Each country and region has its own set of tax laws. In the US, there is sales tax, which is governed at the state level. In the EU and in most other countries, value-added tax (VAT) is in place. In Japan, there is a consumption tax. While the Japanese consumption tax (JCT) operates similarly to VAT, there are some important differences to be aware of if your business is considering expanding to Japan.

Here’s a guide to what you need to know about JCT, including when you should be collecting it from your customers, the correct rate to charge, and what to do when it is time to file and remit.

What's in this article?

• What is the Japan consumption tax (JCT)?
  
• When am I required to collect JCT from customers?
  
• How much is the Japan Consumption Tax?
  
• How do I register to collect JCT?
  
• When to file and remit JCT
  
• How Stripe Tax can help
  

What is the Japan consumption tax (JCT)?

The Japan consumption tax (JCT) is a type of indirect tax that applies to physical goods or services sold domestically in Japan as well as goods and services imported into the country.

JCT also applies to cross-border sales of digital services by foreign service providers. In this scenario, a reverse-charge mechanism applies to business-to-business (B2B) transactions, but foreign service providers may need to register for consumption tax purposes with regard to business-to-consumer (B2C) transactions.

When am I required to collect JCT from customers?

Businesses are required to collect JCT from customers in Japan if they meet the mandatory threshold of ¥10 million JPY in the base period. The base period is the calendar year two years prior to the current one. For example, the base period for the year of 2023 is 2021.

In addition, businesses are required to collect JCT if their taxable sales or salaries paid exceed ¥10 million JPY in the specified period. The specified period refers to the first six months of the previous calendar year (for sole proprietors) or the first six months of a fiscal year (for corporations).

In Japan, non-resident businesses are required to have an office located in Japan or have a tax representative in Japan.

How much is the Japan Consumption Tax?

As of October 2019, the JCT rate is 10% for most goods and services, with a reduced rate of 8% for certain food, beverage, and newspaper sales. These rates are a combination of the national and local consumption rates. Exports and certain services to non-residents are taxed at a zero rate.

How do I register to collect JCT?

Here is how to register to collect JCT as a non-resident or foreign business:

1. Determine if JCT registration is mandatory
   Non-resident businesses supplying B2C digital services (software, streaming, e-learning, etc.) to Japanese consumers must register for Japanese Consumption Tax (JCT) once taxable sales exceed ¥10 million in the base period (two fiscal years prior) or in the first six months of the preceding fiscal year. If you sell B2C digital services through a designated app marketplace, verify whether the platform operator collects JCT on your behalf under platform taxation rules.

2. Appoint a Japanese tax agent
   Non-resident businesses without a physical presence in Japan must designate a resident tax agent by filing a "Notification of Tax Agent" with the district tax office. The agent handles filings and communication with the National Tax Agency (NTA) on the business's behalf.

3. Register as a Qualified Invoice Issuer
   Since the Qualified Invoice System (QIS) took effect on 1 October 2023, businesses must submit an "Application for Registration as a Qualified Invoice Issuer" alongside the standard JCT registration form to receive a Qualified Invoice Issuer Number (format: "T" + 13-digit corporate number).

4. Issue qualified invoices
   Invoices issued to Japanese business clients must include all required elements, including supplier name, JCT number, transaction date, description, tax-exclusive price, and JCT amount by rate.

5. Keep up with registration dates
   Transitional rules currently allow partial input tax credit on invoices from unregistered suppliers, but this relief tightens further on 1 October 2026. Businesses that haven't registered by then risk their B2B customers losing the ability to deduct JCT on unqualified invoices, which creates real commercial pressure to register promptly. Unregistered suppliers' invoices no longer support full credit under the tightened transitional rules.

Note that the B2B versus B2C classification for cross-border digital services depends on the nature of the service and terms of service, not customer self-identification. Standard, click-through purchases are classified as B2C (requiring the seller to collect JCT). Only contracts with terms or operational characteristics that restrict the service exclusively to businesses qualify for reverse-charge treatment.

What is changing with Japan's invoicing system in 2026?

Japan's 2026 tax reform introduces key updates to the JCT and the Qualified Invoice System, directly affecting inbound businesses, cross-border sellers, and retail merchants. The primary adjustments taking effect in 2026 include:

• Relaxation of input tax credit transitional rules
  Under original QIS rules, the allowable input tax deduction for purchases from unregistered suppliers was scheduled to drop from 80% to 50% on 1 October 2026. The 2026 reform eases this step-down schedule, allowing businesses to deduct 70% of JCT on purchases from non-qualified issuers starting 1 October 2026. The deduction will subsequently decrease to 50% in October 2028 and 30% in October 2030.

• Transition to an airport refund model for tax-free shopping
  Effective 1 November 2026, Japan will end point-of-sale tax exemptions for foreign visitors. Inbound travellers must pay the full tax-inclusive price at store registers and claim their 10% JCT refund at airport or seaport customs terminals prior to departure after customs confirms the goods are leaving Japan.

• Consumption tax enforcement on cross-border e-commerce
  New regulations require overseas sellers to collect and remit consumption tax on cross-border mail-order sales of goods priced at ¥10,000 or less. When these low-value goods are sold through digital marketplaces, the tax liability shifts directly to the platform operator.

These changes provide temporary relief for businesses purchasing from smaller vendors and also tighten reporting requirements across cross-border digital commerce and tourist retail.

When to file and remit JCT

In general, JCT returns must be filed annually. A corporation must file its annual JCT return within two months after its fiscal year end. Businesses may opt to file JCT returns monthly or quarterly instead of annually.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard or using our powerful API.

Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US, automate US filings in the Dashboard, and manage global filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, VAT, and GST on:

• Digital goods and services in all US states and over 100 countries
  
• Physical goods in all US states and 42 countries
  

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration, or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: If you need to register for a sales tax in the US, let Stripe manage your tax registrations. You'll benefit from a simplified process that prefills application details – saving you time and simplifying compliance with local regulations. If you need help registering outside of the US, Stripe partners with Taxually to help you register with local tax authorities.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax automates US filings in the Dashboard, powered by TaxJar. For global filings, Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business. US tax filings can be automated in the Stripe Dashboard, powered by TaxJar.

Learn more about Stripe Tax or get started today.