Japan GST/VAT Update:

Invoice Based System Recommended and A Rate Hike is Widely Expected

Excerpt from Practical Asian Tax Strategies by Edwin T. Whatley, Kazuo Taguchi and Gabriele Slattery (Baker & McKenzie, Japan)

GST/VAT Legislative Changes
There have been no significant changes to Japanese GST/VAT (referred to as “consumption tax” in Japan) legislation in the 12 months to May 2008. One legislative change, not specific to consumption tax that may have an effect on Japanese consumption taxpayers is the modification of some administrative aspects of the Japanese tax ruling system.

GST/VAT Rulings: Changes to Advance Ruling System
While formal rulings have, since the introduction of the tax ruling system in 2001, been binding on the National Tax Agency (“NTA”), Japan’s formal advance ruling system has thus far not been very useful in producing guidance for taxpayers. The authorities generally have taken a very narrow view of what types of questions fall within the scope of Japanese tax law issues upon which a ruling could be issued. In particular, the issuance of binding tax rulings has been limited to past transactions and future transactions which are certain to be conducted, the applicant’s name has been publicly disclosed and details of the ruling have been made public within 60 days in most cases. The tax authority has been under a “loose” obligation to issue a ruling within three months in principle.

Effective April 1, 2008, the tax ruling system has been modified in an effort to make the advance ruling system more useful for taxpayers.

Read More about Specific Improvements