Whether the company is classified as “small” for consumption tax filing purpose is determined following the below steps;
1. Is taxable sales amount recognized during two terms prior to the current fiscal year JPY 10 million or less?
2. If the answer to the above question is yes, is either of taxable sales amount or the salaries amount recognized during previous fiscal year JPY 10 million or less?
If the answers to both questions above are yes, the company is classified as “small” for consumption tax filing purpose and can be exempt from the consumption tax filing & payment for the current fiscal year.
Although the company is classified as “small” and can be exempt from the consumption tax filing for the current fiscal year, the company can voluntarily elect to be a taxable status by submitting “Report on the Selection of Taxable Enterprise for Consumption Tax” before the beginning of the current fiscal year.
For a newly established company with no “two terms prior to the current fiscal year”, whether the company is classified as “small” is determined based on the amount of paid-in-capital at the beginning of the fiscal year. If the amount of paid-in-capital at the beginning of the fiscal year is less than JPY 10 million, the company can be classified as “small” and exempt from consumption tax.
For a company established on or after April 1, 2014, the company can not be classified as “small” and exempt from consumption tax filing even if its paid-in-capital is less than JPY 10 million if the company is directly or indirectly owned by a company with taxable sales exceeding JPY 500 million.