need to keep an accounting book in order to receive your VAT refund in Japan

You can make accounting book that clarifies the amount of VAT paid by you.

Once you have prepared necessary documents to apply for VAT refund in Japan, you can submit tax filing.

After that Tax office will ask you to provide further evidence.

So you can provide documents that prove exporting of Vehicles etc.

Then if Tax office grants your application, your tax agent in Japan can receive your VAT refund.

Actually some persons tried to steal money by using this scheme.

So in the case of refund of VAT, tax office tries to confirm if your application for VAT is true or fake.

Actually you need to pay money to seller in Japan and pay VAT to him.

Then you actually need to export it to other country.

You need to prove it by evidence issued by third party.

Refund of consumption tax in the case of domestic company

In the case sales amount of ABC company (Capital amount : less than 10 million yen. Fiscal year end : end of December) in 2019 (two years before from today) was more than 10 million yen, the company needs to pay consumption tax for 2021.

Assumed that ABC company purchased a pen at 110 yen from wholesaler (10 yen is consumption tax) and it sells the pen at 220 yen to a customer (20 yen is consumption tax) in 2021.

ABC company needs to pay consumption tax of 10 yen to tax office in February 2022.

Even if sales amount of XYZ company in 2019 was less than 10 million yen, if XYZ company submits a document (selection of consumption taxpayer) to tax office by end of 2020, it can become Consumption taxpayer from fiscal year of 2021.

If XYZ company purchases a pen at 110 yen from wholesaler (consumption tax : 10 yen) and it exports the pen at 200 yen in 2021, the company can receive refund of consumption tax (10 yen) in February 2022.

Newly established domestic company 

In the case a company was established in January 2021 in Japan.

Capital amount is less than 10 million yen.

Fiscal year end of this company is end of end of September 2021

This company hopes to become consumption tax payer. Because it exports vehicles from Japan and export it to Hong Kong.

If it can be consumption tax payer, it can apply for refund of consumption tax.

So it needs to submit Selection of consumption taxpayer to tax office by due date.

In the case of newly established company, it needs to submit the document by end of the first fiscal year.

So, in the case of this company, it needs to submit Selection of consumption taxpayer by end of September 2021.

If it submits the paper by end of September 2021, it can become Consumption tax payer from the 1st fiscal year.

So if it exported a vehicle in February 2021, it can apply for refund of consumption tax for the vehicle. 

Structure of consumption tax of Japan

Case 1

Assumed that you are operating a company in Japan.

Business term of your company is from 1st January to end of December.

Registered capital amount is less than 10 million yen.
(if it is more than 10 million yen, this company is consumption taxpayer from its establishment.)

Before 2019, Taxable annual sales amount was less than 10 million yen.

However in 2019, Taxable annual sales amount increased and it was more than 10 million yen.

In this case, this company becomes consumption taxpayer from 1st January 2021 automatically.

So this company needs to pay consumption tax on February 2022 to tax office.

This company purchased a pen at 60 yen (6 yen is consumption tax) from whole saler and sold it at 110 yen (10 yen is consumption tax) to a customer in 2021.
(6 yen is consumption tax paid and 10 yen is consumption tax received)

So this company needs to pay 4 yen to tax office in 2022.

Case 2

Assumed that you are operating a company in Japan.

Business term of your company is from 1st January to end of December.

Registered capital amount is less than 10 million yen.

Taxable annual sales amount has been less than 10 million yen.

However this company plans to export wine to overseas and it is its only business.

In 2022, this company will purchases wines at 60 yen (6 yen is consumption tax paid) and sales and exports it at 100 yen.

As of now, this company is not consumption taxpayer.

If it hopes to receive refund of 6 yen from tax office, it needs to become consumption taxpayer.

In order to become consumption taxpayer, it needs to submit a document by end of 2021.

If this company submits it to tax office by end of 2021, it can become consumption taxpayer from 1st January 2022.

So it can file refund of consumption tax paid (6 yen).

It will submit tax filing paper on February 2023 to receive 6 yen.

Simplified Tax System of Japan

What is Simplified Tax System (かんいかぜい=簡易課税)?

This system is relating to Consumption Tax of Japan.

Assumed that you are operating a business and need to pay Consumption Tax. You purchased a flour at 110 yen (10 yen is Consumption Tax paid by you) and make a bread and sell it at 220 yen (20 yen is Consumption Tax received from customer) in 2021.

There was not other business activity in your business in 2021. In this case you need to pay Consumption Tax of 10 yen to tax office in 2022.

20 yen (Consumption Tax) – 10 yen (Consumption Tax) = 10 yen.

In order to use this method, you need to keep all records of all transactions. You might sell breads 1 million time per year. You do not hope to spend a lot of times to make accounting book as below.

Cash 100 yen / sales 100 yen
10 yen cash / Consumption Tax received 10 yen

Instead, you may hope to make a accounting book like below.
Cash 110 yen / Sales 110 yen

So if you are a small and medium enterprises (SME), you can use Simplified Tax System (簡易課税) of Japan for Consumption Tax.

In this system, it is deemed that specific ratio of sales amount is purchase price named Purchase Ratio.

Requirements to use Simplified Tax System

Amount of sales amount in standard period should 50 million yen or less

If it is 2021 now, standard period is 2019. So if your sales amount in 2019 was more than 50 million yen, you can not use Simplified Tax System in 2021.

And in order to apply for the Simplified tax method, you need to submit notification paper to tax office in advance.

Purchase ratio differs depending on business category

Wholesale business : Purchase ratio : 90%.

Because wholesale business operator will purchases a wine at 90 yen and sale it to retalier shop at 100 yen.


Retailer Business : Purchase ratio : 80%.

Because Retailer Business operator will purchases a wine at 80 yen from wholesaler and sale it to consumers at 100 yen.


Restaurant Business operator : Purchase ratio : 60%.

Because Restaurant Business operator will purchases a meat at 60 yen and make a steak and sale it to consumers at 100 yen.

Other service operator : Purchase ratio : 50%

Because language school operator will pay rental fee for school space. She will not pay a lot of money to purchase something.

Real estate business operator : Purchase ratio : 40%

Because Real estate business operator will intermediate real estate transaction and receive fee. She will not pay a lot of money to purchase something, though she sometimes purchases a real estate to resale it.

How to calculate amount of Consumption Tax by Simplified Tax System

You are operating a restaurant business. So purchase ratio (仕入率) is 60%.

Annual sales amount of your business is 11 million yen and amount of Consumption Tax received from customer is 1 million yen.

Then 1 million yen * 60% = 600,000 yen.
This is deemed Consumption Tax paid by you to purchase a meat.

1 million yen – 600,000 yen = 400,000 yen.

So you need to pay Consumption Tax of 400,000 yen to tax office.

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