Reverse Charge 



1. Introduction of  "REVERSE CHARGE"  in Japanese Consumption Taxation and Tax Representative

 On and after 1st October 2015, "Reverse Charge" system would be introduced and go into effect under Japanese Consumption Tax Law (CT Law).


 Reverse Charge might affect all of the businesses located or incorporated outside Japan (Overseas Suppliers, who make cross-border transactions to sell Digital products or services that attributively defined under the CT Law such as e-Music downloading service, e-Movie downloading service, e-book downloading service etc to Japanese tax resident businesses, to impose Consumption Tax obligation on the overseas suppliers.


 Every Overseas Supplier covered under CT Law who does not have any permanent establishments in Japan would need a TAX REPRESENTATIVE (TR)  in Japan in order to have TR to file the overseas supplier's Consumption Tax to National Tax Agency on behalf of them. Our company has a affiliate Certified Public Tax Accountant Office in Tokyo *1 and they can serve you as your TAX REPRESENTATIVE for outsourcing all of your tax obligation procedures but tax payments to them.  


OKAMURA Certified Public Tax Accountant Office

3-13-3 Kayaba-cho Nihombashi Chuo-city, Tokyo Japan

ZIP Code: 103-0025

Tel: 81-3-3662-7337


2. Outline of Reverse Charge mechanism on Cross-Border Supplies of Services

From October onward, foreign business who provides B2C electronic commerce to Japanese residents shall account for Japan Consumption Tax (JCT).


(1) For B2B electronic commerce, a foreign business shall notify its Japanese customers that they shall account for VAT under the reverse charge mechanism.

(2) A business whose taxable turnover in Japan (2013FY) is more than 10 million JPY shall be a "taxable person" (2015FY) under Japanese Consumption Tax Law and shall account for JCT.


A foreign business who wishes to allow its customers to deduct their input tax for its B2C supplies of services needs to register with Japan's National Tax Agency as "Registered Foreign Business (RFB)".

* A foreign business is able to account for JCT without the said registration; however, in this case, their Japanese customers are NOT able to deduct the input tax its B2C transactions. Registration procedures are planned to start from July 1st.



3. Main Points of Reverse Charge Mechanism

  • Extend the coverage of Japan Consumption Tax to cross-border supplies of electronic commerce by foreign businesses, such as the provision of digital book, music and advertisements, in order to ensure competitive quality between domestic and foreign businesses - effective October 1st, 2015.
  • As to taxation on cross-border supplies of services other than electronic commerce, conduct further deliberations while taking into account discussions at the OECD.

4. Taxation Scheme

  • Concerning the taxation scheme where a service provider is a foreign business;
  1. with regard to B2B transactions(1), the "reverse charge mechanism"(2) is introduced and
  2. with regard to B2C transactions(1), the foreign business declares and pays the tax.

         (1) "B2B transactions are services that are normally limited for businesses, concerning the nature, terms in its contract etc. of services provided (e.g., provision of advertisement). The other transaction are "B2C" transactions (e.g., provision of digital books and music).

         (2) Mechanism in which service recipients are required to file and pay JCT; whereas normally service providers would be required to do so.

         (3) Considering administrative burdens, as to businesses whose rate of taxable sales to total sales is 95% or more, transactions subject to the reverse charge mechanism are exempt from JCT tax filing.

         (4) A foreign taxpayer who does not have its offices and/or permanent establishments in Japan is required appoint a resident to whom tax documents of the taxpayer is delivered (TAX REPRESENTATIVE).

  • A registration system for foreign businesses to be a "Registered Foreign Business (RFB)" is established and opened to apply on and after July 1st 2015, and the registration requires foreign businesses to appoint a qualified tax agent, normally "Certified Public Tax Accountant" of Japan, or to have its physical office(s) in Japan.
  • Your customers can be permitted to deduct input-taxes in their JCT filing only if the foreign service provider gets registered successfully as RFB to National Tax Agency.



Please feel free to contact us about the details of Reverse Charge system at



Muneo Marc OKAMURA

Certified Public Tax Accountant of Japan