Only the Importer of Record is eligible for the Deduction of Import JCT - Japan Consumption Tax

Last Updated on April 17, 2025 by SK ADVISORY INC

In Japan, only the Importer of Record (IOR) is eligible to deduct input (import) consumption tax in principle.

The taxpayer liable for the Japan Consumption Tax on Imported Goods from the bonded area, and 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), Basic Customs Notification 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 themselves to become Importer of Record (IOR) and deduct (or refund) import Consumption Tax.

We have numerous experiences where we have facilitated 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.

 

Amendment of the Basic Customs Notification as of October 1, 2023

The revision to the Basic Customs Notification 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).

 

 

 

 

 

📌 What Is a JCT Tax Representative and Why Is It Required?

When a non-resident foreign entity becomes subject to Japan’s Consumption Tax (JCT), it is required to appoint a JCT Tax Representative (Tax Agent).

If a non-resident company sells goods to customers in Japan, it typically collects 10% consumption tax on those sales. This collected JCT must be reported and submitted to the Japanese National Tax Office, unless the entity qualifies as a tax-exempt business. (See: "Are we a Tax-Exempt Business?")

If the entity is JCT-liable—or voluntarily registers as a taxable entity, such as by obtaining a Qualified Invoice Issuer Number—it must appoint a JCT Tax Representative to handle all tax-related procedures in Japan, including JCT tax filings. In the JCT tax return process, the paid import JCT can be offset against the collected JCT.

• If the import JCT exceeds the collected amount, the difference may be refunded.
• If the collected JCT exceeds the import amount, the difference must be paid to the tax office.

A JCT Tax Representative is legally required to manage this process on behalf of the foreign entity.  

Please note: The JCT Tax Representative is distinct from the Attorney for Customs Procedures (ACP), which is appointed for customs clearance purposes.

• ACP = Customs representative
• JCT Tax Representative = Tax representative

 

✅ Our JCT Representative Service

At SK Advisory Inc., we provide a comprehensive one-stop service covering both:

• Attorney for Customs Procedures (ACP)
• Japan Consumption Tax (JCT) Tax Representative

For the JCT portion of the service, we subcontract with a certified tax accountant (our trusted partner).

As the primary contractor, SK Advisory oversees the entire process and ensures quality and consistency across all deliverables.

Thanks to our deep expertise in customs procedures and JCT treatment, our clients are able to efficiently deduct or reclaim paid import JCT through proper tax filings.  

 

🧾 Contract Structure of Comprehensive One-Stop Service for ACP and JCT Representative

 

🔹 Standard Scope of Works

In collaboration with our partner certified tax accountant, we provide:

• JCT Registration Setup including Obtaining a Qualified Invoice Issuer Number.
• Support notification of tax representative appointment.
• Support preparation/submission of the JCT return.
• Communication with stakeholders including National Tax Office.
• Cash handling support (e.g. Payment of the JCT to National Tax Office)

   

👥 Flexibility in Tax Accountant Introduction

Our service structure is flexible and tailored to the client’s business needs. If we determine that the client’s business involves complex international tax issues, we may introduce another trusted tax advisory firm to provide advanced tax consultation in coordination with our services.  

 

 

 

Japan Consumption Tax (JCT) Compliance

Understanding the handling of JCT (such as payment of import JCT, collection of sales JCT from customers, and JCT returns) is crucial to avoid significant cost burdens. This is a vital aspect, so please ensure a thorough understanding to determine the most optimal business model.  

 

Basic Process of JCT Handling

The JCT treatment for foreign corporations without a base in Japan, importing and then selling in Japan, can be broadly outlined in the following three steps:

1. At Import: Pay import VAT (10% of the declared value) to customs – Supported by ACP (Attorney for Customs Procedures)
2. At Sale: Collect VAT (10% of sales) from customers
3. Final Tax Return (usually annually): Deduct the import VAT paid (step 1) from the JCT collected from customers (step 2), and pay or receive the difference to/from the tax office – Supported by a Tax Representative (Certified Tax Accountant)

Note: Using ACP to become the importer (IOR) is essential for JCT deductions and refunds. If another company acts as the IOR, you cannot deduct the input tax (step 1), and must pay the entire VAT collected (step 2) to the national tax authorities, leading to significant costs.

If you are a JCT-exempt business, the process ends at steps 1 and 2. For taxable businesses or invoice-registered businesses, step 3 (Final Tax Return) is obligatory. In the Final Tax Return (step 3), if the JCT paid (step 1) exceeds the provisional JCT received (step 2), the difference is refunded. Conversely, if the provisional JCT received (step 2) exceeds the JCT paid (step 1), the difference must be paid to the tax office.  

