Location : HOME > Tax Policy > Japanese Tax System > Japanese Tax System [1999 Edition] > Outline of the Consumption Tax System

Outline of the Consumption Tax System

 

Current system

Transactions subject to taxation

(a)

Transfers of assets and related transactions made by business operators within the country (transfer of assets, lending of assets, and provision of services)

(b)

Imported goods (foreign goods delivered from the bonded areas)

Taxpayer

(a)

Domestic transactions
Business operators (the system of designated tax exemption thresholds for business operators) taxable sales (executive of taxes, unless noted otherwise) for the taxation period (the year prior to the previous year, or the business year prior to the previous business year) were 30 million yen or less.

(b)

Import transactions
importers

(Note)

Tax obligation is not exempted for newly established corporations with the equity capital of 10 million yen or more for the starting 2 years.

Tax base

(a)

The counter-value of the transfers of assets or related transactions

(b)

Delivery value at the time of import

Tax rate

4

% (effective April 1, 1997, raised from 3 %)

*

special tax rate for ordinary passengers cars:

from April 1, 1989 to March 31, 1992 -------- 6 %

from April 1, 1992 to March 31, 1994 -------- 4.5 %

(Note)

With the introduction of local consumption tax (with the rate equal to 25 % of consumption tax), the tax rate of consumption tax in total has become 5 %.

Tax exemption for export

Export and related transactions (export of goods, international transportation and communications, etc.) are exempted from taxation.

Tax exemption

The following transfers of assets and related transactions within the domestic economy are exempted from taxation.

(a)

transfer or lease of land

(b)

transfer of securities and transfer of means of payment

(c)

interest on loans and insurance premiums

(d)

transfer of postal and revenue stamps

(e)

fees for government services, international postal money orders, international postal transfers, and foreign exchange

(f)

medical care under the medical insurance laws

(g)

social welfare services specified by the Social Welfare services Law

(h)

midwifery service

(i)

burial and crematory service

(j)

transfer or lease of goods for physically handicapped persons

(k)

tuition, entrance fee, facilities fees and examination fees of schools designated by Article of the School Education Law

(l)

transfer of school textbooks

(m)

lease of housing units

Tax deductions

(1)

Deduction for tax on purchases

(a)

Principle (regular consumption)

[1]

If the taxable sales are 95 % or more, the entire consumption tax associated with purchases can be deducted.

[2]

If the taxable sales are less than 95 %, the amount calculated either by the itemized method or the aggregate proportional allocation method can be deducted as the consumption tax associated with purchases.

(Note)

In order to qualify for this provision, the taxpayer is obliged to maintain accounts or invoices (invoice method)

(b)

Special provisions (the simplified taxation system)
For the taxation period for which the taxable sales were 200 million yen or less during the base period covered, the taxpayer can choose to use the product of the consumption tax associated with final sales and the deemed rate of purchases as the consumption tax associated with purchases.

*

deemed rate of purchases

class-1 enterprises (wholesalers) ---------
class-2 enterprises (retailers) --------------

class-3 enterprises (manufactures) ------
class-4 enterprises (others) ----------------
class-5 enterprises (services) ------------- 

90 %
80 %
70 %
60 %
50 %

(2)

Marginal deduction system
abolished

Filing of tax returns and payment of tax

(1)

Domestic transactions

(a)

Taxation period
calendar year for individual business operators; business year for corporations (the short-term period of 3 months can be chosen)

(b)

Filing of tax returns and payment of tax
Returns are to be filed and tax is to be paid within 2 months of the end of the taxation period

(Note)

1. For individual business operators, the deadline for the filing of returns and payment of tax is the end of March of the following year (Special Taxation Law)
2.

Taxpayers are obliged to attach supporting documents with monetary figures to tax returns, as evidence to support the calculation of the tax base.

(c)

Interim filing of returns and payment of tax

[1]

Business operators whose tax payments during the previous taxation period are more than 5 million yen are required to file interim returns and make tax payment 3 times a year (filing and payment: 4 times a year).

[2]

Business operators whose tax payments during the previous taxation period are between 600,000 and 5 million yen are required to file interim returns and make tax payment once a year (filing and payment: twice a year)

(Note)

With the introduction of local consumption tax, the amount of consumption tax period is adjusted to make the overall amount equal to the applicable amount before the introduction

5 million yen ya00.gif (844 ???) 4 million yen
600,000 yen ya00.gif (844 ???) 480,000 yen

(2)

Import transactions
Returns are to be filed, and tax is to be paid when the delivery is received from the bonded areas (the payment can be extended for up to 3 months).


[Next Page]

[Table of Contents]