JAPAN Law and Practice Contributed by: Hiromi Hayashi, Daisuke Tsuta, Masaki Yukawa and Keiichi Bando, Mori Hamada & Matsumoto
1.3 Taxation of Digital Advertising Income Tax (Individual Income Tax and Corporate Tax) See 1.2 Digital Economy Taxation . Consumption Tax (Value Added Tax) The distribution of advertisements on the internet is a provision of electronic services, and whether it is subject to consumption tax is determined by the location of the recipients of the distribution services. When a Japanese company or individual pays compensation for the distribution of adver - tisements by a foreign business operator, that compensation is subject to consumption tax. The distribution of advertisements by a foreign business operator is classified as the “provision of B2B electronic services”, for considering the nature of the services. Under the reverse charge mechanism, business operators in Japan are generally required to file a consumption tax return and pay consumption tax for the distribution of advertisements. Thus, a foreign business operator distributing adver - tisements for a Japanese business operator is required to indicate beforehand that the service recipient will be responsible for filing a consump - tion tax return and paying the consumption tax that the transaction is subject to. Conversely, when a foreign company or individual pays com - pensation for the distribution of advertisements by a Japanese business operator, such compen - sation is not subject to consumption tax. For more details of consumption tax, see 1.2. Digital Economy Taxation .
The provision of B2C electronic services (platform taxation, or filing and payment by each foreign business operator) The reverse charge mechanism does not apply to a foreign business operator providing B2C electronic services, and the foreign service pro - vider is generally required to file a consumption tax return and pay the consumption tax. However, from 1 April 2025, if a foreign busi - ness operator provides B2C electronic services via a digital platform and receives compensation therefor via “a specified platform business oper - ator”, that specified platform business operator is required to file a consumption tax return and pay the consumption tax in respect of the elec - tronic services provided by the foreign business operator. This taxation scheme, which transfers the burden of filing for and paying the consump - tion tax, is called platform taxation. A digital platform operator that receives more than JPY5 billion in a taxable year for the pro - vision of B2C electronic services, must submit a designation notification to the Commissioner of the National Tax Agency by the submission deadline for filing a tax return of the taxation period. The National Tax Agency discloses a list of specified platform business operators, which as of 6 December 2024, includes the following: • iTunes K.K., operating “App Store”, “Apple Books”, and “Apple Podcasts”; • Amazon Web Services Japan G.K., operating “AWS Marketplace”; • Google Asia Pacific Pte. Ltd, operating “Google Play”; and • Nintendo Co., Ltd., operating “Nintendo eShop”.
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