 

Is Being the Importer Important?

It is very important. Without acting as the importer (IOR) through ACP (Attorney for Customs Procedures), you cannot deduct input tax in step 3. You must pay the full amount of JCT collected in step 2 to the tax office, with no possibility of a refund, resulting in substantial costs. Be careful not to let another company act as the importer.  

 

Are we a Tax-Exempt Business?

Tax Filing Obligations of Nonresidents and Foreign Corporations First, the consumption tax received from customers in Step 2 above should basically be paid to the national tax office. Consumption tax is imposed on transfers, etc. of assets made in Japan. Therefore, even if a nonresident or foreign corporation transfers assets in Japan, it is subject to consumption tax and is obligated to pay the tax. In some cases, such as exempt businesses, it may not be necessary to pay the tax to the national tax office. However, the following are examples where one cannot qualify as an exempt business and must file for consumption tax:

<Examples of Entities Required to File JCT Tax Returns (Non-Exempt Businesses)>

• Qualified Invoice Issuers: Businesses registered as qualified invoice issuers under Japan’s invoice system.
• Businesses with Taxable Sales Exceeding JPY 10 Million During the Base Period: Entities whose taxable sales in Japan during the base period (generally the fiscal year two years prior) exceed JPY 10 million.
• Businesses with Taxable Sales Exceeding JPY 10 Million During the Specific Period: Entities whose taxable sales in Japan during the specific period (generally the first six months of the previous fiscal year) exceed JPY 10 million.
• Newly Established Corporations with Capital of JPY 10 Million or More: Newly established corporations (including certain newly established corporations) with capital or investment of JPY 10 million or more during a taxable period without a base period.
• Foreign Corporations with Capital of JPY 10 Million or More Deemed to Have No Base Period: (Applicable to taxable periods starting on or after October 1, 2024) * Foreign corporations without a base period and with capital or investment of JPY 10 million or more at the start of the fiscal year are not exempt from consumption tax obligations.
• Businesses Opting for Taxable Enterprise Status: Entities that voluntarily select to be treated as taxable enterprises.

 

*Important Notes on the 2024 JCT Tax Law Amendment

Under the 2024 amendment of Japan’s Consumption Tax Law, the exemption for foreign corporations initiating business in Japan has been significantly tightened.

Foreign corporations with no base period and capital of JPY 10 million or more at the beginning of the fiscal year are no longer exempt from consumption tax obligations during that fiscal year.

Starting from taxable periods beginning on or after October 1, 2024, a foreign corporation that has an existing base period but was primarily conducting business outside Japan and subsequently starts taxable business activities in Japan after the day following the end of its base period will be deemed as having no base period.

Being "deemed to have no base period" means that if the corporation’s capital or investment is JPY 10 million or more, it will incur consumption tax obligations from the deemed base period fiscal year onward. 

As a result of this amendment, many foreign corporations will be required to file consumption tax in Japan from their first year of business operations in the country.  

 

Disclaimer: The above outlines the general principles of Japan’s consumption tax obligations. Each company’s specific tax liability should be confirmed by consulting with a licensed tax accountant.

 

 

 

Can Tax-Exempt Businesses Receive Refunds?

Yes, however, a final JCT tax return (Step 3) is required in order to receive a refund. Even if your business is initially classified as tax-exempt, you may voluntarily register as a taxable entity and begin filing JCT tax returns to claim refunds for import JCT you have paid.  This can be beneficial, for example, when the JCT paid at import (Step 1) exceeds the JCT collected from customers (Step 2). In such cases, the difference may be refunded by the National Tax Office. Importantly, to claim a refund or deduction for import JCT, the use of an Attorney for Customs Procedures (ACP) is essential for non-resident businesses—only ACP-registered importers are eligible for JCT recovery.  

 

Is It Better to Become a Registered Invoice Issuer?

This depends on individual circumstances, but generally speaking, for B2B where customers are corporations, it's better to be a Registered Invoice Issuer (as corporations file JCT returns and need qualified invoices for input tax deductions). For B2C where customers are primarily consumers, the necessity is somewhat reduced (as most consumers do not file JCT returns). Many companies seem to become Registered Invoice Issuer without fully understanding the system. Being a registered business mandates the filing of a final tax return (step 3). Please seek advice from appropriate experts.  

 

Is Support from a Certified Tax Accountant Necessary?

