Japan- Deemed Supplier Rules For Digital Platforms

To help businesses better understand the new taxation rules for digital platforms, the Japanese National Tax Agency (JNAT) published helpful information for foreign businesses using digital platforms to supply B2C digital services to Japanese consumers.

Impact on Digital Platforms and Foreign Businesses

Following new taxation rules, digital platforms, like app stores or online marketplaces, will be considered suppliers when a foreign business uses them to provide B2C digital services and receives fee payments for the service they provide through that specified platform starting next year. Under the deemed supplier rules, beginning on April 1, 2025, digital platforms will be responsible for filing and paying the consumption tax.

Nevertheless, the deemed supplier rule will not apply if a foreign business provides B2C digital services through a digital platform but does not receive a fee.

These rules will affect B2B transactions since the responsibility to file and pay consumption tax will remain on the businesses that provide the service.

The list of digital platforms subject to new taxation rules is expected to be published by the end of this year. However, if a digital platform is not on the list and, at one point, the total fee received through the platform exceeds JPY 5 billion, that platform must notify the JNAT that it became liable under the deemed supplier rules.

As an additional obligation, digital platforms that fall under the scope of the new taxation rules must notify foreign businesses that they are subject to deemed supplier rules and the effective date.

Conclusion

These new rules may relieve foreign businesses since they will no longer be responsible for collecting and paying consumption tax. In contrast, digital platforms will face new challenges and administrative burdens.

Nevertheless, both digital platforms and foreign businesses should familiarize themselves with new rules and regulations and adjust their business practices accordingly. 

Source: National Tax Agency - Overview of Platform Taxation,National Tax Agency - Platform Taxation of Consumption Tax