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Consumption Tax – Tax Rates and Accounting Issues

List of news

1. Introduction
Starting on October 1, 2019, Japan’s consumption tax rate was raised to 10%. At the same time, the reduced tax rate system was also introduced. In this News, we will mention the consumption tax rates after implementing the reduced tax rate system and related accounting issues.

2. Consumption tax rates related to the implementation of the reduced tax rate system
As of October 1, 2019, Japan’s consumption tax introduced a multi tax rate structure which consists of a standard tax rate and a reduced tax rate. The consumption tax rates used in regular transactions are as follows:

A reduced tax rate:8.0 %(National tax rate:6.24%, local tax rate : 1.76%)
A standard tax rate:10.0 %(National tax rate:7.8%, local tax rate : 2.2%)
Transitional measures:8.0 %(National tax rate:6.3%, local tax rate : 1.7%)

As mentioned above, the 8% rate is used in both the reduced tax rate and the rate on transitional measures; however, please note that the national and local tax portions slightly differ in each tax rate.

3. Related accounting issues
You have seen receipts and invoices using the multiple tax rates since October 1, 2019. As mentioned in 2, when preparing for consumption tax returns, you should output information from accounting software by clearly distinguishing the old tax rate of 8% for transactions on or before September 30, 2019 or transitional measures and the reduce tax rate of 8% for the specific items on or after October 1, 2019.

4. Conclusion
In this News, we mentioned “Consumption Tax – Tax Rates and Related Accounting Issues.”
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.

National Tax Agency, “Consumption Tax Guide to the Reduced Tax Rate System”, August, 2019 (Japanese)