Q&A on tax (VAT & CIT) regulations for Foreign Company with Non-Resident status in Japan

Email: tyo4ww@evershinecpa.com
Contact: Andrea Kyu, speak both Japanese and Mandarin
Onarimon Yusen Building 7F, Nishi-Shinbashi 3-23-5,Minato-ku, Tokyo 105-0003, Japan

NR-JP-110:
Can a foreign company with Non-Resident status apply for a VAT number in Japan? If can, is it necessary to pay for the corporate income tax?
Official website? Application form?

Answer:
According to BNA VAT Navigator 9.2 and BNA Country Guide 2.2.2.
No. Article 117 of Japan’s General Law of National Taxes provides that if a nonresident taxable person without domestic residence in Japan is required to designate a local tax administrator to perform these duties and to notify the director of the local tax office of the appointment.
Nonresident corporations are only taxed on income and gains of the Japanese branch, or any other permanent establishment in Japan.
Foreign company can register by submit to the NTA an application for registration as a registered foreign business.
Official website: https://www.e-tax.nta.go.jp/

NR-JP-120:
If the foreign entity with Non-Resident status appoints an agent to applied for a VAT number in Japan:
What is the official name of the agent?
What qualifications does the agent need?
Is the agent jointly and severally liable to the Japan tax bureau?
Does the Non-Resident Entity need to pay for corporate income tax?
Official website?
Answer:
According to BNA VAT Navigator 9.2 and 10.4 and BNA Country Guide 2.2.2.
Agent in Japan is called Tax Administrators (Nouzei Kanri Nin).
There are no specific rules for consumption tax administrator.
Any person or corporation with an address in Japan can be appointed as a tax administrator.
The tax administrator does not have joint liability for the payment of tax with the nonresident taxable person.
Nonresident corporations are only taxed on income and gains of the Japanese branch, or any other permanent establishment in Japan.

NR-JP-130:
What are the circumstances that a Non-Resident Company in Japan will not be consider as having permanent establishment (PE) in Japan? And what circumstances will be considered as having PE in Japan?
Answer:
According to BNA Country Guide 2.1&2.2.
Article 2 (xii-xix) of the CT Law provides for 3 types of permanent establishments (PEs): a fixed place of business, a construction project, and an agency.
A fixed place of business PE of a foreign corporation can be triggered by a branch (shiten), factory (kojo), place of business (jigyosho), and office (jimusho), a sub-branch (shutchosho), and a warehouse (soko) (limited to a warehouse used by a warehouseman in his own business).
A foreign corporation acquires a PE in Japan when it carries on, for a period of over 1 year, a construction (kensetsu), installation (suetsuke) or assembly (kumitate) project or similar activity or performs services in supervising or superintending (shikikantoku) such a project or activity in Japan.
Certain persons who are authorized to conclude contracts on behalf of the foreign corporation can trigger a PE in Japan.
These include “contracting” agents, “fills order” agents, and “negotiating” or “secures orders” agents.
In the case of a commissioned agent providing services in Japan, the characterization of the payment from customer to principal depends on the terms of the contract.
Under a (nonbinding) notice issued by the Tax Authority, a server used to hose a foreign corporation’s website in Japan can be treated as a PE of the foreign corporation in Japan if the server is owned by or leased to the foreign corporation.
However, if the website is hosted on a server of a third-party internet service provider, the server would not constitute a fixed place of business of the foreign corporation in Japan and therefore no PE would be triggered.
Japanese tax law does not specify whether use by local customers of cloud computing services can give rise to a PE.

NR-JP-210:
Does Japan have Free Trade Zone and bonded warehouse system? How do foreign businessmen use the Free Trade Zone to obtain tax concessions?
Answer:
According to https://www.customs.go.jp/okinawa/english/04/index.htm
ree Trade Zone in Japan includes Okinawa SFTZ, Naha FTZ and Nigata Free Port.
Foreign goods that are stored, processed, and manufactured in the region and re-exported to foreign countries are exempted from customs duties and domestic consumption tax.
This includes preferential treatment such as exempted from tariffs and domestic consumption tax for goods imported in the FTZ for manufacturing and for re-exported goods.
It also offers preferential tax and financial incentives for companies.
According to https://www.customs.go.jp/english/c-answer_e/sonota/9203_e.htm
The Bonded Area System is a system in which storage, processing or manufacturing or display, etc. is allowed for foreign goods at designated locations or facilities.
The cargo prior to receiving the import permit from the Director General of Customs is called “foreign goods”.
Bonded warehouse can hold only foreign goods.

