The Japan Consumption Tax (JCT) implications for foreign companies using Fulfillment by Amazon (FBA) to sell goods in Japan are outlined below. This assumes that the foreign company does not have a permanent establishment in Japan.

[Overview of Transactions]

As indicated in the overview above, the title transfer of goods from the foreign company to the Japanese customer occurs in Japan. Therefore, the sales of these goods by the foreign company are subject to JCT.
The JCT amount for the foreign company is calculated by deducting the Purchase JCT paid on JCT-Taxable Purchases from the Sales JCT received at the time of JCT-Taxable Sales.
Below is our explanation about the JCT-Taxable Sales and the JCT Taxable Purchases for a foreign company selling goods in Japan via FBA, based on the Amazon Payout Report.

1. JCT-Taxable Sales
   The following three items constitute the JCT-Taxable Sales for the foreign company:
   1. FBA products sales
   2. Shipping credits
   3. Gift wrap credits
2. JCT-Taxable Purchases
   1. Import JCT
      If the Importer of the goods is the foreign company, the foreign company can claim the Import JCT paid at the time of import on the foreign company’s final JCT return.
   2. Fees paid to Amazon for FBA
      AWI Tax Consulting considers the JCT nature of various FBA-related fees as follows:
      • FBA selling fees
        FBA selling fees are treated as the fees for Digital Services. The JCT nature (taxable or non-taxable) for Digital Services are determined by the location of the service recipients. Thus, the FBA selling fees are not JCT-Taxable Purchases because the foreign company’s (service recipient) office is located overseas.
      • FBA transaction fees
        These fees are for delivery services provided in Japan, and so qualify as JCT-Taxable Purchases.
      • FBA inventory and inbound services fees
        These fees are for managing inventory located in Japan, and so qualify as JCT-Taxable Purchases.
      • Cost of advertising
        Cost of advertising is treated as the fee for Digital Services. The JCT nature (taxable or non-taxable) for Digital Services are determined by the location of the service recipients. Thus, the Cost of advertising is not JCT-Taxable Purchase because the foreign company’s (service recipient) office is located overseas.
   3. Other expenses
      JCT-Taxable Purchases or not for the expenses, such as fees to customs specialists or tax accountants, should be determined based on the nature of their services.

After filing the final JCT return, particularly if in a JCT refund position due to the payment of Import JCT, the Japan Tax Office may request additional documents such as JCT qualified invoices and Amazon Payout Report issued by Amazon Japan. Therefore, it is advisable to ensure that the final JCT return is consistent with these documents when preparing the return.

Additionally, the general procedure for a foreign company to file JCT return and pay JCT is as follows:

1. The foreign company appoints a Japanese tax agent. As foreign companies do not have offices or bank accounts in Japan, the tax agent is necessary to act on behalf of the foreign company for Japanese tax matters. In many cases, the tax accountant working on the foreign company’s tax return also acts as the tax agent.
2. The foreign company needs to file JCT return and pay JCT within two months from the end of its fiscal year. Typically, the foreign company does not have a Japanese bank account, so it transfers funds from its overseas bank account to the tax agent’s Japanese bank account, and then the tax agent pays JCT to the Japan Tax Office. If in a JCT refund position, the Japan Tax Office refunds the JCT to the tax agent’s bank account, and the tax agent transfers the refunded amount to the foreign company’s account.