Consumption Tax – Transitional Rules for Tax Rate on Leasing Assets
Starting from October 1, 2019, Japan’s consumption tax rate will be increased to 10%. However, since the nature of some transactions does not match the drastic change to the new tax rate applied from the effective date, the old tax rate (8%) is applied to certain transactions as transitional rules. Please note that the application of the old tax rate (8%) is mandatory for certain transactions designated under the transitional rules; the selection of the tax rate of either 8% or 10% is not allowed.
2. Transitional rules for the tax rate on leasing assets
Where the contract for leasing assets is entered into between October 1, 2013 and March 31, 2019, and the actual leasing starts before October 1, 2019, but continues on or after October 1, 2019, the amount of consideration is subject to consumption tax at the rate of 8% on the condition that the relevant contract of such transactions satisfies either ① and ②, or ① and ③ of the following. (Except for the cases where the amount of consideration is changed on or after April 1, 2019)
① The term and amount of consideration shall be stipulated.
② There is no stipulation that business operators can request customers to change the amount of consideration due to change in circumstances and other related reasons.
③ There is no stipulation that either or both of the parties can request for the termination of the relevant contract. Also, the amount of consideration shall satisfy the following condition:
※ The total amount of consideration paid during the term / the total amount of acquisition cost of the leasing asset and expenses attributable to the purchase of the leasing asset ≧ 90%
In this News, we have mentioned “Consumption Tax – Transitional Rules for Tax Rate on Leasing Assets.”
Please note that this News only introduces general outlines and does not include professional advice. So please make sure not to make any decisions without taking professional advice individually. If you have any questions, please feel free to contact us.
(Reference / Japanese)
・National Tax Agency Q&A Regarding the Transitional Rules for Consumption Tax Rate on Leasing Assets on or after October 1, 2019
Tatsuya Ota, “Consumption Tax - Reduced Tax Rate and Invoicing System”, (2019) Zeimu Kenkyukai,Inc.