Japanese Consumption Tax Set To Increase (Sept 2019 Update)

Retailers are busy preparing for the more complicated tax scheme which is hoped will work as an incentive for cashless payments. A reward points system for small and mid-sized retailers will also be introduced for nine months (until June 2020).

When consumers purchase goods at these small and midsize stores with cashless payments, they will be given 5% of the purchase price in rewards points. The rate for these reward points will only be 2% at franchise chains of major operations (convenience stores).

The 8% rate will remain on some goods, such as non-alcoholic beverages and food.

Subscribe to our monthly VAT newsletter to ensure you never miss an important update.

How will this change affect consumers and businesses?

As we covered in our previous blog on this topic, both consumers and businesses are still worried this change will create confusion around the different rates for similar goods. An example that highlights the potential confusion is sushi – meals from a conveyor belt in a sushi restaurant will be taxed at 10% (dining out). However, if sushi is purchased as takeout, it will be taxed at 8%. It is believed that some businesses may not have cash registers that will be able to cope with the change.

According to a survey carried out by the Chamber of Commerce, as of May 2019, 40% of small businesses had yet to introduce cash registers that will be able to handle the new regime.

For consumers, the new scheme will initially present five different effective tax rates depending on the types of good and the stores:

• 3%
• 5%
• 6%
• 8%
• 10%

Efforts are being made by retailers to help consumers understand the different tax rates.

If you are concerned by how this change may impact your business, contact our experts.