消費税 (shohizei), consumption tax, is a value-added tax (VAT) levied on most goods and services in Japan. It operates as a multi-stage tax, collected at each stage of production and distribution, and is ultimately borne by the final consumer. The standard rate is 10%, while a reduced rate of 8% applies to certain items, such as food and non-alcoholic beverages.
The consumption tax system in Japan includes both taxable and exempt transactions. Taxable transactions encompass the sale of goods and services. However, certain transactions, such as the sale and lease of land, interest on loans, and medical services, are exempt from consumption tax.
Businesses are required to calculate and remit the tax collected from their sales. They can deduct the consumption tax paid on their purchases, known as input tax, from the tax collected on sales, known as output tax. This process is called the input tax credit, ensuring that the tax burden ultimately falls on the final consumer rather than on businesses throughout the supply chain.
There are two main accounting methods for handling consumption tax: the tax-included method and the tax-excluded method. The tax-included method simplifies bookkeeping by incorporating the tax into the price of goods and services, while the tax-excluded method separates the tax from the price, providing clearer financial reporting.
Businesses with annual taxable sales exceeding 10 million yen are required to register as taxable businesses and file consumption tax returns. Smaller businesses may qualify as tax-exempt businesses and are not required to collect or remit consumption tax unless they choose to register voluntarily.
See Also
In Japanese, the term 経費 (keihi) refers to "expenses" or "business expenses." These are the costs incurred in the process of running a business. Keihi can include a wide range of expenditures such as rent for office space, utilities like electricity, water, and internet, employee salaries and wages, office supplies, travel expenses, marketing and advertising costs, and depreciation of assets. Properly tracking and managing keihi is essential for maintaining accurate financial records, budgeting, and ensuring compliance with tax regulations. In Japan, businesses must be meticulous in documenting and categorizing their expenses to maximize tax deductions and maintain transparency with the tax authorities.
滞納 (tainou) refers to the failure to pay taxes or other required payments by the due date. This can lead to several consequences depending on the type of payment and the length of the delay.
For example, if national health insurance premiums are overdue, the individual might initially receive reminders and then a "資格証明書" (qualification certificate) instead of a regular insurance card, requiring them to pay medical costs upfront and seek reimbursement later. Continued non-payment can result in loss of benefits, such as high-cost medical expense coverage, and potentially lead to asset seizure if the overdue amounts remain unpaid.
In the case of local taxes like resident tax, late payments result in additional charges called 延滞金 (entairyou), which accumulate daily based on the amount owed and the length of the delay. Persistent non-payment can lead to more severe actions, including the seizure of assets like bank accounts or property.
For fixed asset taxes, the penalties are similar. An initial interest rate is applied for the first month of delay, which increases significantly after this period. If payments are not made even after receiving several reminders, the authorities may ultimately seize assets to cover the unpaid taxes
特段 (tokudan) is a Japanese term that translates to "special" or "particular" in English. It is used to describe something that is out of the ordinary or requires specific attention. For example, you might hear it in phrases like 特段の事情 (tokudan no jijou), meaning "special circumstances," or 特段の理由 (tokudan no riyuu), meaning "particular reason."
In business contexts, 特段 might be used to refer to exceptional conditions or considerations that need to be addressed separately from the usual procedures or rules.
Frequently Asked Questions
消費税 (shohizei), consumption tax, is a value-added tax (VAT) levied on most goods and services in Japan. It operates as a multi-stage tax, collected at each stage of production and distribution, and is ultimately borne by the final consumer. The standard rate is 10%, while a reduced rate of 8% applies to certain items, such as food and non-alcoholic beverages.
Consumption tax is 消費税 (shohizei) in Japanese.
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