Consumption tax ratio is 5% (4% for national tax plus 1% for local tax).
There are two calculation methods for the consumption tax.
* As of May 18th, a measure to increase the national consumption tax is under discussion at a Lower House special committee.
Calculation formula:
1) Ordinary Calculation Method
Consumption tax payable = Consumption tax received – (Consumption tax prepaid + Import consumption tax)
Consumption tax received: Consumption tax received on sales and asset transfers(Consumption tax on taxable sales)
Consumption tax prepaid: Consumption tax paid upon purchases of goods/services and other expenditures (Consumption tax on taxable purchases etc.)
Import consumption tax: Consumption tax paid at the time of import
If the amount of consumption tax payable is negative on the consumption tax return, such negative amount will be refunded.
2) Simplified Calculation Method(*please see the conditions list below which must be satisfied in order to apply this method)
Consumption Tax Payable = Consumption tax received – (Consumption tax received × Deemed purchase rate)
(Deemed purchase rates are defined in accordance with the taxpayer’s type of business).
Deemed purchase rate
| Type of Business | Deemed purchase rate | |
| First class business | Wholesalers | 90% |
| Second class business | Retailers | 80% |
| Third class business | Agriculture,forestry, fishery, mining,construction, manufacture etc. | 70% |
| Fourth class business | Restaurants, financial or insurance etc., which is not classified into first, second, third, fifth class business | 60% |
| Fifth class business | Real estate, transportation, communication and service industry. | 50% |
industry other than first, so
Under the simplified taxation method, the amount of tax payable will never be a negative figure. Companies adopting the simplified method are required to automatically apply such method for at least two consecutive terms.
Conditions to Adopt Simplified Method:
・Taxable sales for a base period are 50 million yen or less (except under certain cases)
・“Notification of Election for Simplified Taxation Method” must be submitted to the local Tax Office by the last day of the immediately preceding term.
The most widely used calculation method is the ordinary method. However, in comparison, if the simplified method is expected to yield favorable results, taxable enterprises would be well served by choosing the simplified method