The development of our network has made it easier for us to expand overseas. What you should be careful about when you import and export as an overseas business is the treatment of consumption tax. I will introduce how to deal with the consumption tax.
How to handle exports and imports that you want to know when expanding overseas
By importing and exporting from foreign countries, business opportunities are greatly expanded. However, the handling of the consumption tax at the time of import and export is complicated, so we should be careful. In the first place, the consumption tax is levied on the consumption of goods and services. In other words, consumers pay the consumption tax.
However, it would be cumbersome for consumers to declare individually, and it would be difficult to accurately grasp the consumption tax from individual declarations. Therefore, consumers pay consumption tax in advance when they purchase goods or services, and business owners pay the consumption tax they receive to the government instead. This type of tax is called indirect tax.
Because of the nature of the consumption tax, the handling of import and export is completely different. First, in the case of import transactions, the final buyer is a Japanese corporation or individual. Therefore, the consumption tax will be the same as in Japan. On the other hand, in the case of export transactions, the final purchaser is an individual or a corporation outside Japan. Therefore, the consumption tax is not imposed in Japan and it is duty free.
Treatment of consumption tax at the time of import
Goods imported from foreign countries are put in a temporary storage place called bonded area and customs duties and consumption taxes are paid when they are received from the bonded area. You need to go through customs when you receive the goods from the bonded area.
You need to submit an import declaration form with information such as the product name, quantity, and amount, as well as the amount of customs and consumption tax to the chief of the customs office to receive the imported goods. Also, as a general rule, you have to pay consumption tax and customs duties by that time.
The consumption tax you paid when you declared the consumption tax can be deducted from the consumption tax you are holding, so please be sure to handle it correctly. It is not rare to forget to deduct the consumption tax when you import at the time of tax return.
Since it takes time and effort to receive imported goods, we can ask a customs agent to take care of it. Customs agents act as agents for receiving goods and declare customs duties and consumption taxes. If you use a customs broker, you must make sure that the name of the importer you paid is the name of the importer. Please note that if you change the name of the importer to the customs broker, you may not be able to deduct the consumption tax.
In addition, generally consumption tax is paid after the amount is fixed after the settlement of accounts, but if it is imported, consumption tax and customs duty will be borne on the spot. As a result, they have to pay consumption tax before they sell products and collect the money, so they need to have some extra cash flow.
The consumption tax at the time of import is stated separately from the consumption tax for domestic transactions in the consumption tax declaration. For this reason, it is important to separate and manage transactions on a daily basis.
Treatment of consumption tax when exporting
Consumption tax is not imposed when you export because it is not consumed in Japan. Export here includes export of goods, international mail, and international telephone. However, if the product is purchased in Japan, we can deduct the consumption tax from the purchase. The consumption tax is paid by subtracting the consumption tax paid from the consumption tax received.
Therefore, if your main business is to purchase domestically and export overseas, there are many cases where you can receive a refund because the amount of tax you paid is negative because the consumption tax you received is small and the amount you paid is large.
There are cases where they don’t claim a refund because they don’t know that they can deduct the consumption tax at the time of purchase even if they expand overseas. Also, you may not be able to get a refund because you are a duty free enterprise of consumption tax.
Only taxable businesses can receive a refund of consumption tax. Therefore, if you know that you will start an overseas business at the time you start a company, you may want to consider filing a notification of your choice of taxable entity.
In addition, there are cases where even taxable businesses choose simple taxation, such as when taxable sales are 10 million yen or less. In order for these companies to become taxable businesses, procedures must be taken before the period starts. Businesses engaged in overseas business should exercise due care.
If you do business overseas like import and export, the tax treatment becomes complicated. There are also many new systems, such as how to collect the consumption tax when exchanging online services. Laws and tax systems related to overseas business will be actively revised, so please check them in detail.
Thanks to the development of the Internet, anyone can easily go overseas. However, on the other hand, there is a risk of doing business without knowledge. If you mishandle the consumption tax, you may lose a lot of money, so you should consider asking an expert with know-how.