We are Murata Sogo Tax Accountanting Office in Miyakojima-ku, Osaka City.
This time, we would like to explain the treatment of consumption tax when importing goods, mainly with businesses engaged in trading in mind.

(1) Overview

Similar to exports, the concept of consumption tax on imports through customs is also based on the Customs Law. In principle, foreign goods imported from bonded areas are subject to a consumption tax, which is designed to protect the neutrality of the consumption tax against price competition and to prevent domestic traders from being at a competitive disadvantage.

In principle, a person who takes delivery of such foreign goods from a bonded area must submit an import declaration and pay the consumption tax by the time of delivery, since consumption tax is imposed on such goods (Extinguishing Act 4(2)).

 

(2) Definition of Import

The definition of import under the Customs Law is “goods arriving in Japan from a foreign country (including marine products caught on the high seas by foreign vessels). (2) Import under the Customs Law means “the receipt of goods arriving in Japan from a foreign country (including marine products harvested on the high seas by foreign vessels) or goods licensed for export to Japan (or to Japan via a bonded area, if the goods are exported via a bonded area)” (Customs Law, 2 (1) (i)).

 

(3) Tax Base

The tax base of foreign goods is the customs duty value (the value that serves as the tax base of imported goods (taxable value), calculated in accordance with the provisions of Article 4 and following of the Customs Tariff Act. The tax base of foreign goods is the total of the customs dutyable value (the taxable value of imported goods, which is detailed in Section II.2) plus the amount of individual consumption taxes other than consumption tax and the amount equivalent to the amount of customs duties (Article 28(4) of the Customs Tariff Act). Where the tax base of consumption tax on domestic transactions is defined as “the amount of consideration for a transaction (including economic benefit)” (Extinguished Law 28①), the tax base of import consumption tax is calculated based on the CIF price, etc., even if the transaction of taking over imported goods is not a consideration transaction (free transaction), and thus consumption tax is Therefore, consumption tax is imposed.

 

(4) Taxpayer

A “person who takes delivery of foreign goods from a bonded area” is liable to pay consumption tax (Extinguishing Act 5(2)). Therefore, not only tax-exempt businesses, but also salaried employees who are not sole proprietors are taxpayers when they take delivery of imported goods.

 

(5) Relationship with the Invoice System

Import transactions are not affected by the invoice system because the transfer of assets, etc. itself takes place outside of Japan, and therefore, customs does not issue invoices. Although import consumption tax is imposed when the goods are picked up from the bonded area, the consumption tax paid to customs is subject to the purchase tax credit (消法 30①).

 

(6) Procedures

A person who intends to take back imported goods from a bonded area must, in principle, submit a declaration stating the name, quantity, value, etc. of the goods and the amount of consumption tax, etc. to the director of customs having jurisdiction over the bonded area, and pay the consumption tax by the time of taking back (Extinguished Law 47). The import license issued by the director of customs is necessary for taking back into the country the goods held in the bonded area and must be preserved for seven years in principle as a requirement for the deduction of tax on purchases (Extinguishing Act 30 (vii), (ix), (v), Extinguishing Order 49 (viii), 50 (i)).

 

In this issue, we have explained the consumption tax on imports for those engaged in the trading business.
In addition to consumption tax, imports are also subject to customs duties, which we will cover in another installment.
If you have any questions about consumption tax, customs duty, or other taxes related to international transactions, please contact us using the Inquiry Form.