For non-residents conducting tax office procedures (step 3) in Japan, appointing a Tax Representative is required. The ACP handles customs procedures, while the Tax Representative deals with national tax (tax office) matters. Under the Certified Tax Accountant Act, the following tasks are exclusively performed by the Certified Tax Accountants, making their support essential:

• Preparation of tax documents
• Tax representation
• Tax consultation

Our company, in partnership with Certified Tax Accountants skilled in international taxation, will provide support in these areas.  

 

 

 

Japan Qualified Invoice System and Compliance JCT (Japan Consumption Tax)

Recently, many companies have been registering as Qualified Invoice Issuers for Japanese Consumption Tax (JCT) due to the new invoice system introduced in October 2023. This new system is similar to the EU's VAT invoice system. After October 2023, your Japanese customer can’t claim input JCT tax credits unless the sellers(suppliers) issue a qualified invoice that is written a JCT number. To issue a qualified invoice, sellers(suppliers) need to be a taxable entity and get a JCT number.

Before October 2023:

Any customer (Company-B) who paid for goods or services could deduct input JCT regardless of whether the seller (Company-A) was registered for JCT. There was no requirement to verify the tax status of the seller.

After October 2023:

Any customer (Company-B) can only deduct input JCT if Company-A, the seller, is registered and can provide a qualified invoice with a JCT registration number.

If Company-A cannot issue such an invoice, Company-B may choose not to continue purchases from them. If Company-A sells only to consumers and not businesses, it may not need to issue qualified invoices since consumers typically do not claim JCT tax returns.

 

Once Company-A obtains a JCT invoice registration number, it becomes a taxable entity required to file JCT returns regularly.

For non-resident entities (Company-A) importing and selling in Japan, the standard procedure involves three steps:

1. Pay import JCT to customs: 10% of the import customs value.
2. Collect JCT from customers in Japan: 10% of the sales price.
3. File a JCT tax return and pay the net JCT to the tax office.

If Company-A paid the import JCT as the importer using an Attorney for Customs Procedures (ACP), they need only pay the net amount of sales JCT minus import JCT.

If Company-A paid the import JCT but was not the importer, they must pay all the collected sales JCT without deducting the import JCT.

Therefore, using an ACP to act as the Importer of Record (IOR) is crucial for managing JCT deductions and refunds.

If another company acts as the IOR, you cannot deduct the import JCT, resulting in significant costs.

We strongly recommend using our ACP services to ensure you can act as IOR, optimizing your JCT handling.

Our team has extensive experience helping clients become importers and successfully manage their JCT responsibilities. You can rely on our expertise to navigate these complexities.  

 

   

 

   

 

Our Customers - Attorney for Customs Procedures (ACP) Service

All our clients have successfully become Japan Importer of Record (IOR) and/or Exporter of Record (EOR) under our guidance.

 

 

Logistics Companies with Collaboration Experience

Here is a list of our partner logistics and forwarding companies with whom we have had successful collaborations. Please note that this list is not exhaustive, as we are open to working with any logistics or forwarding companies. For clients, we(SK Advisory) work as an Attorney for Customs Procedures (ACP), while the logistics companies manage forwarding, logistics, customs clearance and warehousing operations. 

 

Why choose us?

We specialize in navigating complex issues at the intersection of customs procedures and taxation—an area where our ability to offer practical, comprehensive support from both perspectives sets us apart. Understanding the close relationship between customs duties and national taxes (especially, Japan Consumption Tax - JCT), and addressing both in an integrated manner, is crucial in the context of international trade.

• Customs and International Trade Professionals - Led by our CEO, Mr. Sawada—Certified Customs Specialist and former KPMG professional—SK Advisory provides expert-level support in Customs and international trade.
• Full Compliance with Japanese Customs Law - We ensure full adherence to Japanese Customs Law, including Importer of Record (IOR) structure, HS code classification, and customs valuation. We assist in preparing all essential shipping documents for non-resident entities.
• One-Stop ACP and JCT Tax Representative Service - We offer a fully integrated service for both ACP and JCT Tax Representative needs. Our expertise enables efficient deduction or refund of import JCT through accurate JCT tax filings.
• Multilingual Communication - Our team communicates fluently in English, Japanese, and Chinese, offering smooth coordination with global clients and authorities in Japan.
• Support for Regulated Products - Our ACP/IOR partnership system can manage regulated items, including cosmetics, PSE-products, foodstuffs, and tableware.
• Trusted by Global Clients - Serving around 100 ACP clients annually, including many Amazon sellers, we’re a certified provider on Amazon SPN (Service Provider Network) under Trade Compliance.