The ideas below are available for use until the invoice system starts (i.e., 1 October 2023).
1. Newly establish company
In general, newly established corporations are exempt from JCT for first 2 years.
For example, output JCT JPY 2million – input JCT JPY 1 million = JPY 1 million is exempt.
JCT payer rules are complicated. An enterprise whose amount of JCT taxable sales in its base period (i.e., a fiscal year that is two years before the current fiscal year) is JPY10 million or less, and whose amount of JCT taxable sales and amount of salaries paid in Japan in the first 6 months of the prior fiscal year is not more than JPY10 million, is not a JCT taxpayer in the current fiscal year.
But, note that a newly established corporation that has no base period, but whose amount of share capital is JPY 10 million or more at the beginning of its first two fiscal years will become a JCT taxpayer automatically for its first two fiscal years.
2. Short period exception
Even if the amount of JCT taxable sales and the amount of salaries paid in Japan in the first 6 months of the prior fiscal year are more than JPY10 million, specific period rule would not apply as long as the prior fiscal year is less than 7 months (short period exception).
In summary, those people who newly set up a Japanese company can enjoy JCT exemption for a maximum of 19 months assuming that the following conditions are satisfied:
- First fiscal year is 7 months or less;
- Share capital is less than JPY 10 million; and
- The newly established corporation is not controlled by a large corporate group (i.e., more than 50% owned, directly or indirectly by other companies whose amount of JCT taxable sales are more than JPY500 million in their base period).
