Introduction
We often receive questions from foreign corporations providing goods and services to customers in Japan, such as whether "it is necessary to register for invoices even if there is no company or branch in Japan" and "if it is possible to obtain only the registration number." The Japanese qualified invoice preservation method, known as the invoice system, started on October 1, 2023, and in principle, for buyers to receive input tax credits for consumption tax, it is necessary to keep invoices issued by qualified invoice issuing businesses. As a result, there is an increasing number of foreign businesses being asked to provide their registration numbers by Japanese corporate clients.
However, invoice registration is not merely a procedure for dealing with business partners or obtaining a number. Once registered, foreign businesses that were exempt from tax will, in principle, become taxable businesses under Japan's consumption tax, and will need to continue issuing qualified invoices, maintaining records and invoices, and filing and paying consumption tax. Additionally, for "specific foreign businesses" that do not have an office in Japan, additional registration requirements, including securing a tax agent, will be established after October 2024.
This article explains the JCT tax relations, registration requirements, necessary documents, tax management, and filing practices after registration that foreign businesses need to consider when contemplating registration as qualified invoice issuers in Japan.
1. First, confirm whether the transaction is subject to Japan's consumption tax.
Before applying for registration, it is necessary to confirm whether the transactions of the foreign business are subject to Japan's consumption tax, Japanese Consumption Tax (JCT). Just because the customer is in Japan does not mean that all transactions are taxable in Japan. In the case of goods sales, it is determined by the location of delivery and the importer, while in the case of service provision, it is determined by the nature of the service, the place of provision, and the attributes of the customer.
For digital services, if the provision of "telecommunication services" such as e-books, music, software, and online advertising is made to businesses or consumers in Japan, it is generally considered a domestic transaction even if provided from abroad. However, for telecommunication services that are clearly intended for Japanese businesses as a condition of the transaction, the reverse charge method is usually applied, where the domestic buyer reports. In this case, the structure is different from transactions where the foreign business issues an invoice and collects JCT.
Furthermore, after April 1, 2025, if a foreign business provides certain consumer-oriented digital services through specific platform operators and receives compensation through that platform, a system will be introduced where the platform operator is deemed to have provided the service and is responsible for reporting and paying taxes. The necessity for registration for foreign businesses may differ between direct sales through their own website and sales through specific platforms. Therefore, it is necessary to organize not only the total sales amount but also the flow of goods, contracting parties, payment routes, and customer classifications.
2. The relationship between invoice registration and JCT taxable businesses.
Only qualified invoice issuing businesses registered with the tax office can issue qualified invoices. Foreign businesses can also register, but registered businesses will, in principle, become taxable businesses for consumption tax during the taxable period in which the registration is valid, even if their taxable sales in the base period are less than 10 million yen.
This is the most important point in practice. If you apply for registration solely because a Japanese customer requests a registration number, you may not be able to grasp the transactions that should be reported in Japan after registration, the deductible input tax amount, the filing deadlines, and the payment methods, which could lead to late filings or tax omissions. The necessity for registration should be judged based on whether the customer is a business or a consumer, whether the customer needs input tax deductions, whether JCT can be included in the transaction price, and whether there are purchases in Japan that are eligible for deductions.
The considerations for necessary notifications and registration timing differ between foreign businesses that are already taxable and those that become taxable businesses from exempt businesses upon registration. If an exempt business registers due to transitional measures, they can indicate a desired registration date that is 15 days after the submission date on the application form. On the other hand, different submission deadlines apply when registering from the first day of the taxable period, so it is necessary to prepare by calculating backward from the date on which an invoice is required under the contract.
3. The difference between foreign businesses and specific foreign businesses.
A foreign business under the consumption tax law refers to individual businesses that are non-residents under the income tax law and foreign corporations under the corporate tax law. Among them, foreign businesses that do not have an office, business location, or other equivalent in Japan related to the transfer of assets conducted in Japan are classified as "specific foreign businesses."
When a specific foreign business operator registers, a stricter system than that required for general foreign business operators is necessary. Specifically, if there is no tax agent with authority over consumption tax matters, or if there is an obligation to appoint a tax management person but no notification has been made, the tax office director can refuse registration. Here, the tax agent refers to those who conduct tax agency based on the Certified Public Tax Accountant Act, such as Japanese tax accountants or tax accountant corporations.
The tax management person and the tax agent are not the same system. The tax management person handles tax affairs such as submitting tax returns, paying taxes, and receiving documents from the tax office within Japan. On the other hand, the tax agent represents tax declarations and responses to tax authorities based on the Certified Public Tax Accountant Act. It is possible for the same tax accountant or tax accountant corporation to handle both, but it is necessary to distinguish their roles and submitted documents in the registration application.
4. Documents required for registration application
Foreign business operators use the "Application for Registration as a Qualified Invoice Issuer" for foreign business operators. The submission method is via e-Tax or by mail in paper form, and in the case of paper, it must be submitted to the invoice registration center that has jurisdiction over the tax payment location. Care must be taken as the format differs from the application form for regular domestic business operators.
The basic attached documents indicated by the National Tax Agency are materials that can confirm the applicant's name or title, foreign address, and business content. In the case of foreign corporations, documents such as the registration certificate from their home country, certificate of incorporation, articles of incorporation, and company brochures may be considered. The application form must consistently state the head office location, business content, tax period, details of domestic transactions, tax payment location, and tax management person.
