Japan's ruling parties are proposing a new way to collect consumption tax on the domestic sales of smartphone apps distributed by overseas firms. They want IT giants that operate app sales platforms to be obliged to pay the tax instead of the overseas firms.
The proposal is part of the tax reform guidelines for fiscal 2024 that were adopted by the main governing Liberal Democratic Party and its junior coalition partner Komeito on Thursday.
The move is a response to the alleged unfairness in consumption tax payments between domestic and overseas businesses.
Overseas firms that sell products in Japan are required to pay the consumption tax. But many are said to have failed to do so.
It came to light in November that a Luxembourg subsidiary of US company Epic Games had been ordered to pay about 3.5 billion yen, or nearly 25 million dollars, in back taxes and penalties to the Tokyo Regional Taxation Bureau.
The Luxembourg firm, which operates the popular online game Fortnite in Japan, reportedly failed to pay some 3 billion yen in taxes for in-app purchases by users in Japan.
Sources say some overseas businesses intentionally opt not to pay the tax, while others fail to pay because of their lack of understanding of Japan's tax system. In any case, Japanese tax officials face difficulty investigating businesses that are based abroad.
The ruling coalition's tax guidelines are calling for the operators of app sales platforms to be required to pay the consumption tax, if overseas firms have sold apps to consumers in Japan through the platforms.
The parties are seeking to implement the system in April 2025, targeting platformers whose annual sales of apps made by overseas businesses top 5 billion yen, or about 35 million dollars. They would include IT giants such as Google and Apple.
The proposal comes as the domestic market for smartphone apps is expected to top 5.1 trillion yen, or over 36 billion dollars, in 2024. That's more than five times the figure for 2015. Apps for online games account for about 60 percent of the sales.
Japan's national tax authorities say many major economies have adopted similar systems to get platform operators to pay taxes.
The proposal is part of the tax reform guidelines for fiscal 2024 that were adopted by the main governing Liberal Democratic Party and its junior coalition partner Komeito on Thursday.
The move is a response to the alleged unfairness in consumption tax payments between domestic and overseas businesses.
Overseas firms that sell products in Japan are required to pay the consumption tax. But many are said to have failed to do so.
It came to light in November that a Luxembourg subsidiary of US company Epic Games had been ordered to pay about 3.5 billion yen, or nearly 25 million dollars, in back taxes and penalties to the Tokyo Regional Taxation Bureau.
The Luxembourg firm, which operates the popular online game Fortnite in Japan, reportedly failed to pay some 3 billion yen in taxes for in-app purchases by users in Japan.
Sources say some overseas businesses intentionally opt not to pay the tax, while others fail to pay because of their lack of understanding of Japan's tax system. In any case, Japanese tax officials face difficulty investigating businesses that are based abroad.
The ruling coalition's tax guidelines are calling for the operators of app sales platforms to be required to pay the consumption tax, if overseas firms have sold apps to consumers in Japan through the platforms.
The parties are seeking to implement the system in April 2025, targeting platformers whose annual sales of apps made by overseas businesses top 5 billion yen, or about 35 million dollars. They would include IT giants such as Google and Apple.
The proposal comes as the domestic market for smartphone apps is expected to top 5.1 trillion yen, or over 36 billion dollars, in 2024. That's more than five times the figure for 2015. Apps for online games account for about 60 percent of the sales.
Japan's national tax authorities say many major economies have adopted similar systems to get platform operators to pay taxes.
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Summary
Japan's ruling parties propose a new consumption tax collection method for overseas app sales. They aim to make IT giants responsible for tax payments instead of the foreign firms, addressing alleged unfairness in domestic-overseas tax payment. The move is part of the tax reform guidelines for
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ID: d06651e9-36ad-4be3-bab2-f57bdfde8d1b
Category ID: nhk
URL: https://www3.nhk.or.jp/nhkworld/en/news/20231214_31/
Date: Dec. 14, 2023
Created: 2023/12/15 06:30
Updated: 2025/12/08 20:12
Last Read: 2023/12/15 10:49