Overview of Consumption Tax -Taxable Transactions and Tax Rates


Taxable Transactions

Understanding of what falls under “Taxable Transactions” is important in calculating final consumption tax due, and also in determining whether you are a consumption tax payer or not.

“Taxable Transactions” are the transactions that are carried out for a compensation as a business such as:

  1. The sale or lease of asset in Japan
  2. The supply of services provided in Japan (excluding certain digital services)
  3. The supply of digital services provided to individual resident of Japan or Japanese companies

Non-Taxable Transactions

There are number of transactions that are exempted from taxable transactions, such as:

  1. Sale or leases of land
  2. Sale of securities
  3. Interests on loans, guarantees and other monetary transactions
  4. Rental of housing
  5. School tuition
  6. Medical and social welfare activities

Export Transactions

Export transactions are the transactions exported from Japan as well as other export related activities such as international transportation. Services provided to non-resident of Japan is also treated as export transactions, except the transport or storage of asset in Japan, and accomodation, food and other services rendered within Japan. Export transactions are categorized as a part of taxable transactions with zero-tax rate.

Tax Rates

The consumption tax rates have been raised from 3% in 1989 when first it is started in Japan, and now a standard rate is 10% in 2022.
There is also reduced rate of 8% for food and beverage that are taken out.
Items subject to the reduced tax rate are:

  • Food and beverage excluding alcoholic drink and dining out
  • Newspapers issued twice a week or more (restricted to those by subscription)