If it falls under a specific foreign business operator, a tax agency authority certificate is also required. Additionally, if it is necessary to appoint a tax management person, the "Notification of Consumption Tax Tax Management Person" must be submitted to the relevant tax office director. If the applicant has already filed tax returns in Japan, it is necessary to align the previous notification content, tax payment location, corporate name representation, and tax period with this registration application.
In cases where the corporate name, brand name, Japanese representation, and kana representation used abroad do not match, there may be issues with registration review, public information after registration, and number verification by customers. It is advisable to organize the correspondence of names on contracts, invoices, registration materials, and application forms in advance.
5. Procedures until registration and management of registration date
Once the application form is submitted, a registration number will be notified after review by the tax authorities, and the registration information will be published on the National Tax Agency's qualified invoice issuer public site. If there are inconsistencies in the application form or if additional confirmation is needed regarding the content of foreign materials, domestic transactions, tax management person, or tax agent, it may take time until registration.
It is not possible to issue a qualified invoice before the registration becomes effective. Therefore, when establishing the invoice issuance start date in contracts with Japanese business partners, it is necessary to manage the registration application date, desired registration date, review period, and changes to the invoicing system as a whole. Even if the registration notification arrives later, under the law, it may be treated as having been registered from the desired registration date stated, so the method for correcting invoices issued during that time or adding the registration number should also be considered in advance.
Furthermore, even if a registration number is obtained, not all invoices will automatically become qualified invoices. Invoices must include statutory items such as the issuer's name or title and registration number, transaction date, transaction details, amounts categorized by tax rate and applicable tax rates, and consumption tax amounts categorized by tax rate, as well as the name or title of the business receiving the invoice.
6. JCT declaration and record retention required after registration
After registering for the invoice, the payable tax amount is calculated by deducting the input tax amount related to taxable purchases that meet the requirements from the consumption tax amount related to taxable sales in Japan. The taxable period for foreign corporations is generally the business year, and typically, consumption tax and local consumption tax returns and payments are made within two months after the end of the taxable period. For individual business operators, the filing deadline is generally March 31 of the following year. Depending on the confirmed consumption tax amount, interim returns and payments may also be required in subsequent taxable periods.
Even if foreign operators have purchases or imports within Japan, it is not necessarily the case that all paid JCT can be deducted or refunded. It is necessary to confirm the correspondence with taxable sales, the preservation of books and qualified invoices, the importer on the import permit, and the ratio of taxable sales. Invoices, etc., should generally be kept for seven years from the specified starting date. For invoices received and issued electronically, it is also necessary to consider compliance with the Electronic Bookkeeping Act.
For specific foreign operators, maintaining timely filing and a tax representation system is also important for continued registration. If the tax representation authority document related to the declaration is not submitted by the consumption tax filing deadline, if the notification of the tax management person is not maintained, or if timely filing is not done without a valid reason, it may be subject to cancellation of registration. It is not appropriate to appoint an accountant only at the time of registration and not manage subsequent filings.
7. Practical Points to Confirm Before Registration
In the invoice registration for foreign operators, first, organize the sales subject to taxation in Japan by transaction type, and then consider whether registration is legally necessary or beneficial in transactions with customers. Especially for digital services, if B2B transactions subject to reverse charge, B2C transactions, transactions through specific platform operators, and direct sales on one's own site are not categorized, it will be difficult to accurately grasp the subjects of declaration after registration.
Next, confirm whether the selling price includes JCT and whether the price can be revised after registration. Even if a new tax obligation arises from registration, if the contract with the customer does not allow for adding JCT to the price, the payable tax amount will effectively become the burden of the foreign operator. It is also necessary to confirm whether the invoicing system can accommodate Japan's tax rate classifications, rounding processing, and registration number display.
Finally, establish a system that can continuously manage from the application stage to declaration and payment. If the registration application, tax management person, tax representative, bookkeeping, document preservation, declaration preparation, and tax payment are divided among different personnel, inconsistencies in transaction information and notification content are likely to occur. It is important to design the overall JCT compliance in the Japanese market, rather than just aiming to obtain a registration number.
8. Support by MOCHIZUKI & Associates
At MOCHIZUKI & Associates, we do not treat the invoice registration by foreign operators merely as a submission of an application form, but rather confirm the transaction structure and the taxation relationship of Japan's consumption tax, organizing the necessity of registration and the burdens after registration. We provide integrated support for creating registration application forms for foreign operators, confirming necessary documents, acting as tax management persons and tax representatives, checking the contents of qualified invoices, and supporting consumption tax declaration and payment.
If you are asked for a registration number by a customer in Japan, if you are providing digital services for Japan, or if you are starting to import and sell in Japan, please consult with us before concluding a contract or starting billing. We will propose practical responses tailored to your business model, including whether you should register.
At MOCHIZUKI & associates, we provide flexible support tailored to the situation of companies, from accounting and tax support for foreign companies and foreign corporations entering Japan, to corporate tax and consumption tax declarations, international tax, and tax advice on inter-company transactions, in languages such as Japanese, English, and Chinese.
View details of our Japanese consumption tax services.