Consumption Tax for Foreign Companies in Their First Year of Business in Japan
【Koshida Accounting Firm Column Date:】
”Every day is a new day.” ― Ernest Miller Hemingway 
Hi, my name is Taisei Koshida, and I am a certified public accountant and tax accountant. I aim to assist non-Japanese business owners who struggle with reading or writing in Japanese. If you find the Japanese tax return system challenging, I can help you with your tax filings.
When foreign companies and individuals, such as system engineers and consultants, establish a corporation or start a sole proprietorship in Japan, it is common for most of their initial clients to be from foreign countries. In such cases, the handling of consumption taxes becomes crucial.
システム・エンジニアやコンサルティングなどをしている外国の企業や個人が日本で法人を設立、もしくは、個人事業を始めた場合、当初は日本以外の国の顧客が大半を占めることがあります。 その場合、消費税の取り扱いが重要になってきます。
１．日本の消費税の考え方 Understanding Japan’s Consumption Tax
If the services are provided in Japan, the transaction is treated as an export sale with a tax rate of 0% (export tax exemption). Conversely, if the services are provided outside Japan, it is considered an international transaction and not subject to consumption tax (non-taxable transaction).
サービス提供地が日本の場合は、輸出売上として扱われ税率はゼロです（輸出免税取引）。一方、サービス提供地が日本以外の海外の場合は、海外取引となり消費税の対象外となります（不課税取引）。
For more details, please refer to the blog below.詳しくは、下記のブログをご覧下ください。 https://kotsicpafirm.com/the-consumption-tax-risks-when-providing-services-overseas/
２. Specific Example (Annual Basis)具体例（年間ベース）
① Sales: 15 million yen – All for foreign clients ② Taxable Expenses: 2.2 million yen (including consumption tax) – Rent, entertainment, and other expenses ③ Non-taxable Expenses: 5 million yen – Executive salaries, social insurance, and other expenses.
①売上高15百万円：すべて海外顧客 ②課税経費２百２十万円（税込）：家賃、交際費など ③課税対象外経費５百万円：役員報酬、社会保険など
（１）Calculation of Consumption Tax 消費税の計算
Temporary Accepted Consumption Tax: 0 Temporary Paid Consumption Tax: ② 2.2 million yen * tax rate 10% ÷ 110% = 200,000 yen Payable Consumption Tax = Temporary Accepted Tax 0 – Temporary Paid Tax 200,000 yen = -200,000 yen
仮受消費税：０ 仮払消費税：②課税経費２百２十万円＊消費税率１０％÷１１０％＝２０万円 納付消費税額＝仮受消費税０- 仮払消費税２０万円＝－２０万円
（２）Export Exemption Transaction: If Services Are Provided in Japan 輸出免税取引：サービス提供地が日本の場合
A refund of 200,000 yen is available only if the application for taxable business status of consumption was submitted, due to the 100% rate of taxable sales.
消費税の課税事業者の届け出を出していた場合に限り、２０万円は還付されます。課税売上割合が１００％だからです。
（３）International Transactions: If Services Are Provided Outside Japan 海外取引：サービス提供地が日本以外の海外の場合
No refund of the 200,000 yen, as the rate of taxable sales is 0%.
２０万円は還付されません。課税売上割合がゼロだからです。
３．Practical Judgment 実務上の判断
１）To Submit or Not the Application for Taxable Business Status of Consumption Tax 消費税課税事業者の届け出を出すかどうか
If the service provision location is unclear, but the provider’s main base is in Japan, it is considered an export exemption transaction. This applies to foreign companies and individuals active in Japan.
サービス提供地が明確でない場合は、サービス提供者の本拠が日本であれば輸出免税取引となります。日本で活動をしている外国のかたの場合は、これに該当すると思われます。
In this situation, you have two options: either to submit the application for taxable business status under consumption tax or not to submit it. If you don’t submit the application, you won’t receive a refund even for export exemption transactions. Conversely, if you claim a consumption tax refund, it increases the likelihood of a tax audit. However, there is no need to worry if the refund amount is small, such as a few hundred thousand yen.
その際に、選択肢が二つあります。課税事業者の届け出を出す、もしくは出さない、です。届け出を出さなければ輸出免税取引であっても、還付は受けることができません。一方で、消費税の還付を受けると、税務調査が入る可能性が高くなります。ただし、数十万円と還付額が少額な場合はあまり気にする必要はないでしょう。
However, if you opt to become a taxable business, you will need to include information about consumption tax when preparing your books. This will increase the workload for both your company and your accounting firm, which may lead to a slight increase in the accounting firm’s fees.
ただし、課税事業者を選択した場合には、帳簿を作る際に消費税についての情報も入力する必要が出てきます。そのため、会社の手間も増えますし、会計事務所の手間も増えるので会計事務所の報酬が少し増えることになります。
（２）Whether to Register as an Invoice Business or Not インボイス事業者登録するかどうか
If you aim to increase your Japanese clientele, registering as an invoice business is advisable. This is because most Japanese companies prefer not to engage with businesses that are not registered for invoices. However, registering as an invoice business automatically classifies you as a taxable business.
日本の顧客を増やそうとするならば、インボイス事業者登録をするほうがスムーズです。日本の大半の企業が、インボイス登録をしていない企業からモノをかったりサービスを受けたりすることを嫌うからです。 しかし、インボイス事業者登録をすると、自動的に課税事業者になります。
（３）Conclusion 結論
If the refund amount is small, there’s no significant concern regarding the tax office, so it’s advisable to file the application for taxable business status under consumption tax unless there are serious concerns. If the refund amount is large, submitting the application is recommended to avoid wasting potential refunds.
When considering registering as an invoice business, you can either register after receiving negative feedback from potential clients or do it from the beginning. The disadvantages of registering include the need to include your invoice number on all invoices issued and a slight increase in fees paid to accounting firms, as they will need to handle transactions related to consumption tax.
還付額が少額であれば税務署をそれほど気にする必要はないので、よっぽど気にならない限り、消費税課税事業者の届け出を出しましょう。還付額が多額になるのであれば、還付を受けないともったいので、届け出を出しましょう。
インボイス事業者登録は、見込み客からネガティブな反応があってから登録する、もしくは、最初からしておきましょう。 インボイス事業者登録することのデメリットは、顧客にわたす請求書にインボイス番号を記載する必要があること、帳簿を作る際に消費税についても作業が必要になるので、会計事務所に支払う報酬が少し増える、その２点です。
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