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Should we be charged Japanese Consumption Tax?

A freelancer in Japan has included Consumption Tax on his invoice, but

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We are a UK registered business conducting a filming project in Japan and one of the freelancers we've engaged has added consumption tax to his invoice, on the advice of his accountant. I've searched multiple sites but can't seem to get a straight answer as to whether this is legitimate or not.

It's stated that consumption tax is applicable for domestic transactions (the work was carried  out in Japan, but we are not based there) and specific export scenarios (definitely not applicable to us).

Technically it seems as though we could claim the tax back, but only by engaging a tax advisor and registering for tax in Japan, which is not a viable option for the amounts involved here.

Is anyone able to shed light on the situation here?

Replies (11)

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By WhichTyler
26th Jul 2019 08:40

It looks like it is similar to VAT, and covers 'the transfer or rental/lease of assets or the provision of services as a business in Japan by an enterprise for consideration' so presumably you are also paying it on all sorts of supplies in Japan (guessing your filming project might involve hotels, restaurants, vehicle & equipment hire that also include it) but may not have noticed (but budgeted for).

Sounds like you have learned a lesson, and as my grandmother used to say, education is expensive...

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Replying to WhichTyler:
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By Accountant A
26th Jul 2019 11:16

WhichTyler wrote:

Sounds like you have learned a lesson, and as my grandmother used to say, education is expensive...

And the main lesson being take professional advice to ensure that you understand the financial consequences of your business activities.

Why do so many people think professional tax and accounting advice is an unnecessary luxury?

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Replying to Accountant A:
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By dansm
26th Jul 2019 12:12

The costs involved of getting professional advice from Japan would almost equal the tax amount involved here, hence why I made an enquiry here. For any amounts material to our business of course we'd seek the appropriate financial advice.

I'm surprised by the hostility I've faced here.

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By dansm
26th Jul 2019 09:19

Hey WhichTyler,

You're correct that we will have been paying the tax on many B2C supplies.

It's B2B which is a bit unclear for me. Making a direct comparison with UK VAT, we wouldn't (and don't) add VAT when we supply services to Japanese business customers. My question would be 'is Japanese Consumption tax different in this respect?'

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Replying to dansm:
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By WhichTyler
26th Jul 2019 13:02

dansm wrote:

we wouldn't (and don't) add VAT when we supply services to Japanese business customers.'

1. it's possible that Japanese tax follows different rules
2. in some circumstances and for some supplies, UK VAT is chargeable to Japanese business customers, so please check you are applying it correctly yourself...

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Replying to WhichTyler:
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By WhichTyler
26th Jul 2019 14:13

However this suggests that 'Performance of services for a company resident outside Japan' could be exempt

https://www.eu-japan.eu/taxes-accounting/consumption-taxes/tax-exemptions

Might be worth pushing back to ask why its not been treated like this. they may have a good reason but its worth asking...

(OTOH this just says goods, an dis more official https://www.mof.go.jp/english/tax_policy/tax_system/japanese_tax_system_... )

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By The Innkeeper
26th Jul 2019 11:20

You have obviously been dealing with Japan or Japanese based entities for a while. Why dont you employ a suitably qualified firm who can advise you properly. I would guess that there aren't many people on this site who know too much about tax in Japan

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Replying to The Innkeeper:
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By dansm
26th Jul 2019 12:17

Hi The InnKeeper,

The values involved here don't justify us seeking professional advice, at least for this particular scenario, especially as this isn't an issue of compliance.

I thought there might be some users on AccountingWeb who had faced a similar scenario.

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By The Innkeeper
26th Jul 2019 12:31

If I new the answer I wouldn't be giving it away for free. It would be my Intellectual Property which I have acquired by exams and or experience.
It is expecting practitioners to give away their IP for free is the reason you are receiving hostility here - as do most freeloaders. We are willing to help other accountants but not freeloaders

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Replying to The Innkeeper:
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By dansm
26th Jul 2019 13:00

I am an ACCA qualified accountant who works in industry. I wasn't necessarily expecting an expert in Japanese tax to answer my question, but perhaps another accountant who works in industry, who has experienced a similar situation.

Perhaps I've misunderstood the scope of the forum.

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By The Innkeeper
26th Jul 2019 13:28

You might have had a very slightly more sympathetic ride on here if you had mentioned that you are a qualified accountant rather than appearing to be some freeloader wanting free advice

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