Only the Importer of Record (IOR) is Eligible for Import JCT Refunds

In Japan, basically only the Importer of Record (IOR) is eligible to reund import consumption tax

The taxpayer liable for the Japan Consumption Tax on imported goods withdrawn from a bonded area is considered the importer under Japanese customs law. Under customs law, the importer is defined as the taxpayer, known as the “Importer of Record - IOR” (Customs Law Articles 6 and 7(1), Customs Act Basic Notice 7-1).

Since the Importer of Record (IOR) is liable for the tax on taxable goods, such an entity, as a business, is eligible to deduct the related Japan Consumption Tax under the Consumption Tax Law (Consumption Tax Law Article 30, Paragraphs 1(3) and (4)).

As of October 1, 2023, amendments to the Customs Regulations have tightened the definition of who can be an "Importer of Record (IOR)". Only those involved in the transaction, such as buyers who import through sales transactions or those with ownership and disposal rights over the goods, are allowed. Third parties uninvolved in the transaction cannot be Importers of Record (IOR). Foreign corporations without a physical presence in Japan (non-residents) can use our Attorney for Customs Procedures (ACP) service, allowing non-residents to become the Importer of Record (IOR) themselves and deduct (or refund) import Consumption Tax.

We have extensive experience in facilitating such tax deductions (or refunds).

Case of Different Substantial Importer and Importer of Record

According to the Tokyo District Court decision on February 20, 2008, "In principle, a tax system where taxable entrepreneurs themselves deduct the taxes paid at the import stage should be assumed. Unless there are special circumstances, it should be understood that a plaintiff who is not the importer of record will not have their consumption tax deductible." It indicates that tax declarations made in the name of a third party are not intended by law.  We can learn from this court case that only the Importer of Record (IOR) has the right to deduct input tax amounts.

In very limited cases, substantial importers who are not the formal Importer of Record are allowed to deduct input tax amounts.

Practically, it is appropriate to assume that entities who are not the Importer of Record (IOR) are not allowed to deduct import consumption tax. An exception that allows the deduction of input tax amounts for those not being the importer of record exists under Basic Consumption Tax Notification 11-1-6 "Handling in Cases Where the Substantial Importer and the Importer of Record Differ". This directive states that even if the importer of record differs from the substantial importer, the following conditions, if met, allow the substantial importer to deduct the consumption tax paid on their taxable goods:

1. The substantial importer sells the taxable goods to the importer of record (manufacturer, etc.) for a consideration after importing.
2. The substantial importer bears the consumption tax amount related to the retrieval of the taxable goods.
3. The substantial importer preserves the original import permit and receipt of the consumption tax related to the retrieval issued in the name of the importer.

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Amendment of the Customs Act Basic Notice as of October 1, 2023

The revision to the Customs Act Basic Notice effective October 1, 2023, has tightened the definition of "importer = importer of record", specifically:

1. For goods imported through an Import Transaction (where the Japanese buyer becomes the importer via a sales transaction between an overseas seller and a Japanese buyer), the definition is similar to "person importing the goods" as stipulated in Basic Customs Notification 6-1(1).
2. In cases other than the above, at the time of import declaration, it refers to those who have the authority to dispose of the imported goods after domestic retrieval, and if there are others performing the importing acts for the same purpose, it includes them as well.

In summary, if a non-resident or foreign corporation without an office in Japan wishes to import into Japan, it is naturally permissible for the Japanese buyer to become the importer via a transaction with a Japanese company, or for the non-resident having disposal rights to become the importer (using ACP, Attorney for Customs Procedures) and deduct import consumption tax.

It is not permissible for a third party with no disposal rights or involvement in the transaction to act as the importer. Foreign corporations without an office in Japan (non-residents) can use our Attorney for Customs Procedures (ACP) service to act as importers, allowing them to deduct import consumption tax (or, in some cases, obtain a refund).

Our Japan Consumption Tax (JCT) Representative Services

At SK Advisory Inc., we provide a comprehensive one-stop service that covers both customs procedures through the Attorney for Customs Procedures (ACP) and Japan Consumption Tax (JCT) procedures with the National Tax Agency through a designated JCT Tax Representative.

By working closely with our trusted partner tax accountants, we act as your ACP while maintaining close coordination and information sharing with the tax representative. This collaboration ensures the proper deduction and refund of Japan Consumption Tax paid at the time of importation.

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