Japan Designates Digital Platforms as Deemed Suppliers for Consumption Tax
Japan is imposing obligations on digital platforms to collect and remit 10% Consumption Tax for transactions carried out by non-resident providers through their platforms. By this new rule, marketplaces become deemed suppliers, which shifts the responsibility to them from foreign service providers of calculating, charging and remitting Japanese Consumption Tax on marketplace sales to domestic consumers (B2C).
Timeline
As of April 1, 2025, designated digital platforms must collect and remit consumption tax on electronically supplied services fulfilled through their platforms. The Japanese Tax Authority will announce the designated specific platform business operators until December 31, 2024.
Impact
Due to the recent publication of the Japanese Tax Agency, as of April 1, 2025, if a non-resident business operator provides telecommunications services to consumers through a digital platform such as app stores or online marketplaces, and this specified platform operator receives the payment for these services, the specified platform operator is required to file a tax return and pay the tax collected, as if they had provided the services themselves. B2B transactions will remain subject to the reverse charge mechanism.
What are telecommunication services in Japan?
According to the Japanese Tax Agency’s guide, telecommunication services are services provided via telecommunication lines (e.g., the Internet), such as
- Provision of e-books, digital newspapers, music, videos, and software (including various applications such as games) via internet
- Services that allow customers to use software and databases in the cloud
- Services that provide customers with storage space to save their electronic data in the cloud
- Distribution of advertisements via internet
- Services that allow customers to access shopping and auction sites on the internet (e.g., charges on posting goods for sale etc)
- Services that allow customers to access the place to sell game software and other products on the internet
- Provision via internet reservation website for accommodation and restaurants (those who charge on posting for the website from the businesses that operate accommodation and restaurants)
- English lessons provided via internet
Designated platforms
Digital platforms will be liable when the total amount of the payments for such services exceeds a 5 billion yen threshold. At that point, digital platforms must notify the National Tax Agency that they are subject to platform taxation. If a taxpayer satisfies the requirements for designation for the taxable period ending on or after April 1, 2024, the taxpayer must submit a designation notification by September 30, 2024.
The National Tax Agency will designate specific platform operators and announce them on its website until 2024.
Specified platform operators will have to notify foreign business providers that they became subject to platform taxation and about the effective date. Non-resident business operators will not be required to issue qualified invoices for such transactions.
As consumption tax obligations are being shifted to marketplace operators, they must prepare their business operations to comply with these new rules from April 1, 2025.