NR-JP-220:
Can a foreign company rent a bonded warehouse in Japan Free Trade Zone under the name of a foreign company?
Can a bonded warehouse held under the name of a foreign company as a holder of the import and export documents?
Or can it be held by a cargo agent?
Answer:
According to https://www.customs.go.jp/kaisei/youshiki/form_C/C3120.pdf
In principle, foreign company cannot become the Importer of Record (IOR) in Japan.
However, foreign company can appoint an Attorney for Customs Procedure (ACP), then the foreign company can become the IOR.
Import using ACP requires the NR company to pay customs duties and Japanese Consumption Tax when import.

NR-JP-230:
Are there any similar roles as IOR (Importer Record in Germany), Tax Agent (Germany), Fiscal Representative (Japan), Registered Agent (USA Texas), ACP (Japan)?
How to avoid situation where the VAT cannot be deducted as input tax?
Answer:
Only the importer can deduct the import consumption tax.
If another IOR entity becomes the importer, then the NR company cannot deduct the import consumption tax.
If NR company import using ACP in Japan which mean you become the role of importer, then import consumption tax is deductible.
However, there are certain product categories limited to Japanese-resident IOR instead of an ACP.

NR-JP-240:
What are the ways of dealing with custom duties and VAT when a foreign company sells to domestic customers in Japan from a warehouse in the bonded area in ​​Japan?
What are the differences when paying for the CIT in Japan?
Answer:
According to: https://www8.cao.go.jp/kisei-kaikaku/oto/otodb/english/houseido/hou/lh_09040.html
The “Law Concerning the Collection of Inland Consumption, etc. Tax on Imported Goods” shall also be applied to the taxable goods removed from the Hozei (bonded) area.
It falls under domestic transactions and is a taxable transaction.
Japanese importers top up 10% consumption tax on their prices when they sell to their customers.
Non-resident importers will have the same responsibilities as those of resident importers in Japan.
Seller must be a taxable entity to get a JCT number, and then issue a qualified invoice.

NR-JP-250:
Foreign companies rent warehouses from bonded warehouses in bonded areas in Japan, and then sell the items to domestic customers in Japan. Will this make foreign companies Non-PE into PE and need to keep accounts and pay income tax?
Answer:
According to:
https://www.eu-japan.eu/taxes-accounting/taxation-outline/taxable-presence
There are several factors determining the taxes payable in Japan by a foreign company, depending on the following circumstances:The ● foreign company has a taxable presence (a “permanent establishment” or “PE”) in Japan
● If the foreign company does have a taxable presence in Japan, the nature of this presence (a branch, an agent PE or a construction site PE),
● The nature of the Japanese source of income.
When goods imported in Japan from bonded warehouse and sell to domestic customer, Japanese law sets forth that any importer, either resident or non-resident is obliged to pay income tax and keep accounting books for 7 years.

NR-JP-310:
For Amazon and other e-commerce B2C, the Japan government stipulates that natural persons should declare customs duties and VAT when importing. How they deal with it?
Answer:
According to:
https://m.media-amazon.com/images/G/09/rainier/help/Understand_ACP_and_IOR._CB1198675309_.pdf
Under the Amazon’s FBA program, Amazon won’t become an importer.
Amazon and its fulfillment centers will not serve as the IOR nor ACP for any shipment of Fulfillment by Amazon (FBA).
In this case, you can appoint a Japanese resident entity as ACP to import.

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E-mail: tyo4ww@evershinecpa.com
Contact: Andrea Kyu, speak both Japanese and Mandarin
Onarimon Yusen Building 7F, Nishi-Shinbashi 3-23-5,Minato-ku, Tokyo 105-0003, Japan

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(version: 2024/07)

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