The definition of electronic services (defined as “Provision of Telecommunication Online Services”) includes
1. Distribution of e-books, e-newspapers, music, image, software (including various applications such as games, etc.)
2. Service to make a software or database, etc. available on the cloud
3. Distribution and posting of advertisement via internet, etc.
4. Service to make a shopping site or auction site available on internet
5. Service to make a website for sale of game software, etc. available on internet
6. Reservation of accommodation or restaurant at website via internet (those who receive insertion fee from enterprise running a lodging facility or restaurant, etc.)
7. English conversation class via internet
As of 1 October 2015 the place of supply of digital services will be deemed to be the place where the recipient is located, i.e. in Japan.
Therefore, if you are providing B2C Telecommunication Online Services to Japanese consumers, you are required to register and appoint a local tax agent (representative) to account for JCT in the case where annual taxable sales in the base period (e.g., in the fiscal year that is two fiscal years prior to the fiscal year concerned) exceeded 10 million yen (approx. USD 83,000 at today’s rates) threshold. However, if it is difficult to establish the annual taxable sales in such base period, this can be calculated as four times the value of taxable sales from 1 April 2015 to 30 June 2015.
The input tax credit on a taxable purchase of B2C Telecommunication Online Services from an Offshore Business Person is not allowed, even though it was actually provided to a business person. However, in case that is from a “Registered Offshore Business Person” (defined as a taxable enterprise who submits an application on or after 1 July 2015 and obtains the registration number from the NTA Commissioner), the input tax credit is allowed if the incoming invoice (including the registration number) is retained.
In B2B relations the reverse-charge mechanism will apply and the Japanese business customer is required to account for consumption tax for the purchase of digital services from foreign digital service providers.
To find out more how these changes may affect your business, please contact your local PwC representative:
Bildquelle: Fabian Voswinkel / pixelio.de